Rate Determination Overview |
Components of experience based contribution rate |
An employer's experience rated contribution rate is based on benefit charges, expenses,
and credits identified below. The first three charges are used in the calculation of the
basic contribution rate. The remaining are adjustments to the rate. Section 8(a)(1)(C)
identifies eight steps in the calculation of the contribution rate which are described in
the section, "Annual Contribution Rate".
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Basic Employer Contribution rate |
The Basic Employer Contribution Rate consists
of three components. 1) Allocated-experience component - Each employer
is responsible for benefits paid to its employees.
2) Unallocated-experience component - Each employer is responsible for a
proportionate share of the system unallocated charge balance. The system unallocated
charges includes benefits paid due to a strike, benefit balance of defunct employers,
benefit payments which exceed the compensation earned by the employee in the base year,
and other charges. Offsetting credits include the contribution balance of defunct
employers, transfers from the Administration Fund, interest income and other credits.
3) Pooled charge or risk-shared benefits
component - Each employer is responsible for a proportionate share of the pooled
charge. The pooled charge covers benefits that are chargeable to an employer but that
cannot be collected because of a maximum contribution rate.
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Overall contribution rate |
The Overall Employer Contribution Rate
consists of the basic contribution rate plus adjustments, as applicable, for the following
items: 1) Administrative expense - add a constant 0.65%;
2) Pooled credit, (if applicable) - The pooled credit depends on the
balance in the RUI account being above an indexed $250,000,000. The index is based on the
changes in the system compensation base since June 1991.
3) Surcharge, if applicable) - The
surcharge depends on the balance in the RUI account being below certain levels. If the
balance in the account is above an indexed $100,000,000, no surcharge will be applied.
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Final rate adjustment |
All contribution rates are adjusted for the
minimum and maximum rates in effect at the time.
0% |
Minimum - 0.65% Maximum - 12.0% |
1.5% |
Minimum - 2.15%
Maximum - 12.0% |
2.5% |
Minimum - 3.15%
Maximum - 12.0% |
3.5% |
Minimum - 4.15% Maximum - 12.5% |
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Benefit Charging |
Multiple employers |
If the last employer before the benefit claim is also the last base year employer,
benefits are charged in reverse chronological order. In all other cases, charges are
pro-rated among base year employers according to their share of the base year
compensation. A benefit year begins each July 1. The base year is the previous calendar
year.
- Example of Chronological Charge
If an employee is laid off from employer A in August 1999 and employer A
was also the last employer in 1998, then employer A is charged benefits. If benefits
charged to employer A exceed the 1998 compensation for the employee, benefits are then
charged to the employer for whom the employee worked in 1998 before employer A, if any.
- Example of Prorated Charge
An employee works for Employer A in January 1998 and earns $925 in
creditable RUIA compensation. The employer works for Employer B from March through
December 1998 and earns $9,250 in creditable RUIA compensation. The employee works for
Employer A from January to July 1999, at which time the employee is laid off and begins
receiving unemployment benefits. The benefits are charged to the two base year employers
in proportion to the base year compensation reported for the employee. Employer A is
charged 1/11th and Employer B is charged 10/11th of each benefit payment.
If benefits charged exceed the
reported base year compensation for all base year employers, the remainder of the benefits
is charged to the system unallocated charge balance.
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Exceptions |
Benefits are NOT charged to a base year
employer if:
- Benefits are paid because of a strike; or
- Benefits are paid to a claimant whose employer is defunct.
The above benefits are charged to the
system unallocated charge balance.
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Charge notice |
Form
ID-4E, Notice of RUIA Claim Determinations, or the equivalent notice sent via RAILINC, is
sent to the employer(s) to notify of the benefit charges.
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Annual Contribution Rate |
Rate calculation |
A rate is calculated in eight steps, using data through the previous June 30. Items
underlined appear on Forms ID-4Q, ID-40R, or ID-40S. Items in italics are defined
following the table.
1 |
Calculate the benefit ratio.
- Divide the net benefits charged of the 12 quarters ending June 30 by the
employer's 3-year compensation base.
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2 |
Calculate the reserve ratio.
- Subtract the cumulative benefit balance (includes system unallocated
charges) from the net cumulative contributions balance (less administrative cost plus
repayment tax and pooled credit) to get the reserve balance.
- Divide the reserve balance by the 1-year compensation base.
Subtract the reserve ratio from the benefit ratio. |
3 |
Calculate the pooled credit ratio, if
any.
- Divide balance in the RUIA account above a specified level
($250,000,000 or higher) by 1-year system compensation base.
Subtract the pooled credit ratio form step 2. |
4 |
Calculate the basic contribution rate.
- Multiply adjusted benefit ratio from step 3 by 100 and round to 2 decimal
places. If less than zero, make zero.
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5 |
Add 0.65% administrative charge. |
6 |
Calculate the surcharge and add to step
5. |
7 |
Calculate the pooled charge ratio, if
any, and add to step 6.
- For each employer whose rate is over the maximum or less than zero,
multiply their 1-year compensation base by the portion of the rate outside the limits. If the
sum of the amounts, is positive, divide by the 'adjusted' system compensation base.
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8 |
Reduce rates over the maximum to the
maximum. See section 'Rate Determination Overviews' for minimum and maximum rates. |
$100,000,000* to $50,000,000* |
Surcharge is 1.5% |
$50,000,000* to $0.00 |
Surcharge is 2.5% |
Less than $0.00 *These
amounts are indexed to the change in the system compensation base. |
Surcharge is 3.5% |
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Terms defined |
Net
benefits charged includes all the benefits paid to employees of the base-year employer,
except benefits paid by reason of a strike, less all the benefits recovered which had
previously been charged to the employer.
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Rate notices |
Employers receive Forms ID-40r and ID-40S no
later than October 15, providing information required by law and necessary to pay your
contributions for the next calendar year. Employers
receive Form ID-40Q during the second month after the calendar quarter advising of the
cumulative benefit and contribution balances.
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Form ID-40Q, Quarterly Notice |
Purpose |
Form ID-40Q is the notice released to employers, each quarter, to provide
cumulative balances from January 1, 1990, of benefits and net contributions.
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Net cumulative contribution balance |
An
employer's net cumulative contribution balance is the total contributions paid since
January 1, 1990, less the amount for RUIA administrative expense, plus any repayment tax,
and plus any pooled credits. The contribution information is taken from Form DC-1, Employer's Quarterly Report
of Contributions Under the Railroad Unemployment Insurance Act.
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Cumulative benefit balance |
The
cumulative benefit balance is the total of benefits charged to an employer since January
1, 1990, less the total benefits recovered since January 1, 1990, that had originally been
charged to that employer, plus the employer's cumulative share of the system unallocated
charge balance.
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Form ID-40R, Annual Notice |
Purpose |
By October 15 each year, Form ID-40R is released to employers notifying them of their
contribution rate for the next calendar year. The notice also includes the component
amounts used to determine the contribution rate.
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Benefit ratio |
The
benefit ratio is the ratio of chargeable benefits to creditable RUIA compensation for the
three-year period ending June 30.
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Reserve ratio |
The
reserve ratio is the ratio of the reserve balance to the one-year compensation base.
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1-year compensation base |
This is
the compensation reported on Form DC-1,
Employer's Quarterly Report of Contributions for the four calendar-year quarters ending
June 30. The DC-1 compensation is balanced to the compensation reported on Form BA-3a, Annual Report of Creditable
Compensation.
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3-year compensation base |
This is
the sum of the latest three one-year compensation bases. The three-year compensation base
is used to calculate the benefit ratio.
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Unallocated charge |
This is
the employer's share of the system unallocated charge. The proportionate share is
determined by dividing the employer's one-year compensation base by the system
compensation base and multiplying the result by the system unallocated charge. Unallocated
charges include benefits paid to employees of defunct employers, strike benefits, and
benefits paid to an employee in excess of his or her base-year compensation. Offsetting
credits include the contribution balance of defunct employers, transfers from the
Administration Fund, and interest income.
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Reserve balance |
This is
the net cumulative contribution balance less the cumulative benefit balance. The reserve
balance may be either positive or negative.
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Form ID-40S - Annual Proclamation |
Enclosed
with the annual rate notice is an annual proclamation that contains system level
information that is used in determining your rate. The system level information is the
same for all employers.
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Coverage Status and Experience Rating |
Coverage status |
An employer's coverage status under the Railroad Retirement and Railroad Unemployment
Insurance Acts affects the employer's contribution rate. Employer status determinations
are made by the three-member Board. Special rate determinations are required for defunct
employers; successor railroads; mergers, acquisitions, or subsidiaries; and new employers.
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Defunct employers |
"Defunct
" for experience rating purposes is the same as "terminated" status under
the Acts. When a railroad is terminated, the railroad's net cumulative contribution
balance is subtracted from, and their cumulative benefit balance is added to, the system
unallocated charge balance. Future benefits paid to employees of the terminated railroad,
assuming no other railroad employment, are added to the system unallocated change balance.
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Successor railroads |
An
employer may be terminated, with a new employer emerging as corporate successor. Under
experience rating, a successor inherits its predecessor's record. The terminated railroad
is not treated as defunct, nor is the emerging railroad treated as a new employer. The
experience records from the terminated employer are joined to the successor.
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Mergers and acquisitions |
The
experience of two or more employers who have merged, consolidated, or reorganized with no
partitioning of property will be combined to produce one rate. Experience is also joined
when an employer acquires the assets or property of a defunct employer.
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Subsidiaries |
Two or
more employers in a Parent and Subsidiary type relationship can request that they receive
joint treatment, for experience rating purposes, by writing to the Chief of Compensation and Employer
Services.
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New employers |
New employers are phased into experience-based
rates over a three to four year period. Until the end of the employer's first full
calendar year of coverage, new employers pay a rate that is the average rate of all
employers for the first three of the last four calendar years. In the second and third full year, the rate is a
weighted average with the employer's own experience. After the third full year, the
employer's rate is based entirely upon its own experience.
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Rate Protest |
Introduction |
Employers have the right to request verification of their rate. Protests can be made of
both the benefits charged to the employer and the contribution rate.
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Benefits protest |
The RRB
notifies employers when a benefit application (except a sickness application) is received
and when each claim (both sickness and unemployment) is received. Both of these notices
are sent prior to payment of the claim. This is the first, and best, time to protest
payment of the claim. Protest should be made directly to the RRB field office handling
the application or claim. Telephone or fax the protest, if possible.
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Post-payment benefit protest |
Employers
are again notified when a claim is paid via Form ID-4E. Employers can protest by
telephone, fax, or mail to the office on the form. Keep in mind that when you receive a
Form ID-4E, the benefits have already been paid. Even if the employer is successful in
their protest, the charge will not be removed until the RRB recovers the benefits from the
employee.
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Rate protest |
An
employer may appeal a determination of a contribution rate by filing a written request
with the Chief of Compensation
and Employer Services within 90 days of the date of the Form ID-40R letter notifying
the employer of the rate for the next calendar year. Within 45 days of receipt of the
protest, the Chief shall issue a decision.
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Appeal rate to the Board |
An
employer aggrieved by the decision of the Chief of Compensation and Employer Services may
appeal to the Board. The appeal must be filed with the Secretary of the Board within 30
days after the date of the initial protest decision. Subject to judicial review, the
decision of the Board is final.
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