20070 Federal Register / Vol. 61, No. 87 / Friday, May 3, 1996 / Rules and Regulations

RAILROAD RETIREMENT BOARD

20 CFR Part 345

RIN 3220–AA79

Employers’ Contributions and

Contribution Reports

AGENCY: Railroad Retirement Board.

ACTION: Final rule.

SUMMARY: The Railroad Retirement

Board hereby revises 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.

EFFECTIVE DATE: May 3, 1996.

ADDRESSES: Secretary to the Board,

Railroad Retirement Board, 844 North

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 first pays compensation

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. Risksharing 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 rule consists of five subparts.

Subpart A contains some general

provisions and definitions. Subpart B

revises part 345 as it read prior to this

revision and sets forth the requirements

for filing reports of contributions and

the manner in which contributions are

to be collected.

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. 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.

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 the experience rating

system. This subpart also explains the

computation of new employer

contribution rates.

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 previous § 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 previously found in

§ 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

§ 345.2(a).

Section 345.105 is a new section and

sets forth the statutory exception that

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 and

contains definitions relevant to this

part.

Subpart B—Reporting and Collecting

Contributions

Section 345.110 follows § 345.4 of the

previous 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.

Section 345.111 is essentially the

same as previous § 345.5 and provides

for the filing of quarterly contribution
Federal Register / Vol. 61, No. 87 / Friday, May 3, 1996 / Rules and Regulations 20071

reports by employers. It eliminates

annual reports 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 previous § 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 previous § 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 previous

§ 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 § 345.9 except that the

provisions for waiving interest or

penalty resulting from a late report are

found in §§ 345.122 and 345.123,

respectively.

Section 345.116 simplifies previous

§ 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 previous § 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 previous

§ 345.12, except that it contains a

clarification providing 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

§ 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

previous § 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 an employer’s

contribution rate under Subpart D, the

Board will pay interest in accord with

section 6621 of the Internal Revenue

Code.

Section 345.120 revises previous

§ 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

§ 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

previous § 345.15, which 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 previous

§ 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 § 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

that permits the Chief Financial Officer

to waive interest when equity warrants.

Section 345.123 follows previous

§ 345.19 and provides for penalties for

delinquent and false contribution

reports.

Section 345.124 is a new section and

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 previous

§ 345.24 to alleviate the burden on

employers to keep supporting records

back to 1939. Under the regulation, an

employer must keep records that

support his contribution reports for five

calendar years after the date the report

was required to be filed.

Section 345.126 is identical to

previous § 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, l990, 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 embodies the socalled ‘‘successor employer rule’’ and

provides that in the case of sale or

transfer of assets by an employer, the

record of the selling employer shall be

transferred to the purchaser. If less than

substantially all the assets are sold or

transferred, the record shall be

transferred in accordance with the

agreement of sale, subject to Board

approval.

Section 345.205 provides that a

reorganization that does not involve a

merger does not affect the employer

records of the entities involved in the

reorganization.

Section 345.206 provides that an

employer who first pays compensation

after December 31, 1989, 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 the

Board shall publish annually notice of

the 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
20072 Federal Register / Vol. 61, No. 87 / Friday, May 3, 1996 / Rules and Regulations

contribution experience as computed

under this subpart.

Section 345.302 defines the words

and phrases used in computing

experience-rated contributions.

Section 345.303 sets forth in a stepby-step manner the computation of the

experience rate.

Section 345.304 provides that new

employers, as defined therein, 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 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 § 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.

On August 18, 1995, the Board

published this rule as a proposed rule

(60 FR 43300), inviting comments on or

before October 17, 1995. No comments

were received.

In reviewing the proposed rule prior

to its publication as a final rule,

clarification of certain provisions, as

enumerated below, was found

necessary.

The second sentence of Step 1 of

§ 345.302(j), which explains the

computation of the pooled charge ratio,

was changed to remove: ‘‘, 345.304, or

345.308 * * *, whichever is applicable’’.

A ‘‘pooled charge’’ is added only to the

contribution rate computed under

§ 345.303 and is not added to a new

employer rate of computation, as

computed under § 345.304, except to the

extent that a new employer rate, as

phased in, reflects its experience with

respect to periods after the period

during which it has an initial

contribution rate, as computed in

§ 345.304(b). Also, there is no § 345.308.

The first sentence of § 345.302(k),

relating to computation of pooled

credits, was amended to add the

language ‘‘, as computed under

§ 345.303 of this part,’’ to clarify that a

new employer is not entitled to a pooled

credit since a new employer’s rate is

computed under the special provisions

of § 345.303(b) and not under the

regular formula found in § 345.303(a),

which provides for the application of

the pooled credit at Step 3.

The first sentence of § 345.302(n),

relating to surcharge rates, was amended

to add the language ‘‘, as computed

under § 345.303 of this part,’’ to clarify

that a surcharge rate, when applicable,

will be added only at Step 6 of

§ 345.303(a) and not to the rate, if any,

as computed under § 345.304(b).

The Labor Member of the Railroad

Retirement Board does not support the

authority contained in § 345.118(c)(3) of

the 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.

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 amended as

follows:

1. Part 345 is 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.
Federal Register / Vol. 61, No. 87 / Friday, May 3, 1996 / Rules and Regulations 20073

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

§ 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

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.

§ 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-railwaylabor-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 nationalrailway-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

national-railway-labor-organization

employers to such employee in such

month.

§ 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)(1)(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)(1)(D) of the Railroad

Unemployment Insurance Act. See

Subpart D of this part.

§ 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.

§ 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 North 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.
20074 Federal Register / Vol. 61, No. 87 / Friday, May 3, 1996 / Rules and Regulations

Subpart B—Reporting and Collecting

Contributions

§ 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.

§ 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)

§ 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

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)

§ 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.

§ 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 § 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)

§ 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 North 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.

§ 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 § 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.

§ 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.

§ 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
Federal Register / Vol. 61, No. 87 / Friday, May 3, 1996 / Rules and Regulations 20075

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 § 345.122 of this part

from the time the adjustment should

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.

§ 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

§ 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 § 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 § 345.120 of this part,

which has not already been collected.

§ 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

§ 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.

§ 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.

§ 345.122 Interest.

(a) Rate. If the employer’s

contribution is not paid to the Board
20076 Federal Register / Vol. 61, No. 87 / Friday, May 3, 1996 / Rules and Regulations

when due and is not adjusted under

§ 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 § 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.

§ 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

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 § 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.

§ 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 § 345.122 of

this part.

§ 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)

§ 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

§ 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 § 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.

§ 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
Federal Register / Vol. 61, No. 87 / Friday, May 3, 1996 / Rules and Regulations 20077

individual employers agree to an

allocation of the consolidated employer

record and such allocation is approved

by the Director of Unemployment and

Sickness Insurance.

§ 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.

§ 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 newemployer contribution rate in

accordance with section 8(a)(1)(D) of the

RUIA and § 345.304 of this part.

§ 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.

§ 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.

§ 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.

§ 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 § 345.302 of this part for the

definition of these terms.

Subpart D—Contribution Rates

§ 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

§ 345.303 of this part. A transitional rate

of contribution applies to each such

employer for 1991 and 1992, in

accordance with section 8(a)(1)(B) of the

RUIA. An employer that first becomes

subject to section 8 of the RUIA after

December 31, 1989 will have a ‘‘newemployer’’ contribution rate as

computed in § 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 experiencerated 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 balance, the

computation of which is explained in

§ 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 § 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 § 345.302(n) of this

part.

§ 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
20078 Federal Register / Vol. 61, No. 87 / Friday, May 3, 1996 / Rules and Regulations

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

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 prorata 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 § 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 § 345.303 of this part.

(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 § 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

§ 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, as computed under

§ 345.303 of this part, 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 the 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.
Federal Register / Vol. 61, No. 87 / Friday, May 3, 1996 / Rules and Regulations 20079

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, as computed under

§ 345.303 of this part, 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

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;

(6) 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.

§ 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 (other than a new

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
20080 Federal Register / Vol. 61, No. 87 / Friday, May 3, 1996 / Rules and Regulations

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.

§ 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 where 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

section 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:

R

A B = 2 2 ( ) +

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:

R

A C = 3 2 +

3

(e) Subsequent calendar years. The

rate of contribution with respect to

months after the third full calendar year

shall be determined under § 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 § 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

§ 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 § 345.303 shall not be

reduced under Step 8 of that section;

and any computations that, under

§ 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.

§ 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

§ 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 to 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.

§ 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.

§ 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
Federal Register / Vol. 61, No. 87 / Friday, May 3, 1996 / Rules and Regulations 20081

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 a 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, 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 § 345.118 of this

part.

Subpart E—Benefit Charging

§ 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.

§ 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)).

§ 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 § 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.

§ 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

§ 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.

§ 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
20082 Federal Register / Vol. 61, No. 87 / Friday, May 3, 1996 / Rules and Regulations

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.

§ 345.406 Defunct employer.

Whenever the Board determines,

pursuant to § 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: April 26, 1996.

By Authority of the Board.

For The Board.

Beatrice Ezerski,

Secretary to the Board.

[FR Doc. 96–10983 Filed 5–2–96; 8:45 am]

BILLING CODE 7905–01–P