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".
Basic Employer Contribution Rate
The Basic Employer Contribution Rate consists of three components.
- Allocated-experience component - Each employer is responsible for benefits
paid to its employees.
- 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.
- 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.
Overall Contribution Rate
The Overall Employer Contribution Rate consists of the basic contribution rate
plus adjustments, as applicable, for the following items:
- Administrative expense - add a constant 0.65%;
- 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.
- 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.
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%
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2.5% |
Minimum - 3.15%
Maximum - 12.0% |
23.5% |
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 2006 and employer A was
also the last employer in 2007, then employer A is charged benefits. If
benefits charged to employer A exceed the 2007 compensation for the employee,
benefits are then charged to the employer for whom the employee worked in 2007
before employer A, if any.
- Example of Prorated Charge
An employee works for Employer A in January 2007 and earns $925 in creditable
RUIA compensation. The employer works for Employer B from March through
December 2007 and earns $9,250 in creditable RUIA compensation. The employee
works for Employer A from January to July 2008, 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.
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.
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.
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.
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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.
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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. |
$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 |
Surcharge is 3.5% |
* These amounts are indexed to the change in the system
compensation base. |
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. |
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.
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.
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.
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.
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.
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.
Benefit Ratio
The benefit ratio is the ratio of chargeable benefits to creditable RUIA
compensation for the three-year period ending June 30.
Reserve Ratio
The reserve ratio is the ratio of the reserve balance to the one-year
compensation base.
1-Year Compensation Bbase
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-3
,
"Annual
Report of Creditable Compensation".
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.
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.
Reserve Balance
This is the net cumulative contribution balance less the cumulative benefit
balance. The reserve balance may be either positive or negative.
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.
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.
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.
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.
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.
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.
Compensation and Employer Services
Railroad Retirement Board
844 North Rush Street
Chicago, Illinois 60611-2092
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.
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.
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.
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.
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
Compensation and Employer Services
Railroad Retirement Board
844 North Rush Street
Chicago, Illinois 60611-2092
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.
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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