Employers' Contributions and Contribution Reports

SUMMARY: The Railroad Retirement Board hereby proposes to revise its

regulations under the Railroad Unemployment Insurance Act in order to

implement amendments to that Act in 1988 to provide for employers under

the RUIA to pay unemployment contributions on the basis of an

experience rating system. Prior to amendment, all employers paid

contributions at the same rate.

DATES: Comments should be submitted on or before October 17, 1995.

ADDRESSES: Secretary to the Board, Railroad Retirement Board, 844 Rush

Street, Chicago, Illinois 60611.

FOR FURTHER INFORMATION CONTACT: Thomas W. Sadler, Assistant General

Counsel, Railroad Retirement Board, Bureau of Law, Chicago, Illinois

60611; (312) 751-4513, TDD (312) 751-4701.

SUPPLEMENTARY INFORMATION: Benefits under the Railroad Unemployment

Insurance Act (RUIA) are funded by contributions paid by employers, as

defined in section 1(a) of the RUIA and part 301 of this chapter. For

calendar years through 1990, all employers, with the exception of

commuter railroads, paid contributions at the same rate. Title VII of

Public Law 100-647 amended section 8(a) of the RUIA to provide for a

contribution rate based upon an employer's experience. The experience

rating system provided by section 8(a) of the RUIA is phased in

beginning with calendar year 1991. For 1991 and 1992, a transitional

rate of contribution applies to each employer. Effective January 1,

1993, each employer will have an experience-based rate of contribution.

A ``new employer'' rate of contribution will be computed for an

employer that becomes subject to the RUIA after December 31, 1989.

The experience rating system that goes into effect January 1, 1993

is based upon recommendations made by the Railroad Unemployment

Compensation Committee (RUCC), which was established by Section 504 of

the Railroad Retirement Solvency Act of 1983 (Public Law 98-76). The

RUCC was required to review all aspects of the unemployment insurance

system under the RUIA, including the method by which benefit costs

under the RUIA were funded. In its report dated June 29, 1984, the RUCC

recommended that railroad unemployment insurance contributions be put

on an experience rating system utilizing what is termed a ``reserve-

benefit ratio method'' of measuring experience. The methodology

contemplates that each employer will pay contributions at a rate

consisting of a basic rate, plus 0.65 percent to cover the

administrative expenses incurred by the Railroad Retirement Board, plus

the amount of any surcharge that becomes applicable when the balance to

the credit of the railroad unemployment insurance account declines to

certain specified levels.

The basic rate referred to above consists of three components. The

first component is the allocated-experience rate and is based upon

benefit payments that are charged to each employer. The purpose of this

rate is to ensure that each employer is ultimately responsible for the

cost of benefits paid to its own employees. The second component is the

unallocated-experience element, which covers benefit payments that are

not chargeable to any employer. Its purpose is to ensure that

responsibility for benefit charges that, by law, cannot be allocated to

a single employer is fairly shared. The third component covers risk-

shared benefit payments, that is, benefits that are chargeable to a

base year employer but the contributions to cover the cost of those

benefits cannot be collected immediately because of the imposition of a

maximum contribution rate. Risk-sharing picks up the income that

otherwise would be lost because of the maximum rate of contribution.

Eventually, the lost income will be paid by the employers that were at

the maximum rate because the reserve-ratio component assures that, over

time, each employer will contribute amounts equal to all benefit

payments charged to it.

This proposed rule consists of five subparts. Proposed Subpart A

contains some general provisions and definitions, and proposed Subpart

B restates and revises existing part 345 and sets forth the

requirements for filing reports of contributions and the manner in

which contributions are to be collected.

Proposed Subpart C implements the provisions of section 8(a)(17)

and (18) of the RUIA, which require the Board to establish individual

employer records and to prescribe regulations relating to the

establishment and discontinuance of joint employer records. Proposed

Subpart C also prescribes the regulations required by section 8(a)(19)

of the RUIA, relating to the establishment of employer records in the

event of mergers, consolidations, or other changes in employer

identity, including changes resulting from a sale or transfer of

assets, reincorporation, or abandonment.

Proposed Subpart D explains the experience rating system under the

RUIA and the methods that the Board will follow in computing each

employer's rate of contribution under that system. This subpart also

explains the computation of transition rates of contribution and new

employer contribution rates.

Proposed Subpart E explains how the Board will charge base year

employers with benefit payments made under the RUIA, the handling of

adjustments to those charges, and the process for notifying base year

employers of the charges.

Section By Section Analysis

Subpart A--General Provisions and Definitions

Section 345.101 sets forth the general requirement that employers

(except for a local lodge or division of a railway labor organization)

covered under the RUIA must pay a contribution on compensation paid to

their employees in order to fund unemployment and sickness benefits

payable under that statute. It revises the present Sec. 345.1.

Section 345.102 provides that where an employee is employed by two

or more employers (other than a subordinate unit of a railway

organization) the employers may prorate the amount of contributions due

based upon the amount of compensation paid to the employee. It

simplifies the provisions presently found in Sec. 345.2(b).

Section 345.103 provides that an employer's rate of contributions

shall be based upon his ``experience'' as defined in Subpart D. It

revises the present Sec. 345.2(a).

Section 345.105 is a new section which sets forth the statutory

exception which exempts employee representatives, as defined in part

205 of this chapter, from paying contributions on their salaries. It

also provides that contributions are the sole obligation of the

employer and may not be deducted from the employee's wages.

Section 345.106 is a new section which contains definitions

relevant to this part.

Subpart B--Reporting and Collecting Contributions

Section 345.110 follows Sec. 345.4 of the present regulation and

provides that the reports of compensation filed under part 209 of this

chapter shall be used to establish an employee's compensation record

under the RUIA.

[[Page 43301]]

Section 345.111 is essentially the same as the present Sec. 345.5

and provides for the filing of a quarterly contribution report by

employers. It eliminates the annual report and provides that an

affiliated group of employers may file a consolidated quarterly

contribution report.

Section 345.112 provides that an employer's final contribution

report shall be filed within 60 days after the last payment of wages.

It is essentially the same as the present Sec. 345.6.

Section 345.113 provides that the contribution report must be filed

by a responsible officer of the employer. It is the same as the present

Sec. 345.7.

Section 345.114 provides that the quarterly contribution report

must be filed on a form approved by the Board unless the failure to use

such form was due to reasonable cause and not due to willful neglect.

It follows the present Sec. 345.8.

Section 345.115 provides that an employer shall file the quarterly

contributions report with the Chief Financial Officer on or before the

last day of the month following the end of the quarter. It is

essentially the same as the present Sec. 345.9 except that the

provisions for waiving interest or penalty resulting from a late report

are found in Secs. 345.122 and 345.123, respectively.

Section 345.116 simplifies the present Sec. 345.10 and provides

that payment or deposit of contributions due shall be in accordance

with instructions provided by the Board.

Section 345.117 permits rounding to the nearest cent when paying

contributions. It reflects a provision found in the RUIA and is

identical to the present Sec. 345.11.

Section 345.118 provides that an employer who underpays or overpays

his contributions may take an interest free adjustment on the

contribution report due after discovery of the error. It is essentially

the same as the present Sec. 345.12, except that it contains a

clarification which provides that if an employer fails to adjust an

underpayment in accordance with the section, he shall be liable for

interest on the underpayment from the time the adjustment should have

been made until the underpayment is made. Section 345.119 provides that

if an employer cannot adjust an overpayment of contributions as

provided for in Sec. 345.118 he may claim a refund for the overpayment.

No claim for refund shall be honored if filed more than three years

after the contribution report containing the error was required to be

filed or more than two years after payment of the erroneous

contribution, whichever is later. This section follows the present

Sec. 345.13, but clarifies that no interest shall be paid on the refund

and that any claim for refund shall be offset by any contributions due

the Board by the employer claiming the refund. However, where the

overpayment of contributions is the result of Board error in computing

employer's contribution rate under Subpart D, the Board will pay

interest in accord with section 6621 of the Internal Revenue Code.

The Labor Member of the Railroad Retirement Board does not support

the authority contained in Sec. 345.118(c)(3) of the proposed

regulation for the payment of interest, under certain circumstances, to

railroad employers who have overpaid their contributions due under the

Railroad Unemployment Insurance Act. There is no express statutory

language in the Railroad Unemployment Insurance Act authorizing the

payment of interest, but rather, the authority is derived from a

provision in the Internal Revenue Code, which is incorporated by

reference. The Labor Member is of the opinion that the regulation

should follow the current regulation of the Railroad Retirement Board,

which does not provide for the payment of interest. In addition to the

lack of express statutory authority for the payment of interest, the

Labor Member believes that it is inequitable to authorize the payment

of interest to railroad employers who have overpaid their contributions

when there is no authority for the Railroad Retirement Board to pay

interest to beneficiaries who have been underpaid benefits under the

Railroad Retirement and Railroad Unemployment Insurance Acts.

Section 345.120 revises the present Sec. 345.14 and provides that

if any contribution is not paid when due the Board may assess the

amount due (whether or not the deficiency is adjustable as an

underpayment under Sec. 345.118). The assessment is the creation of an

account receivable by the Chief Financial Officer. The amount assessed

may be collected, after notice and demand, by any remedy available

under law, but must be collected within 10 years after assessment. In

collecting an assessment the Board may use any remedy available under

the Internal Revenue Code for collecting railroad retirement taxes.

Section 345.121 is the same as the present Sec. 345.15 and permits

the Board to make an assessment of contributions (jeopardy assessment)

before the return of contributions is due in order to protect the

interest of the United States.

Section 345.122 follows the present Sec. 345.15 which provides that

interest of one percent a month, or fraction thereof, shall accrue on

contributions not paid on time or not adjusted in a timely manner under

Sec. 345.118. Because the interest provision in the RUIA is really a

penalty provision, that is, it assesses a fixed rate regardless of the

market rate of interest, a new provision is added which permits the

Chief Financial Officer to waive interest when equity warrants.

Section 345.123 follows the present Sec. 345.19 and provides for

penalties for delinquent and false contribution reports.

Section 345.124 is a new section which provides that an employer

may seek administrative review of any determination made by the Chief

Financial Officer with regard to amounts due under this part. A request

for review, however, does not stay the employer's obligation to make or

continue to file reports as required under this part.

Section 345.125 revises the present Sec. 345.24 to alleviate the

burden on employees to keep supporting records back to 1939. Under the

proposed regulation an employer must keep records which support his

contribution reports for five calendar years after the date the report

was required to be filed.

Section 345.126 is identical to the present Sec. 345.18 and

provides that any amount due from an employer under this part is a lien

on the employer's property in favor of the United States.

Subpart C--Individual Employer Records

Section 345.201 provides that effective January 1, 1990, the Board

will establish a ``record'' for each employer composed of the

employer's contribution and benefit ``experience'' and his share of the

system ``experience'' to determine the employer's experience based

contribution rate.

Section 345.202 provides that two or more employers under common

control may consolidate their respective employer records and be

treated as one employer.

Section 345.203 provides that in the event of a merger of two

employers the surviving employer's record shall consist of the

combination of the individual employer records of the employers

participating in the merger.

Section 345.204 provides that in the case of sale or transfer of

assets by an employer, the record of the selling employer shall be

prorated among the employers receiving the assets in accordance with

the agreement of sale, subject to Board approval.

Section 345.205 provides that a reorganization which does not

involve a

[[Page 43302]]

merger does not affect the employer records of the entities involved in

the reorganization.

Section 345.206 provides that an employer who temporarily ceases

its common carrier activities, but is not a defunct employer, shall

continue to maintain an employer record during the period of

inactivity.

Section 345.207 provides that in the case of an employer who

permanently ceases operations (defunct employer) that employer's net

cumulative contribution balance and net cumulative benefit balance

shall be transferred to the system unallocated charge balance, that is,

the employer's ``experience'' is spread among all employers.

Section 345.208 provides that annually the Board shall publish

notice of system unallocated charges and credits.

Subpart D--Contribution Rates

Section 345.301 provides that effective January 1, l993, each

employer's contribution rate will be computed based upon his benefit

and contribution experience as computed under this subpart.

Section 345.302 defines the terms used in the experience rate

contribution.

Section 345.303 sets forth in a step-by-step manner the computation

of the experience rate.

Section 345.304 provides that new employers shall have a phased in

experience rate and sets forth the computation of this rate.

Section 345.305 provides that annually the Board shall notify each

employer of his contribution rate as computed under this subpart and of

the components that make up that rate.

Section 345.306 provides that upon request the Board will make

available to each employer the data used to determine the employer's

contribution rate.

Section 345.307 provides a procedure under which an employer may

protest his rate. Such a procedure may include a hearing and any final

decision of the Board is subject to judicial review. During pendency of

the appeal the employer shall pay at the protested rate. Should the

employer prevail in the protest, he will be refunded the overpaid

contributions or may take a credit in the amount of the overpayment

against future contributions due as provided for in section 345.118 of

this part.

Subpart E--Benefit Charging

Section 345.401 provides that all benefits paid to an employee for

his or her days of unemployment or sickness will be charged to the base

year employer of the employee.

Section 345.402 provides that unemployment benefits paid for days

of unemployment resulting from a strike or work stoppage will not be

charged to the employee's base year employer, but shall be charged to

the system unallocated charge balance.

Section 345.403 explains how benefits paid are charged if the

employee had more than one base year employer.

Section 345.404 provides that benefits previously charged shall be

adjusted if later recovered by the Board because they were erroneously

paid. However, no adjustment shall be made where recovery of the

benefits has been waived, or to the extent that recovery is not made

because the debt is determined uncollectible or because it was

compromised.

Section 345.405 provides that the Board will notify an employer

when a claim for benefits is made and when such benefits are paid. In

addition, each quarter the Board will provide each employer with a

report of its cumulative benefit balance.

Section 345.406 provides that the cumulative benefit balance of a

defunct employer shall be added to the system unallocated charge

balance.

The Board has determined that this is not a major rule under

Executive Order No. 12866; therefore no regulatory impact analysis is

required. The information collection requirements contained in this

rule have been approved by the Office of Management and Budget under

control numbers 3220-0008 and 3220-0012.

List of Subjects in 20 CFR Part 345

Railroad employers, Railroad unemployment benefits.

For the reasons set out in the preamble, title 20, chapter II of

the Code of Federal Regulations is proposed to be amended as follows:

1. Part 345 is proposed to be revised to read as follows:

PART 345--EMPLOYERS' CONTRIBUTIONS AND CONTRIBUTION REPORTS

Subpart A--General Provisions and Definitions

Sec.

345.101 Requirement for contribution.

345.102 Multiple employer limitation.

345.103 Rate of contribution.

345.104 Employees and employee representatives not liable.

345.105 Definitions.

Subpart B--Reporting and Collecting Contributions

345.110 Reports of compensation of employees.

345.111 Contribution reports.

345.112 Final contribution reports.

345.113 Execution of contribution reports.

345.114 Prescribed forms for contribution reports.

345.115 Place and time for filing contribution reports.

345.116 Payment of contributions.

345.117 When fractional part of cent may be disregarded.

345.118 Adjustments.

345.119 Refunds.

345.120 Assessment and collection of contributions or underpayments

of contributions.

345.121 Jeopardy assessment.

345.122 Interest.

345.123 Penalty for delinquent or false contribution reports.

345.124 Right to appeal.

345.125 Records.

345.126 Liens.

Subpart C--Individual Employer Records

345.201 Individual employer record defined.

345.202 Consolidated employer records.

345.203 Merger or combination of employers.

345.204 Sale or transfer of assets.

345.205 Reincorporation.

345.206 Abandonment.

345.207 Defunct employer.

345.208 System records.

Subpart D--Contribution Rates

345.301 Introduction.

345.302 Definition of terms and phrases used in experience rating.

345.303 Computation of rate.

345.304 New-employer contribution rates.

345.305 Notification and proclamations.

345.306 Availability of information.

345.307 Rate protest.

Subpart E--Benefit Charging

345.401 General rule.

345.402 Strikes or work stoppages.

345.403 Multiple base year employers.

345.404 Adjustments.

345.405 Notices to base year employers.

345.406 Defunct employer.

Authority: 45 U.S.C. 362(l).

Subpart A--General Provisions and Definitions

Sec. 345.101 Requirement for contribution.

Every employer, as defined in part 301 of this chapter, shall pay

to the Railroad Retirement Board a contribution with respect to the

compensation paid to an employee in any calendar month for service by

such employee (except for service to a local lodge or division of a

railway labor organization). For the purposes of this part, the term

``compensation'' is defined in part 302 of this chapter. The

compensation subject to contribution is the gross amount of

compensation paid

[[Page 43303]]

to an employee for service in any month, not to exceed the amount of

the monthly compensation base (MCB), as defined in part 302 of this

chapter. The amount of contribution payable by each employer is to be

computed and paid pursuant to the provisions of this part.

Sec. 345.102 Multiple employer limitation.

(a) The contributions required by this part shall not apply to any

amount of the aggregate compensation paid to such employee by all such

employers in such calendar month which is in excess of the MCB; and

(b) Each employer (other than a subordinate unit of a national-

railway-labor-organization employer) shall be liable for that portion

of the contribution with respect to such compensation paid by all such

employers which the compensation paid by the employer to such employee

bears to the total compensation paid in such month by all such

employers to such employee.

(c) In the event that the compensation paid by such employers to

the employee in such month is less than the MCB, each subordinate unit

of a national-railway-labor-organization employer shall be liable for

such portion of any additional contribution as the compensation paid by

such employer to such employee in such month bears to the total

compensation paid by all such employers to such employee in such month.

Sec. 345.103 Rate of contribution.

(a) Each employer will have an experience-rated rate of

contribution computed by the Board under the provisions of section

8(a)(l)(C) of the Railroad Unemployment Insurance Act. See Subpart D of

this part.

(b) Notwithstanding paragraph (a) of this section the rate of

contribution applicable to an employer that first becomes subject to

this part after December 31, 1989, will be computed by the Board in

accordance with section 8(a)(l)(D) of the Railroad Unemployment

Insurance Act. See Subpart D of this part.

Sec. 345.104 Employees and employee representatives not liable.

The amount of contributions for which an employer is liable under

this part shall not be deducted from an employee's compensation, and

the Board will not recognize any agreement under which an employee

assumes liability for such contributions. Employee representatives

under part 205 of this chapter are not employees for purposes of the

Railroad Unemployment Insurance Act and are not liable for payment of

contributions under this part.

Sec. 345.105 Definitions.

(a) Chief Financial Officer. References in this part to the Board's

Chief Financial Officer mean the Chief Financial Officer, Railroad

Retirement Board, 844 Rush Street, Chicago, Illinois 60611. The Chief

Financial Officer shall be responsible for assessing, collecting, and

depositing contributions due from employers under this part.

(b) Monthly compensation base. For the purposes of this part, the

monthly compensation base (MCB) is the maximum monthly amount of

compensation per employee that is subject to contribution pursuant to

this part. On or before December 1 of each year, the Board will compute

the amount of the MCB in accordance with section 1(i) of the Railroad

Unemployment Insurance Act and part 302 of this chapter, and will

publish notice of the amount so computed in the Federal Register within

10 days after such computation has been made. Information as to the

amount of the MCB should be requested from the Board's Chief Financial

Officer.

(c) Month defined. (1) For the purposes of this part, if the date

prescribed for filing a report or paying a contribution is the last day

of a calendar month, each succeeding calendar month or fraction thereof

during which the failure to file or pay the contribution continues

shall constitute a month.

(2) If the date prescribed for filing the report or paying the

contribution is a date other than the last day of a calendar month, the

period that terminates with the date numerically corresponding thereto

in the succeeding calendar month and each such successive period shall

constitute a month. If, in the month of February, there is no date

corresponding to the date prescribed for filing the report or paying,

the period from such date in January through the last day of February

shall constitute a month. Thus, if a report is due on January 30, the

first month shall end on February 28 (or 29 if a leap year), and the

succeeding months shall end on March 30, April 30, etc.

(3) If a report is not timely filed or a contribution is not timely

paid, the fact that the date prescribed for filing the report or paying

the contribution, or the corresponding date in any succeeding calendar

month, falls on a Saturday, Sunday, or a legal holiday is immaterial in

determining the number of months.

(d) Reference to forms. Any reference in this part to any

prescribed reporting or other form of the Board includes a reference to

any other form of the Board prescribed in substitution for such

prescribed form.

(e) Showing reasonable cause. For purposes of this part if an

employer exercised ordinary business care and prudence and was

nevertheless unable to file the return within the prescribed time, then

the delay is due to reasonable cause. A failure to pay any amount due

under this part within the prescribed time will be considered to be due

to reasonable cause to the extent that the employer has made a

satisfactory showing that he exercised ordinary business care and

prudence in providing for payment but nevertheless was unable to pay on

time.

Subpart B--Reporting and Collecting Contributions

Sec. 345.110 Reports of compensation of employees.

The provisions of part 209 of this chapter shall be applicable to

the reporting of compensation under the Railroad Unemployment Insurance

Act to the same extent and in the same manner as they are applicable to

the reporting of compensation under the Railroad Retirement Act.

Sec. 345.111 Contribution reports.

(a) General. (1) Except as provided in paragraph (a)(2) of this

section, every employer shall, for each calendar quarter of each year,

prepare a contribution report, in duplicate, on Form DC-1.

(2) Contribution reports of employers who are required by State law

to pay compensation on a weekly basis shall include with respect to

such compensation all payroll weeks in which all or the major part of

the compensation falls within the period for which the reports are

required.

(b) Compensation to be reported on Form DC-1. Employers shall enter

on the employer's quarterly contribution report, prior to any additions

or subtractions, the amount of creditable compensation appearing on

payrolls or other disbursement documents for the corresponding quarter

as the amount of creditable compensation from which the contribution

payable for that quarter is to be computed.

(Approved by the Office of Management and Budget under control

number 3220-0012.)

Sec. 345.112 Final contribution reports.

Upon termination of employer status, as determined under part 301

of this chapter, the last contribution report of the employer shall be

so indicated by checking the box on the Form DC-1 entitled ``Final

Report''. Such

[[Page 43304]]

contribution report shall be filed with the Board on or before the

sixtieth day after the final date for which there is payable

compensation with respect to which contribution is required. The period

covered by each such contribution report shall be plainly written

thereon, indicating the final date for which compensation is payable.

There shall be executed as part of each such final contribution report

a statement giving the address at which compensation records will be

kept and the name of the person keeping the records.

(Approved by the Office of Management and Budget under control

number 3220-0012.)

Sec. 345.113 Execution of contribution reports.

Each contribution report on Form DC-1 shall be signed by:

(a) The individual, if the employer is an individual;

(b) The president, vice president, or other duly authorized

officer, if the employer is a corporation; or

(c) A responsible and duly authorized member or officer having

knowledge of its affairs if the employer is a partnership or other

unincorporated organization.

Sec. 345.114 Prescribed forms for contribution reports.

Each employer's contribution report, together with any prescribed

copies and supporting data, shall be filled out in accordance with the

instructions and regulations applicable thereto. The prescribed forms

may be obtained from the Board. An employer will not be excused from

making a contribution report for the reason that no form has been

furnished to such employer. Application should be made to the Board for

the prescribed forms in ample time to have the contribution report

prepared, verified, and filed with the Board on or before the due date.

Contribution reports that have not been so prepared will not be

accepted and shall not be considered filed for purposes of Sec. 345.115

of this part. In case the prescribed form has not been obtained, a

statement made by the employer disclosing the period covered and the

amount of compensation with respect to which the contribution is

required may be accepted as a tentative contribution report if

accompanied by the amount of contribution due. If filed within the

prescribed time, the statements so made will relieve the employer from

liability for any penalty imposed under this part for the delinquent

filing of the contribution report provided that the failure to file a

contribution report on the prescribed form was due to reasonable cause

and not due to willful neglect, and provided further, that within 30

days after receipt of the tentative report such tentative report is

supplemented by a contribution report made on the proper form.

(Approved by the Office of Management and Budget under control

number 3220-0012.)

Sec. 345.115 Place and time for filing contribution reports.

Each employer shall file its contribution report with the Chief

Financial Officer, Railroad Retirement Board, 844 Rush Street, Chicago,

Illinois, 60611. The employer's contribution report for each quarterly

period shall be filed on or before the last day of the calendar month

following the period for which it is made. If such last day falls on

Saturday, Sunday, or a national legal holiday, the report may be filed

on the next following business day. If mailed, reports must be

postmarked on or before the date on which the report is required to be

filed.

Sec. 345.116 Payment of contributions.

(a) The contribution required to be reported on an employer's

contribution report is due and payable to the Board without assessment

or notice, at the time fixed for filing the contribution report as

provided for in Sec. 345.115 of this part.

(b) An employer shall deposit the contributions required under this

part in accord with instructions issued by the Railroad Retirement

Board. At the direction of the Board, the Secretary of the Treasury

shall credit such contributions to the Railroad Unemployment Insurance

Account in accord with section 10 of the Railroad Unemployment

Insurance Act and to the Railroad Unemployment Insurance Administration

Fund in accord with section 11 of the Railroad Unemployment Insurance

Act.

Sec. 345.117 When fractional part of cent may be disregarded.

In the payment of employers' contributions to the Board a

fractional part of a cent shall be disregarded unless it amounts to

one-half cent or more, in which case it shall be increased to one cent.

Sec. 345.118 Adjustments.

(a) In general. If more or less than the correct amount of an

employer's contribution is paid with respect to any compensation,

proper adjustments with respect to the contributions shall be made,

without interest, in subsequent contribution payments by the same

employer, as provided for in this section.

(b) Compensation adjustment. A compensation adjustment is the

amount of any adjustment reported by an employer on Form BA-4. See part

209 of this chapter.

(c) Adjustment of contributions. (1) All adjustments of

contributions based on compensation adjustments shall be accounted for

by the employer on the contribution report for the same quarter in

which the Form BA-4 reflecting the compensation adjustments is filed

with the Board.

(2) If less than the correct amount of contributions is paid for

any previous calendar quarter or calendar year because of an error that

does not constitute a compensation adjustment as defined in paragraph

(b) of this section, the employer shall adjust the error by--(i)

Reporting the additional contribution on the next report filed after

discovery of the error; and

(ii) Paying the amount thereof to the Board at the time such report

is filed.

(3) If more than the correct amount of contributions is paid for

any previous calendar quarter or calendar year because of an error that

does not constitute a compensation adjustment as defined in paragraph

(b) of this section, the employer shall adjust the error by applying

the excess payment as a credit against the contribution due on the next

report filed after discovery of the error. However, if the overpayment

cannot be adjusted because the employer is no longer required to file a

report or because the overpayment to be adjusted exceeds the amount of

contribution due on the employer's next report, the employer may file

for a refund of the amount which cannot be adjusted as provided for in

this section. If the overpayment is the result of an incorrect

contribution rate as determined by the Board, the employer may file for

a refund of the amount of overpayment or may take an adjustment as

provided for in this section.

(d) Limitations on adjustments. No overpayment shall be adjusted

under this section after the expiration of three years from the time

the contribution report was required to be filed, or two years from the

time the contribution was paid, whichever of such periods expires the

later, or if no contribution report was filed, two years from the time

the contribution was paid. Any underpayment not adjusted within the

time limits as set forth in paragraph (c) of this section shall be

adjusted on the employer's next contribution report or reported

immediately on a supplemental return. Interest shall accrue on such

underpayment as provided for in Sec. 345.122 of this part from the time

the adjustment should

[[Page 43305]]

have been made under paragraph (c) of this section to date of payment.

However, no underpayment shall be adjusted under this section after the

receipt from the Board of formal notice and demand.

Sec. 345.119 Refunds.

(a) In general. If more than the correct amount of the employer's

contribution is paid with respect to any compensation and the

overpayment may not be adjusted in accordance with Sec. 345.118 of this

part, the amount of the overpayment shall be refunded in accordance

with this section.

(b) When permitted. A claim for refund may be made only when the

overpayment cannot be adjusted in accordance with the procedure set

forth in Sec. 345.118.

(c) Form of claim. A claim for refund shall be directed to the

Chief Financial Officer and shall set forth all grounds in detail and

all facts alleged in support of the claim, including the amount and

date of each payment to the Board of the contribution to the Board, and

the period covered by the contribution report on which such

contribution was reported.

(d) Claim by fiduciary. If an executor, administrator, guardian,

trustee, or receiver files a claim for refund, evidence to establish

the legal authority of the fiduciary shall be annexed to the claim

filed by such fiduciary under this section.

(e) Time limit. No refund shall be allowed after the expiration of

three years from the time the contribution report was required to be

filed or two years from the time the contribution was paid, whichever

of such periods expires the later, or if no contribution report was

filed, two years from the time the contribution was paid.

(f) Interest. Interest shall be payable on any contribution

refunded at the overpayment rate provided for in section 6621 of the

Internal Revenue Code of 1986 from the date of the overpayment to a

date preceding the date of the refund check by not more than 30 days.

(g) Refunds reduced by underpayments. Any overpayment claimed or a

refund under this section shall be reduced by the amount of any amount

of any contributions previously assessed under Sec. 345.120 of this

part, which has not already been collected.

Sec. 345.120 Assessment and collection of contributions or

underpayments of contributions.

(a) If any employer's contribution is not paid to the Board when

due or is not paid in full when due, the Board may, as the

circumstances warrant, assess the contribution or the deficiency and

any interest or penalty applicable under this part (whether or not the

deficiency is adjustable as an underpayment under Sec. 345.118 of this

part).

(b) The amount of any such assessment will be collected in

accordance with the applicable provisions of law. If any employer

liable to pay any contribution neglects or refuses to pay the same

within ten days after notice and demand, the Board may collect such

contribution with such interest and other additional amounts as are

required by law, by levy, by administrative offset as authorized by 31

U.S.C. 3716 and in accordance with the procedures set forth in part 367

of this chapter, or by a proceeding in court, but only if the levy is

made or proceeding begun:

(1) Within 10 years after assessment of the contribution; or

(2) Prior to the expiration of any period, including extension

thereof, for collection agreed upon by the Chief Financial Officer and

the employer.

(c) All provisions of law, including penalties, applicable with

respect to any tax imposed by the provisions of the Railroad Retirement

Tax Act and the regulations thereunder, insofar as not inconsistent

with the provisions in this part, shall be applicable with respect to

the assessment and collection of contributions under this part.

Sec. 345.121 Jeopardy assessment.

(a) Whenever in the opinion of the Board it becomes necessary to

protect the interests of the Government by effecting an immediate

reporting and collection of an employer's contribution, the Board will

assess the contribution whether or not the time otherwise prescribed by

law for filing the contribution report and paying such contribution has

expired, together with all penalties and interest thereon. Upon

assessment, such contribution, and any penalty, and interest provided

for under this part shall be immediately due and payable, and the Board

shall thereupon issue immediately a notice and demand for payment of

the contribution, penalty, and interest.

(b) The collection of the whole or any part of the amount of the

jeopardy assessment may be stayed by filing with the Board a bond in an

amount equal to the amount with respect to which the stay is desired,

and with such sureties as the Board may deem necessary. Such bond shall

be conditioned upon the payment of the amount (together with interest

and any penalties thereon) the collection of which is stayed, at the

time at which, but for the jeopardy assessment, such amount would be

due. In lieu of surety or sureties the employer may deposit with the

Board bonds or notes of the United States, or bonds or notes fully

guaranteed by the United States as to principal and interest, having a

par value not less than the amount of the bond required to be

furnished, together with an agreement authorizing the Board in case of

default to collect or sell such bonds or notes so deposited.

Sec. 345.122 Interest.

(a) Rate. If the employer's contribution is not paid to the Board

when due and is not adjusted under Sec. 345.118 of this part, interest

accrues at the rate of 1 percent per month, or fraction of a month.

Interest on past due contributions from the due date thereof until the

date paid will be assessed after payment of the contributions, and

notice and demand made upon the employer for payment thereof, in any

case in which payment of the contribution is made before assessment

under Sec. 345.120.

(b) Waiver of interest. The Chief Financial Officer may waive, in

whole or in part, any interest imposed by paragraph (a) of this section

if in his or her judgment--

(1) There was a reasonable cause and not willful neglect for the

late filing, late payment or underpayment, such as: the serious illness

or death of an individual with the sole authority to execute the return

and payment; fire, casualty, or natural disaster at the place where the

railroad unemployment insurance records are kept; or reasons outside

the employer's control, such as, the failure of the employer's bank to

comply with the employer's filing and payment instructions;

(2) The amount of interest attributed to the delinquency is totally

disproportionate to the period of the delay and the amount of

contributions paid; and

(3) The employer's past record for timely compliance with railroad

unemployment insurance reporting and payment requirements warrants such

action considering such factors as the number and extent of delays

associated with late reports, payments, and underpayments.

Sec. 345.123 Penalty for delinquent or false contribution reports.

(a) Delinquent reports. Unless waived under paragraph (b) of this

section, the failure to file a contribution report on or before the due

date shall cause a penalty to accrue of five percent of the amount of

such contribution if the failure is for not more than one month, with

an

[[Page 43306]]

additional five percent for each additional month or fraction thereof

during which such failure continues, not exceeding 25 percent in the

aggregate.

(b) Waiver of penalty. The Chief Financial Officer may waive all or

a portion of the penalty imposed under paragraph (a) of this section

consistent with the criteria applicable to waiver of interest as

provided for in Sec. 345.122(b) of this part.

(c) Penalty on net amount. For the purpose of paragraph (a) of this

section the amount of contribution required to be shown on Form DC-1

shall be reduced by the amount of any part of the contribution that is

paid on or before the date prescribed for the payment of the

contribution and by the amount of any credit against the contribution

that may be claimed upon the DC-1.

(d) False reports. If a fraudulent contribution report is made, a

penalty equal to 50 percent of the amount of any underpayment shall be

imposed on the employer.

Sec. 345.124 Right to appeal.

(a) Except as otherwise provided, an employer may seek

administrative review of any determination with respect to any

contribution, interest, or penalty made under this part by filing a

request for reconsideration with the Chief Financial Officer within 30

days after the mailing of notice of such determination. An employer

shall have a right to appeal to the Board from any reconsideration

decision under this section by filing notice of appeal to the Secretary

to the Board within 14 days after the mailing of the decision on

reconsideration. Upon receipt of a notice of an appeal the Board may

designate one of its officers or employees to receive evidence and

report to the Board under the procedures set forth in part 319 of this

chapter.

(b) Request for reconsideration. Any appeal filed under this part

shall not relieve the employer from filing any reports or paying any

contribution required under this part nor stay the collection thereof.

Upon the request of an employer, the Board may relieve the employer of

any obligation required under this part pending an appeal. Unless

specifically provided by the Board, such relief shall not stay the

accrual of interest on any disputed amount as provided for in

Sec. 345.122 of this part.

Sec. 345.125 Records.

Every employer subject to the payment of contributions for any

calendar quarter shall, with respect to each such quarter, keep such

permanent records as are necessary to establish the total amount of

compensation payable to its employees, for a period of at least five

calendar years after the date the contribution report to which the

compensation relates was required to be filed, or the date the

contribution is paid, whichever is later. The record should be in such

form as to contain the information required to be shown on the

quarterly contribution report. All records required by the regulations

in this part shall be kept at a safe and convenient location accessible

to inspection by the Board or any of its officers or employees, or by

the Inspector General of the Railroad Retirement Board. Such records

shall be at all times open for inspection by such officers or

employees.

(Approved by the Office of Management and Budget under control

number 3220-0012.)

Sec. 345.126 Liens.

If any employer, after demand, neglects or refuses to pay a

contribution required under this part, the amount of such contribution

(including any interest, penalties, additional amount, or additions to

such contribution, together with any costs that may accrue in addition

thereto) shall be a lien in favor of the United States upon all

property and rights to property, whether real or personal, belonging to

such employer.

Subpart C--Individual Employer Records

Sec. 345.201 Individual employer record defined.

Effective January 1, 1990, the Board will establish and maintain a

record, hereinafter known as an Individual Employer Record, for each

employer subject to this part. As used in this subpart, ``Individual

Employer Record'' means a record of each employer's benefit ratio;

reserve ratio; 1-year compensation base; 3-year compensation base;

unallocated charge; reserve balance; net cumulative contribution

balance; and cumulative benefit balance. See Sec. 345.302 of this part

for a definition of these terms. Whenever a new employer begins paying

compensation with respect to which contributions are payable under this

part, the Board will establish and maintain an individual employer

record for such employer.

Sec. 345.202 Consolidated employer records.

(a) Establishing a consolidated employer record. Two or more

employers that are under common ownership or control may request the

Board to consolidate their individual employer records into a joint

individual employer record. Such joint individual employer record shall

be treated as though it were a single employer record. A request for

such consolidation shall be made to the Director of Unemployment and

Sickness Insurance, and such consolidation shall be effective

commencing with the calendar year following the year of the request.

(b) Discontinuance of a consolidated employer record. Two or more

employers that have established and maintained a consolidated employer

record will be permitted to discontinue such consolidated record only

if the individual employers agree to an allocation of the consolidated

employer record and such allocation is approved by the Director of

Unemployment and Sickness Insurance.

Sec. 345.203 Merger or combination of employers.

In the event of a merger or combination of two or more employers,

or an employer and non-employer, the individual employer record of the

employer surviving the merger (or any person that becomes an employer

as the result of the merger or combination) shall consist of the

combination of the individual employer records of the entities

participating in the merger.

Sec. 345.204 Sale or transfer of assets.

(a) In the event property of an employer is sold or transferred to

another employer (or to a person that becomes an employer as the result

of the sale or transfer), or is partitioned among two or more employers

or persons, the individual employer record of such employer shall be

prorated among the employer or employers that receive the property

(including any person that becomes an employer by reason of such

transaction or partition), in accordance with any agreement among the

respective parties (including an agreement that there shall be no

proration of the employer record). Such agreement shall be subject to

the approval of the Board.

(b) There shall be no transfer of the employer record where an

employer abandons a line of track in accordance with the provisions of

the Interstate Commerce Act and the applicable regulations thereunder,

and a new entity, found by the Board to be an ``employer'' under part

301 of this chapter, is formed to operate or continue service over such

line; the Board will assign to such entity a new-employer contribution

rate in accordance with section 8(a)(l)(D) of the RUIA and Sec. 345.304

of this part.

[[Page 43307]]

Sec. 345.205 Reincorporation.

The cumulative benefit balance, net cumulative contribution

balance, 1-year compensation base, and 3-year compensation base of an

employer that reincorporates or otherwise alters its corporate identity

in a transaction not involving a merger, consolidation, or unification

will attach to the reincorporated or altered identity.

Sec. 345.206 Abandonment.

If an employer abandons property or discontinues service but

continues to operate as an employer, the employer's individual employer

record shall continue to be calculated as provided in this subpart

without retroactive adjustment.

Sec. 345.207 Defunct employer.

If the Board determines that an employer has permanently ceased to

pay compensation with respect to which contributions are payable under

this part, the Board will, on the date of such determination, transfer

the employer's net cumulative contribution balance as a subtraction

from, and the cumulative benefit balance as an addition to, the system

unallocated charge balance and will cancel all other accumulations of

the employer. The Board's determination that an employer is defunct

will be based on evidence indicating that the employer has ceased all

operations as an employer and has terminated its status as an employer.

In making its determination, the Board will consider evidence as

described in part 202 of this chapter with respect to termination of

employer status under the Railroad Retirement Act. Mere failure of an

employer to pay contributions due under this part does not indicate

that such employer is defunct.

Sec. 345.208 System records.

Effective January 1, 1990, the Board will establish and maintain

records necessary to determine pooled charges, pooled credits, and

unallocated charges for the experience rating system and will publish a

notice with respect thereto no later than October 15 of each year. See

Sec. 345.302 of this part for the definition of these terms.

Subpart D--Contribution Rates

Sec. 345.301 Introduction.

(a) General. Effective January 1, 1993, each employer that is

subject to this part will have an experience-rated rate of contribution

computed as set forth in Sec. 345.303 of this part. A transitional rate

of contribution applies to each such employer for 1991 and 1992, in

accordance with Sec. 345.308 of this part. An employer that becomes

subject to section 8 of the RUIA after December 31, 1989 will have a

``new-employer'' contribution rate as computed in Sec. 345.304 of this

part. An employer's experience-rated contribution rate will be not less

than 0.65 percent nor more than 12.5 percent. Not later than October 15

of each year, the Board will notify each employer of its experience-

rated contribution rate for the following calendar year.

(b) Components of an experience-rated contribution rate. An

employer's experience-rated contribution rate for each calendar year

beginning with 1993 will be based upon the following charges:

(1) An allocated charge based upon the amount of benefits paid to

employees of such employer; this charge is explained in subpart E of

this part;

(2) An unallocated charge based upon a proportionate share of the

system unallocated charge the computation of which is explained in

Sec. 345.302(p) of this part;

(3) A pooled charge, also referred to as risk-sharing, to cover the

cost of benefit payments that are chargeable to a base year employer

but are not captured by the contribution rate assigned to such employer

because it is paying contributions at the maximum rate of contribution;

the formula for computing the pooled charge is set forth in

Sec. 345.302(j) of this part;

(4) A surcharge of 1.5, 2.5, or 3.5 percent, or a pooled credit,

depending on the balance to the credit of the Account as of June 30 of

a given year; and

(5) An addition of 0.65 percent to the rate of contribution to

cover the expenses incurred by the Board in administering the RUIA.

(c) Maximum rate of contribution. Notwithstanding any provision of

this part, an employer's contribution rate for any calendar year shall

be limited to 12 percent, except when a surcharge of 3.5 percent is in

effect with respect to that calendar year. If a 3.5 percent surcharge

is in effect, the maximum contribution limit with respect to that

calendar year is 12.5 percent. The surcharge rate for a calendar year

will be 3.5 percent when the balance to the credit of the Account is

less than zero. The Board will compute the surcharge rate in accordance

with Sec. 345.302(n) of this part.

Sec. 345.302 Definition of terms and phrases used in experience-

rating.

(a) Account. The Railroad Unemployment Insurance Account

established by section 10 of the Railroad Unemployment Insurance Act

(RUIA) and maintained by the Secretary of the Treasury in the

unemployment trust fund established pursuant to section 904 of the

Social Security Act. Benefits paid under the RUIA for an employee's

days of unemployment or days of sickness are paid from this Account.

(b) Benefit ratio. This ratio is computed for each employer as of

any given June 30 by dividing all benefits charged to the employer

under subpart E of this part during the 12 calendar quarters ending on

such June 30 by the employer's three-year compensation base as of such

June 30, as computed under paragraph (q) of this section. The ratio is

computed to four decimal places.

(c) Benefits. Benefits are money payments paid or payable by the

Board to a qualified employee with respect to his or her days of

unemployment or days of sickness, as provided by the RUIA.

(d) Compensation. This term has the meaning given in part 302 of

this chapter.

(e) Contributions. Contributions are the money payments paid or

payable by an employer subject to this part with respect to the

compensation paid or payable to employees of such employer.

(f) Cumulative benefit balance. An employer's cumulative benefit

balance as of any given June 30 is determined by adding:

(1) The net amount of the benefits charged to the employer under

subpart E on or after January 1, 1990, and

(2) The cumulative amount of the employer's unallocated charges on

and after January 1, 1990, as computed under paragraph (r) of this

section.

(g) Fund. The Railroad Unemployment Insurance Administration Fund

established by section 11 of the RUIA and maintained by the Secretary

of the Treasury in the unemployment trust fund established pursuant to

section 904 of the Social Security Act. The costs incurred by the Board

in administering the RUIA are paid from the Fund.

(h) Net cumulative contribution balance. The Board will determine

an employer's net cumulative contribution balance as of any given June

30, as follows:

(1) Step 1. Compute the sum of all contributions paid by the

employer pursuant to this part after December 31, 1989; add that

portion of the tax, if any, imposed under 26 U.S.C. 3321(a) that is

attributable to the surtax rate under section 7106(b) of the Railroad

Unemployment Insurance and Retirement Improvement Act of 1988 (Pub. L.

100-647) and any repayment taxes paid by the employer pursuant to

[[Page 43308]]

26 U.S.C. 3321(a) after the outstanding balance of loans made under

section 10(d) of the RUIA before October 1, 1985, plus interest, has

been paid;

(2) Step 2. Subtract an amount equal to the amount of such

contributions deposited, pursuant to section 8(i) of the RUIA, to the

credit of the Fund; and

(3) Step 3. Add an amount equal to the aggregate amount by which

such contributions were reduced in prior calendar years as a result of

pooled credits, if any, under paragraph (k) of this section.

(i) One-year compensation base. An employer's one-year

compensation base is the aggregate amount of compensation with respect

to which the employer is liable for contributions under this part in

the four calendar quarters ending on such June 30.

(j) Pooled charge ratio. The pooled charge ratio, when applicable,

is a pro-rata increase in the rate of contribution assigned to each

employer that is not already paying contributions at the maximum rate.

A pooled charge will become applicable to each such employer during a

calendar year when the Account loses income because one or more other

employers are paying contributions at the maximum rate (12 or 12.5

percent) rather than at the higher experience-based rate that their

benefit charges would otherwise require. The pooled charge ratio thus

picks up the cost of benefits paid to employees of employers whose rate

of contribution is capped at the maximum rate. The pooled charge ratio

for a calendar year is the same for all employers whose rate is less

than the maximum and is computed as follows:

(1) Step 1. For each employer paying contributions at the maximum

contribution limit under Sec. 345.301(c) of this part, compute the

amount of contributions that such employer would have paid if its

experience-based rate were applied to its one-year compensation base as

of the preceding June 30 and by then deducting from such amount the

amount derived by applying the maximum contribution rate to the same

one-year compensation base. For the purposes of this computation, the

experience-based rate is the rate computed for such employer under

Secs. 345.303, 345.304, or 345.308 of this part, whichever is

applicable.

(2) Step 2. After the amount is computed for each employer in

accordance with Step 1 of this paragraph (j), add the amounts for all

such employers. The aggregate amount so computed represents the amount

of contributions not collected by the Account because of the maximum

contribution limit.

(3) Step 3. For each employer whose experience-based rate of

contribution, as computed at Step 3 of Sec. 345.303(a) of this part, is

less than zero, the percentage rate by which the employer's rate was

raised in order to bring that rate to the minimum rate of zero is

multiplied by the employer's 1-year compensation base. The total of the

amounts so computed is subtracted from the aggregate amount computed in

Step 2 of this paragraph (j).

(4) Step 4. Divide the net aggregate amount computed at Step 3 of

this paragraph (j) by the system compensation base as of the preceding

June 30, excluding from such base the one-year compensation base of

each employer whose experience-based contribution rate, computed at

Step 6 of Sec. 345.303(a) of this part, exceeds the maximum

contribution limit. The result is the pooled charge ratio for the

current calendar year. This ratio is computed to four decimal places.

(k) Pooled credit ratio. Effective January 1, 1991, and on the

first of each subsequent calendar year, the Board will reduce each

employer's rate of contribution by the amount of the pooled credit

ratio, if any, applicable to such calendar year. This ratio is computed

by reference to the accrual balance to the credit of the Account as of

the preceding June 30. The Board will determine the amount of the

pooled credit ratio, as follows:

(1) Step 1. First, the Board computes the accrual balance to the

credit of the Account as of close of business on the preceding June 30

in the same manner as under Step 1 of paragraph (n) of this section.

There will be a pooled credit ratio for the calendar year if that

balance is in excess of the greater of $250 million or of the amount

that bears the same ratio to $250 million as the system compensation

base as of that June 30 bears to the system compensation base as of

June 30, 1991, as computed in accordance with paragraph (o) of this

section.

(2) Step 2. If there is such an excess amount, divide that excess

amount by the system compensation base as of the June 30 preceding the

calendar year. The result is the pooled credit ratio applicable to each

employer for the calendar year involved in the computation. This ratio

is computed to four decimal places.

(l) Reserve balance. An employer's reserve balance is computed as

of any given June 30 by subtracting its cumulative benefit balance as

of such June 30 from its net cumulative contribution balance as of such

June 30. An employer's net cumulative benefit balance is computed under

paragraph (f) of this section and its net cumulative contribution

balance under paragraph (h) of this section. An employer's reserve

balance may be either positive or negative, depending upon whether its

net cumulative contribution balance exceeds its cumulative benefit

balance.

(m) Reserve ratio. This ratio is computed for each employer as of

any given June 30 by dividing its reserve balance as of June 30 by its

one-year compensation base as of such June 30. An employer's reserve

balance is computed under paragraph (l) of this section and its one-

year compensation base under paragraph (i) of this section. This ratio

is computed to four decimal places; it may be either a positive or

negative figure, depending on whether the employer's reserve balance is

a positive or negative figure.

(n) Surcharge rate. Effective January 1, 1991, and on the first of

each subsequent calendar year, the Board will add to each employer's

rate of contribution a surcharge rate of 1.5, 2.5, or 3.5 percent if

the accrual balance to the credit of the Account, as of the preceding

June 30, falls within the range of balances set forth in Steps 1 and 2

of this paragraph (n). The Board will determine which surcharge rate,

if any, is in effect for a calendar year by means of the following

computation:

(1) Step 1. First, the Board computes the accrual balance to the

credit of the Account as of the close of business on the preceding June

30. Such balance will include any amounts in the Account attributable

to loans made under section 10(d) of the Act before October 1, 1985,

but not the obligation of the Account to repay such loans with

interest. For this purpose, the Account will be deemed to include any

balance to the credit of the Fund that exceeds $6 million. The

surcharge rate, as specified in Step 2 of this paragraph (n), will

apply if that balance is less than the greater of $100 million or of

the amount that bears the same ratio to $100 million as the system

compensation base as of that June 30 bears to the system compensation

base as of June 30, 1991, as computed in accordance with paragraph (o)

of this section.

(2) Step 2. If the balance to the credit of the Account is less

than the greater of the amounts referred to in the last sentence of

Step 1 of this paragraph (n), but is equal to or more than the greater

of $50 million or of the amount that bears the same ratio to $50

million as the system compensation base as of that June 30 bears to the

system compensation base as of June 30, 1991, then the surcharge rate

for the calendar year shall be 1.5 percent. If the balance to the

credit of the Account is less than

[[Page 43309]]

the greater of the amounts referred to in this Step 2, but greater than

or equal to zero, then the surcharge rate for the calendar year shall

be 2.5 percent. If the balance to the credit of the Account is less

than zero, the surcharge rate for the calendar year shall be 3.5

percent.

(o) System compensation base. The system compensation base as of

June 30 of each year is the total of the amounts of the one-year

compensation bases of all base year employers, computed in accordance

with paragraph (i) of this section. Not later than October 15 of each

year, the Board will compute the amount of the system compensation base

and will publish notice of such amount in the Federal Register as soon

as practicable thereafter.

(p) System unallocated charge balance. This balance, as computed

initially for the period January 1 through June 30, 1990 and updated as

of June 30 of each subsequent calendar year, represents the net amount

of expenditures from, and income to, the Account that cannot be

allocated as benefit charges, or adjustments, to the cumulative benefit

balances of individual base year employers. The Board computes this

balance, as of June 30 of each year, as follows:

(1) Step 1. Compute the aggregate amount of all interest paid by

the Account on loans from the Railroad Retirement Account after

September 30, 1985, pursuant to section 10(d) of the RUIA, during the

12-month period ending on June 30;

(2) Step 2. Add the amount of unemployment benefits paid by reason

of strikes or work stoppages growing out of labor disputes and the

cumulative benefit balance of any defunct employer;

(3) Step 3. Add the aggregate amount of any other benefit payment

that is not chargeable to a base year employer pursuant to subpart E of

this part and any other expenditure not chargeable to the Fund;

(4) Step 4. Subtract the aggregate amount of income to the Account

received as a proportionate part of the earnings of the unemployment

trust fund, computed in accordance with section 904(e) of the Social

Security Act, and all income to the Account received as fines or

penalties collected under the RUIA;

(5) Step 5. Subtract the aggregate amount of all transfers from the

Fund to the Account pursuant to section 11(d) of the RUIA;

(7) Step 6. Subtract the aggregate amount of any other cash receipt

to the Account that cannot be treated as an adjustment to the benefit

charges of a base year employer;

(7) Step 7. Subtract the net cumulative contribution balance of any

defunct employer, calculated as of the date on which the Board

determines that such employer is defunct. After the Board has computed

the amount of the system unallocated charge balance as of June 30 of

each year, the Board will publish notice of such amount in the Federal

Register on or before October 15 of such year.

(q) Three-year compensation base. An employer's three-year

compensation base as of any given June 30 is the aggregate amount of

compensation with respect to which the employer is liable for

contributions under this part in the 12 calendar quarters ending on

such June 30.

(r) Unallocated charge. An employer's unallocated charge as of any

given June 30 is the amount that, as of such June 30, bears the same

ratio to the system unallocated charge balance as the employer's 1-year

compensation base bears to the system compensation base. The system

unallocated charge balance is computed under paragraph (p) of this

section and the system compensation base under paragraph (o) of this

section.

Sec. 345.303 Computation of rate.

(a) With respect to compensation in a calendar year that begins

after December 31, 1992, the Board will compute, by October 15, 1992,

and by October 15 of each subsequent year, a contribution rate for each

employer, in accordance with the following 8-step process:

(1) Step 1. Compute the employer's benefit ratio as of the

preceding June 30;

(2) Step 2. Compute the employer's reserve ratio as of the

preceding June 30 and subtract it from the benefit ratio;

(3) Step 3. Subtract the pooled credit ratio (if any) for the

calendar year;

(4) Step 4. Multiply the Step 3 result by 100, in order to obtain a

percentage rate, and then round such rate to the nearest 100th of one

percent. If the rate so computed is zero or less than zero, the

percentage rate will be deemed zero at this point;

(5) Step 5. Add 0.65 (the administrative charge) to the percentage

rate computed through Step 4.

(6) Step 6. Add the surcharge rate (if any) for the calendar year;

(7) Step 7. Add the pooled charge ratio (if any) for the calendar

year, as computed to four decimal places and multiplied by 100;

(8) Step 8. If the rate computed through Step 7 is greater than 12

percent (or 12.5 percent if a surcharge of 3.5 percent is in effect for

the calendar year), reduce the percentage rate so computed to 12

percent or 12.5 percent, if appropriate.

(b) The percentage rate computed under paragraph (a) of this

section is the employer's rate of contribution for the calendar year in

question.

(c)(1) Any computation that is to be made under this section on the

basis of a 12-quarter period ending on a given June 30 shall be made on

the basis of a period beginning on January 1, 1990, or on the first day

of the first calendar quarter that begins after the date on which the

employer first began to pay compensation subject to this part, or on

July 1 of the third calendar year preceding that June 30, whichever

date is later, and ending on that June 30.

(2) The amount computed under paragraph (c)(1) of this section

shall be increased to an amount that bears the same ratio to the amount

so computed as 12 bears to the number of calendar quarters on which the

computation is based.

Sec. 345.304 New-employer contribution rates.

(a) An employer whose coverage under the RUIA becomes effective

after December 31, 1989, is considered a ``new employer'' for the

purposes of this part and will be assigned a contribution rate as

computed under this section. The Board shall determine whether an

employer is a new employer and, if so, the effective date of its

coverage under the RUIA and its rate of contribution with respect to

compensation paid to employees on and after such effective date.

(b) Initial contribution rate. The rate of contribution with

respect to compensation paid in calendar months before the end of the

first full calendar year that the employer is subject to this part

shall be the average contribution rate paid by all employers during the

three calendar years preceding the calendar year before the calendar

year in which the compensation is paid. The Board will compute the

average contribution rate by dividing the aggregate contributions paid

by all employers during those three calendar years by the aggregate

compensation with respect to which such contributions were paid and by

then multiplying the resulting ratio, as computed to four decimal

points, by 100.

(c) Second contribution rate. The rate of contribution with respect

to compensation paid in months in the second full calendar year shall

be the smaller of the maximum contribution limit under the RUIA or the

percentage rate computed as follows:

[[Page 43310]]

2(A2)+B

R = ------------

3

(d) Third contribution rate. The rate of contribution with respect

to compensation paid in months in the third full calendar year shall be

the smaller of the maximum contribution limit under the RUIA or the

percentage rate computed as follows:

A3+2C

R = -----------

3

(e) Subsequent calendar years. The rate of contribution with

respect to months after the third full calendar year shall be

determined under Sec. 345.303 of this part.

(f) Meaning of symbols. For the purpose of the formulas in

paragraphs (c) and (d) of this section, ``R'' is the applicable

contribution rate being computed; ``A2'' is the contribution rate that

would have been determined under paragraph (b) of this section if the

employer's second calendar year had been its first full calendar year;

``A3'' is the contribution rate that would have been determined under

paragraph (b) of this section, if the employer's third calendar year

had been such employer's first full calendar year; ``B'' is the

contribution rate for the employer as determined under Sec. 345.303 of

this part for the employer's second full calendar year; and ``C'' is

the contribution rate for the employer as determined under Sec. 345.303

of this part for the employer's third full calendar year.

(g) Special rule for certain computations. For purposes of

computing ``B'' and ``C'' in the formulas in this section, the

percentage rate computed under Sec. 345.303 shall not be reduced under

Step 8 of that section; and any computations that, under Sec. 345.303,

are to be made on the basis of a 4-quarter or 12-quarter period ending

on a given June 30 shall be made on the basis of a period commencing

with the first day of the first calendar quarter that begins after the

date on which the employer first began paying compensation subject to

this part and ending on that June 30, and the amount so computed shall

be increased to an amount that bears the same ratio to the amount so

computed as four or twelve, as appropriate, bears to the number of

calendar quarters in the period on which the computation was based.

Sec. 345.305 Notification and proclamations.

(a) Quarterly notifications to employers. Not later than the last

day of any calendar quarter that begins after March 31, 1990, the Board

will notify each employer of its cumulative benefit balance and its net

cumulative contribution balance as of the end of the preceding calendar

quarter, as computed in accordance with Sec. 345.302(f) and (h) of this

part as of the last day of such preceding calendar quarter rather than

as of a given June 30 if such last day is not a June 30.

(b) Annual notifications to employers. Not later than October 15,

1990, and October 15 of each year thereafter, the Board will notify

each employer of its benefit ratio, reserve ratio, one-year

compensation base, three-year compensation base, unallocated charge,

and reserve balance as of the preceding June 30, as computed in

accordance with this part, and of the contribution rate applicable to

the employer for the following calendar year as computed under the

applicable section of this part.

(c) Proclamations. Not later than October 15, 1990, and October 15

of each year thereafter, the Board shall proclaim--

(1) The balance of the credit of the Account as of the preceding

June 30 for purposes of computing the pooled credit ratio and the

surcharge rate of contribution;

(2) The balance of any advances to the Account under section 10(d)

of the RUIA after September 30, 1985, that has not been repaid with

interest as provided in such section as of September 30 of that year;

(3) The system compensation base as of that June 30;

(4) The system unallocated charge balance as of that June 30; and

(5) The pooled credit ratio, the pooled charge ratio, and the

surcharge rate of contribution, if any, applicable in the following

calendar year.

(d) Publication and notice. As soon as practical after the Board

has determined and proclaimed the amounts specified in paragraph (c) of

this section, the Board will publish notice of such amounts in the

Federal Register. The notifications to employers under paragraphs (a)

and (b) of this section will be sent to the employer official

designated to receive them.

Sec. 345.306 Availability of information.

Upon request of an employer subject to this part, the Board will

make available to such employer any information that is necessary to

verify the accuracy of its rate of contribution, as determined by the

Board, including information necessary to verify the accuracy of the

data maintained by the Board in the employer's individual employer

record.

Sec. 345.307 Rate protest.

(a) Request for reconsideration. An employer may appeal a

determination of a contribution rate computed under this part by filing

a request for reconsideration with the Director of Unemployment and

Sickness Insurance within 90 days after the date on which the Board

notified the employer of its rate of contribution for the next ensuing

calendar year. Within 45 days of the receipt of a request for

reconsideration the Director shall issue a decision on the protest.

(b) Appeal to the Board. An employer aggrieved by the decision of

the Director of Unemployment and Sickness Insurance under paragraph (a)

of this section may appeal to the Board. Such appeal shall be filed

with the Secretary to the Board within 30 days after the date on which

the Director notified the employer of the decision on reconsideration.

The Board may decide such appeal without hearing or in its discretion

may refer the matter to a hearings officer pursuant to part 319 of this

chapter.

(c) Decision of the Board final. Subject to judicial review

provided for in section 5(f) of the RUIA, the decision of the Board

under paragraph (b) of this section is final with respect to all issues

determined therein.

(d) Waiver of time limits. A request for reconsideration or appeal

under this section shall be forfeited if the request or appeal is not

filed within the time prescribed or unless reasonable cause, as defined

in this part, for failure to file timely is shown.

(e) Rate pending review. Pending review of the protested rate the

employer shall continue to pay contributions at such rate. Any

adjustment in the contributions paid at such rate as the result of an

appeal shall be in accordance with Sec. 345.118 of this part.

Subpart E--Benefit Charging

Sec. 345.401 General rule.

Effective January 1, 1990, all benefits paid to an employee for his

or her days of unemployment or days of sickness will be charged to the

base year employer of such employee, except as hereinafter provided in

this part. The Board will make the charge by adding the gross amount of

the benefits payable to an employee on the basis of a claim for

benefits to that employee's base year employer's cumulative benefit

balance. The benefit charge does not depend on whether the employee

receiving the benefit payment is a current employee of the base year

employer.

[[Page 43311]]

Sec. 345.402 Strikes or work stoppages.

If benefits are payable to an employee for days of unemployment

resulting from a strike or work stoppage growing out of a labor

dispute, the Board will charge the benefit payment to the system

unallocated charge balance, not to the cumulative benefit balance of

the employee's base year employer. For the purposes of this section,

the phrase ``strike or work stoppage growing out of a labor dispute''

does not include an employee's protected refusal to work under section

212(b) of the Federal Railroad Safety Act of 1970 (45 U.S.C. 441(b)).

Sec. 345.403 Multiple base year employers.

(a) General rules for benefit charging. All benefits paid to an

employee who had more than one base year employer shall be charged to

the cumulative benefit balances of such employers, as follows:

(1) If the employer at the time of the claim is the same as the

last employer in the base year, benefits will be charged in reverse

chronological order, but the amount charged to each base year employer

shall not exceed the amount of compensation paid by such employer to

the employee in the base year;

(2) In all other cases, benefits will be charged in the same ratio

as the compensation paid to such employee by the employer bears to the

total of such compensation paid to such employee by all such employers

in the base year; benefit charging in accordance with this method shall

apply whether the base year employment was with successive employers or

with concurrent employers.

(b) Excess benefit payments. If, in applying the rule in paragraph

(a)(1) of this section, there remain benefit payments, in whole or in

part, that cannot be charged to any base year employer, the amount of

benefits paid in excess of those chargeable under paragraph (a)(1)

shall be charged to the system unallocated charge balance.

(c) Board records as basis for charging multiple base year

employers. Where an employee has more than one base year employer, the

Board will use records compiled on the basis of employer reports filed

under Sec. 345.110 of this part for the purpose of determining whether

the employer at the time of the claim for benefits is the last employer

in the base year, and for other purposes related to benefit charging

under this subpart. If, in a particular case, such records do not

contain all the data necessary to determine the charge, the Board will

request the necessary data from the base year employers who may be

liable for the charge.

Sec. 345.404 Adjustments.

(a) Recovery of benefits charged to base year employer. Where the

Board recovers a benefit payment that it had previously charged, in

whole or in part, to one or more base year employers, the Board will

subtract the amount of the recovery from the cumulative benefit

balances of the employers of the employee to whom such amount was paid

as a benefit in proportion to the amount by which each such employer's

cumulative benefit balance was increased as a result of the payment of

the benefit.

(b) Recovery of other benefit payments. Where the Board recovers a

benefit payment that was not charged, in whole or in part, to any base

year employer, or was made before January 1, 1990, the Board will treat

the amount of the recovery as a subtraction from the system unallocated

charge balance.

(c) Payment of interest or other debt collection-related charges.

The Board will not adjust a base year employer's cumulative benefit

balance to reflect payment by a debtor of interest or other charges

assessed by the Board under Sec. 200.7 of this chapter with respect to

the collection of a debt arising from a benefit payment charged to such

employer and later found to be recoverable by the Board.

(d) Limitations. The Board will adjust a base year employer's

cumulative benefit balance only when the Board actually recovers, by

cash payment or setoff, a debt that represents a benefit payment that

was charged, in whole or in part, to such employer. No adjustment shall

be made--

(1) If the Board waives recovery of a debt in accordance with part

340 of this chapter, or

(2) If the Board finds that a debt is uncollectible, or

(3) To the extent of the amount not recovered by the Board by

reason of a compromise settlement of a debt.

Sec. 345.405 Notices to base year employers.

(a) Prepayment notification. When the Board receives an employee's

claim for unemployment or sickness benefits, the Board will give the

employee's base year employer notice of the claim and an opportunity to

provide information to the Board with respect to the employee's

eligibility for benefits for the period of time covered by the claim.

(b) Notice of claim determination. After the base year employer has

had an opportunity to provide information in accordance with the

prepayment notification process described in paragraph (a) of this

section, the office of the Board that is adjudicating the employee's

claim for benefits will determine whether to pay or to deny benefits on

the claim. Such office will send notice to the base year employer

showing what determination was made on the claim. If benefits are found

to be payable, the amount of the payment will be charged to the

cumulative benefit balance of the base year employer in accordance with

the provisions of this subpart. If the base year employer disagrees

with the payment of benefits, it may request reconsideration in

accordance with part 320 of this chapter.

(c) Quarterly notice of benefit charges. As soon as practical

following the end of each calendar quarter, the Board will send to each

employer a report of its cumulative benefit balance computed as of the

end of such quarter. The computation of such balance will reflect the

following:

(1) The total amount of unemployment and sickness benefit payments

made after December 31, 1989, that have been charged to the employer as

the base year employer of the employees who received the benefits;

minus

(2) The total amount realized in recovery of such benefits; plus

(3) The total amount of the unallocated charges assigned to such

base year employer after December 31, 1989; minus

(4) The total amount realized in recovery of such unallocated

charges.

Sec. 345.406 Defunct employer.

Whenever the Board determines, pursuant to Sec. 345.207 of this

part, that an employer is defunct, the Board will add the amount of

such employer's benefit charges, as shown in its cumulative benefit

balance, to the system unallocated charge balance.

Dated: August 10, 1995.

By Authority of the Board.

Beatrice Ezerski,

Secretary to the Board.

[FR Doc. 95-20445 Filed 8-17-95; 8:45 am]

BILLING CODE 7905-01-P