[Federal Register Volume 61, Number 87 (Friday, May 3, 1996)]
[Rules and Regulations]
[Pages 20070-20082]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10983]




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Part V





Railroad Retirement Board





_______________________________________________________________________



20 CFR Part 345



Employers' Contributions and Contribution Reports; Final Rule

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

[[Page 20070]]



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. Risk-sharing picks up the income that 
otherwise would be lost because of the maximum rate of contribution. 
Eventually, the lost income will be paid by the employers that were at 
the maximum rate because the reserve-ratio component assures that, over 
time, each employer will contribute amounts equal to all benefit 
payments charged to it.
    This 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 Sec. 345.1.
    Section 345.102 provides that where an employee is employed by two 
or more employers (other than a subordinate unit of a railway 
organization) the employers may prorate the amount of contributions due 
based upon the amount of compensation paid to the employee. It 
simplifies the provisions previously found in Sec. 345.2(b).
    Section 345.103 provides that an employer's rate of contributions 
shall be based upon his ``experience'' as defined in Subpart D. It 
revises the present Sec. 345.2(a).
    Section 345.105 is a new section 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 Sec. 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 Sec. 345.5 and 
provides for the filing of quarterly contribution

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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 Sec. 345.6.
    Section 345.113 provides that the contribution report must be filed 
by a responsible officer of the employer. It is the same as previous 
Sec. 345.7.
    Section 345.114 provides that the quarterly contribution report 
must be filed on a form approved by the Board unless the failure to use 
such form was due to reasonable cause and not due to willful neglect. 
It follows previous Sec. 345.8.
    Section 345.115 provides that an employer shall file the quarterly 
contributions report with the Chief Financial Officer on or before the 
last day of the month following the end of the quarter. It is 
essentially the same as the present Sec. 345.9 except that the 
provisions for waiving interest or penalty resulting from a late report 
are found in Secs. 345.122 and 345.123, respectively.
    Section 345.116 simplifies previous Sec. 345.10 and provides that 
payment or deposit of contributions due shall be in accordance with 
instructions provided by the Board.
    Section 345.117 permits rounding to the nearest cent when paying 
contributions. It reflects a provision found in the RUIA and is 
identical to the previous Sec. 345.11.
    Section 345.118 provides that an employer who underpays or overpays 
his contributions may take an interest free adjustment on the 
contribution report due after discovery of the error. It is essentially 
the same as previous Sec. 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 Sec. 345.118, he may 
claim a refund for the overpayment. No claim for refund shall be 
honored if filed more than three years after the contribution report 
containing the error was required to be filed, or more than two years 
after payment of the erroneous contribution, whichever is later. This 
section follows previous Sec. 345.13, but clarifies that no interest 
shall be paid on the refund and that any claim for refund shall be 
offset by any contributions due the Board by the employer claiming the 
refund. However, where the overpayment of contributions is the result 
of Board error in computing 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 Sec. 345.14 and provides that if 
any contribution is not paid when due, the Board may assess the amount 
due (whether or not the deficiency is adjustable as an underpayment 
under Sec. 345.118). The assessment is the creation of an account 
receivable by the Chief Financial Officer. The amount assessed may be 
collected, after notice and demand, by any remedy available under law, 
but must be collected within 10 years after assessment. In collecting 
an assessment, the Board may use any remedy available under the 
Internal Revenue Code for collecting railroad retirement taxes.
    Section 345.121 is the same as previous Sec. 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 Sec. 345.15, which provides that 
interest of one percent a month, or fraction thereof, shall accrue on 
contributions not paid on time or not adjusted in a timely manner under 
Sec. 345.118. Because the interest provision in the RUIA is really a 
penalty provision, that is, it assesses a fixed rate regardless of the 
market rate of interest, a new provision is added that permits the 
Chief Financial Officer to waive interest when equity warrants.
    Section 345.123 follows previous Sec. 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 Sec. 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 Sec. 345.18 and provides 
that any amount due from an employer under this part is a lien on the 
employer's property in favor of the United States.

Subpart C--Individual Employer Records

    Section 345.201 provides that effective January 1, 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 so-called ``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

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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 step-by-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 Sec. 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 Sec. 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 
Sec. 345.303 and is not added to a new employer rate of computation, as 
computed under Sec. 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 Sec. 345.304(b). Also, there is no Sec. 345.308.
    The first sentence of Sec. 345.302(k), relating to computation of 
pooled credits, was amended to add the language ``, as computed under 
Sec. 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 Sec. 345.303(b) and not under the 
regular formula found in Sec. 345.303(a), which provides for the 
application of the pooled credit at Step 3.
    The first sentence of Sec. 345.302(n), relating to surcharge rates, 
was amended to add the language ``, as computed under Sec. 345.303 of 
this part,'' to clarify that a surcharge rate, when applicable, will be 
added only at Step 6 of Sec. 345.303(a) and not to the rate, if any, as 
computed under Sec. 345.304(b).
    The Labor Member of the Railroad Retirement Board does not support 
the authority contained in Sec. 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.

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Subpart C--Individual Employer Records

345.201  Individual employer record defined.
345.202  Consolidated employer records.
345.203  Merger or combination of employers.
345.204  Sale or transfer of assets.
345.205  Reincorporation.
345.206  Abandonment.
345.207  Defunct employer.
345.208  System records.

Subpart D--Contribution Rates

345.301  Introduction.
345.302  Definition of terms and phrases used in experience-rating.
345.303  Computation of rate.
345.304  New-employer contribution rates.
345.305  Notification and proclamations.
345.306  Availability of information.
345.307  Rate protest.

Subpart E--Benefit Charging

345.401  General rule.
345.402  Strikes or work stoppages.
345.403  Multiple base year employers.
345.404  Adjustments.
345.405  Notices to base year employers.
345.406  Defunct employer.

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

Subpart A--General Provisions and Definitions


Sec. 345.101  Requirement for contribution.

    Every employer, as defined in part 301 of this chapter, shall pay 
to the Railroad Retirement Board a contribution with respect to the 
compensation paid to an employee in any calendar month for service by 
such employee (except for service to a local lodge or division of a 
railway labor organization). For the purposes of this part, the term 
``compensation'' is defined in part 302 of this chapter. The 
compensation subject to contribution is the gross amount of 
compensation paid to an employee for service in any month, not to 
exceed the amount of the monthly compensation base (MCB), as defined in 
part 302 of this chapter. The amount of contribution payable by each 
employer is to be computed and paid pursuant to the provisions of this 
part.


Sec. 345.102  Multiple employer limitation.

    (a) The contributions required by this part shall not apply to any 
amount of the aggregate compensation paid to such employee by all such 
employers in such calendar month which is in excess of the MCB; and
    (b) Each employer (other than a subordinate unit of a national-
railway-labor-organization employer) shall be liable for that portion 
of the contribution with respect to such compensation paid by all such 
employers which the compensation paid by the employer to such employee 
bears to the total compensation paid in such month by all such 
employers to such employee.
    (c) In the event that the compensation paid by such employers to 
the employee in such month is less than the MCB, each subordinate unit 
of a national-railway-labor-organization employer shall be liable for 
such portion of any additional contribution as the compensation paid by 
such employer to such employee in such month bears to the total 
compensation paid by all national-railway-labor-organization employers 
to such employee in such month.


Sec. 345.103   Rate of contribution.

    (a) Each employer will have an experience-rated rate of 
contribution computed by the Board under the provisions of section 
8(a)(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.


Sec. 345.104   Employees and employee representatives not liable.

    The amount of contributions for which an employer is liable under 
this part shall not be deducted from an employee's compensation, and 
the Board will not recognize any agreement under which an employee 
assumes liability for such contributions. Employee representatives 
under part 205 of this chapter are not employees for purposes of the 
Railroad Unemployment Insurance Act and are not liable for payment of 
contributions under this part.


Sec. 345.105   Definitions.

    (a) Chief Financial Officer. References in this part to the Board's 
Chief Financial Officer mean the Chief Financial Officer, Railroad 
Retirement Board, 844 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.

[[Page 20074]]

Subpart B--Reporting and Collecting Contributions


Sec. 345.110   Reports of compensation of employees.

    The provisions of part 209 of this chapter shall be applicable to 
the reporting of compensation under the Railroad Unemployment Insurance 
Act to the same extent and in the same manner as they are applicable to 
the reporting of compensation under the Railroad Retirement Act.


Sec. 345.111   Contribution reports.

    (a) General. (1) Except as provided in paragraph (a)(2) of this 
section, every employer shall, for each calendar quarter of each year, 
prepare a contribution report, in duplicate, on Form DC-1.
    (2) Contribution reports of employers who are required by State law 
to pay compensation on a weekly basis shall include with respect to 
such compensation all payroll weeks in which all or the major part of 
the compensation falls within the period for which the reports are 
required.
    (b) Compensation to be reported on Form DC-1. Employers shall enter 
on the employer's quarterly contribution report, prior to any additions 
or subtractions, the amount of creditable compensation appearing on 
payrolls or other disbursement documents for the corresponding quarter 
as the amount of creditable compensation from which the contribution 
payable for that quarter is to be computed.

(Approved by the Office of Management and Budget under control 
number 3220-0012)


Sec. 345.112   Final contribution reports.

    Upon termination of employer status, as determined under part 301 
of this chapter, the last contribution report of the employer shall be 
so indicated by checking the box on the Form DC-1 entitled ``Final 
Report''. Such contribution report shall be filed with the Board on or 
before the sixtieth day after the final date for which there is payable 
compensation with respect to which contribution is required. The period 
covered by each such contribution report shall be plainly written 
thereon, indicating the final date for which compensation is payable. 
There shall be executed as part of each such final contribution report 
a statement giving the address at which compensation records will be 
kept and the name of the person keeping the records.

(Approved by the Office of Management and Budget under control 
number 3220-0012)


Sec. 345.113   Execution of contribution reports.

    Each contribution report on Form DC-1 shall be signed by:
    (a) The individual, if the employer is an individual;
    (b) The president, vice president, or other duly authorized 
officer, if the employer is a corporation; or
    (c) A responsible and duly authorized member or officer having 
knowledge of its affairs if the employer is a partnership or other 
unincorporated organization.


Sec. 345.114   Prescribed forms for contribution reports.

    Each employer's contribution report, together with any prescribed 
copies and supporting data, shall be filled out in accordance with the 
instructions and regulations applicable thereto. The prescribed forms 
may be obtained from the Board. An employer will not be excused from 
making a contribution report for the reason that no form has been 
furnished to such employer. Application should be made to the Board for 
the prescribed forms in ample time to have the contribution report 
prepared, verified, and filed with the Board on or before the due date. 
Contribution reports that have not been so prepared will not be 
accepted and shall not be considered filed for purposes of Sec. 345.115 
of this part. In case the prescribed form has not been obtained, a 
statement made by the employer disclosing the period covered and the 
amount of compensation with respect to which the contribution is 
required may be accepted as a tentative contribution report if 
accompanied by the amount of contribution due. If filed within the 
prescribed time, the statements so made will relieve the employer from 
liability for any penalty imposed under this part for the delinquent 
filing of the contribution report provided that the failure to file a 
contribution report on the prescribed form was due to reasonable cause 
and not due to willful neglect, and provided further, that within 30 
days after receipt of the tentative report such tentative report is 
supplemented by a contribution report made on the proper form.

(Approved by the Office of Management and Budget under control 
number 3220-0012)


Sec. 345.115   Place and time for filing contribution reports.

    Each employer shall file its contribution report with the Chief 
Financial Officer, Railroad Retirement Board, 844 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.


Sec. 345.116   Payment of contributions.

    (a) The contribution required to be reported on an employer's 
contribution report is due and payable to the Board without assessment 
or notice, at the time fixed for filing the contribution report as 
provided for in Sec. 345.115 of this part.
    (b) An employer shall deposit the contributions required under this 
part in accord with instructions issued by the Railroad Retirement 
Board. At the direction of the Board, the Secretary of the Treasury 
shall credit such contributions to the Railroad Unemployment Insurance 
Account in accord with section 10 of the Railroad Unemployment 
Insurance Act and to the Railroad Unemployment Insurance Administration 
Fund in accord with section 11 of the Railroad Unemployment Insurance 
Act.


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

    In the payment of employers' contributions to the Board a 
fractional part of a cent shall be disregarded unless it amounts to 
one-half cent or more, in which case it shall be increased to one cent.


Sec. 345.118   Adjustments.

    (a) In general. If more or less than the correct amount of an 
employer's contribution is paid with respect to any compensation, 
proper adjustments with respect to the contributions shall be made, 
without interest, in subsequent contribution payments by the same 
employer, as provided for in this section.
    (b) Compensation adjustment. A compensation adjustment is the 
amount of any adjustment reported by an employer on Form BA-4. See part 
209 of this chapter.
    (c) Adjustment of contributions. (1) All adjustments of 
contributions based on compensation adjustments shall be accounted for 
by the employer on the contribution report for the same quarter in 
which the Form BA-4 reflecting the compensation adjustments is filed 
with the Board.
    (2) If less than the correct amount of contributions is paid for 
any previous calendar quarter or calendar year because of an error that 
does not

[[Page 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 Sec. 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.


Sec. 345.119  Refunds.

    (a) In general. If more than the correct amount of the employer's 
contribution is paid with respect to any compensation and the 
overpayment may not be adjusted in accordance with Sec. 345.118 of this 
part, the amount of the overpayment shall be refunded in accordance 
with this section.
    (b) When permitted. A claim for refund may be made only when the 
overpayment cannot be adjusted in accordance with the procedure set 
forth in Sec. 345.118.
    (c) Form of claim. A claim for refund shall be directed to the 
Chief Financial Officer and shall set forth all grounds in detail and 
all facts alleged in support of the claim, including the amount and 
date of each payment to the Board of the contribution to the Board, and 
the period covered by the contribution report on which such 
contribution was reported.
    (d) Claim by fiduciary. If an executor, administrator, guardian, 
trustee, or receiver files a claim for refund, evidence to establish 
the legal authority of the fiduciary shall be annexed to the claim 
filed by such fiduciary under this section.
    (e) Time limit. No refund shall be allowed after the expiration of 
three years from the time the contribution report was required to be 
filed or two years from the time the contribution was paid, whichever 
of such periods expires the later, or if no contribution report was 
filed, two years from the time the contribution was paid.
    (f) Interest. Interest shall be payable on any contribution 
refunded at the overpayment rate provided for in section 6621 of the 
Internal Revenue Code of 1986 from the date of the overpayment to a 
date preceding the date of the refund check by not more than 30 days.
    (g) Refunds reduced by underpayments. Any overpayment claimed or a 
refund under this section shall be reduced by the amount of any amount 
of any contributions previously assessed under Sec. 345.120 of this 
part, which has not already been collected.


Sec. 345.120  Assessment and collection of contributions or 
underpayments of contributions.

    (a) If any employer's contribution is not paid to the Board when 
due or is not paid in full when due, the Board may, as the 
circumstances warrant, assess the contribution or the deficiency and 
any interest or penalty applicable under this part (whether or not the 
deficiency is adjustable as an underpayment under Sec. 345.118 of this 
part).
    (b) The amount of any such assessment will be collected in 
accordance with the applicable provisions of law. If any employer 
liable to pay any contribution neglects or refuses to pay the same 
within ten days after notice and demand, the Board may collect such 
contribution with such interest and other additional amounts as are 
required by law, by levy, by administrative offset as authorized by 31 
U.S.C. 3716 and in accordance with the procedures set forth in part 367 
of this chapter, or by a proceeding in court, but only if the levy is 
made or proceeding begun:
    (1) Within 10 years after assessment of the contribution; or
    (2) Prior to the expiration of any period, including extension 
thereof, for collection agreed upon by the Chief Financial Officer and 
the employer.
    (c) All provisions of law, including penalties, applicable with 
respect to any tax imposed by the provisions of the Railroad Retirement 
Tax Act and the regulations thereunder, insofar as not inconsistent 
with the provisions in this part, shall be applicable with respect to 
the assessment and collection of contributions under this part.


Sec. 345.121  Jeopardy assessment.

    (a) Whenever in the opinion of the Board it becomes necessary to 
protect the interests of the Government by effecting an immediate 
reporting and collection of an employer's contribution, the Board will 
assess the contribution whether or not the time otherwise prescribed by 
law for filing the contribution report and paying such contribution has 
expired, together with all penalties and interest thereon. Upon 
assessment, such contribution, and any penalty, and interest provided 
for under this part shall be immediately due and payable, and the Board 
shall thereupon issue immediately a notice and demand for payment of 
the contribution, penalty, and interest.
    (b) The collection of the whole or any part of the amount of the 
jeopardy assessment may be stayed by filing with the Board a bond in an 
amount equal to the amount with respect to which the stay is desired, 
and with such sureties as the Board may deem necessary. Such bond shall 
be conditioned upon the payment of the amount (together with interest 
and any penalties thereon) the collection of which is stayed, at the 
time at which, but for the jeopardy assessment, such amount would be 
due. In lieu of surety or sureties the employer may deposit with the 
Board bonds or notes of the United States, or bonds or notes fully 
guaranteed by the United States as to principal and interest, having a 
par value not less than the amount of the bond required to be 
furnished, together with an agreement authorizing the Board in case of 
default to collect or sell such bonds or notes so deposited.


Sec. 345.122  Interest.

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

[[Page 20076]]

when due and is not adjusted under Sec. 345.118 of this part, interest 
accrues at the rate of 1 percent per month, or fraction of a month. 
Interest on past due contributions from the due date thereof until the 
date paid will be assessed after payment of the contributions, and 
notice and demand made upon the employer for payment thereof, in any 
case in which payment of the contribution is made before assessment 
under Sec. 345.120.
    (b) Waiver of interest. The Chief Financial Officer may waive, in 
whole or in part, any interest imposed by paragraph (a) of this section 
if in his or her judgment--
    (1) There was a reasonable cause and not willful neglect for the 
late filing, late payment or underpayment, such as: the serious illness 
or death of an individual with the sole authority to execute the return 
and payment; fire, casualty, or natural disaster at the place where the 
railroad unemployment insurance records are kept; or reasons outside 
the employer's control, such as, the failure of the employer's bank to 
comply with the employer's filing and payment instructions;
    (2) The amount of interest attributed to the delinquency is totally 
disproportionate to the period of the delay and the amount of 
contributions paid; and
    (3) The employer's past record for timely compliance with railroad 
unemployment insurance reporting and payment requirements warrants such 
action considering such factors as the number and extent of delays 
associated with late reports, payments, and underpayments.


Sec. 345.123  Penalty for delinquent or false contribution reports.

    (a) Delinquent reports. Unless waived under paragraph (b) of this 
section, the failure to file a contribution report on or before the due 
date shall cause a penalty to accrue of five percent of the amount of 
such contribution if the failure is for not more than one month, with 
an additional five percent for each additional month or fraction 
thereof during which such failure continues, not exceeding 25 percent 
in the aggregate.
    (b) Waiver of penalty. The Chief Financial Officer may waive all or 
a portion of the penalty imposed under paragraph (a) of this section 
consistent with the criteria applicable to waiver of interest as 
provided for in Sec. 345.122(b) of this part.
    (c) Penalty on net amount. For the purpose of paragraph (a) of this 
section the amount of contribution required to be shown on Form DC-1 
shall be reduced by the amount of any part of the contribution that is 
paid on or before the date prescribed for the payment of the 
contribution and by the amount of any credit against the contribution 
that may be claimed upon the DC-1.
    (d) False reports. If a fraudulent contribution report is made, a 
penalty equal to 50 percent of the amount of any underpayment shall be 
imposed on the employer.


Sec. 345.124  Right to appeal.

    (a) Except as otherwise provided, an employer may seek 
administrative review of any determination with respect to any 
contribution, interest, or penalty made under this part by filing a 
request for reconsideration with the Chief Financial Officer within 30 
days after the mailing of notice of such determination. An employer 
shall have a right to appeal to the Board from any reconsideration 
decision under this section by filing notice of appeal to the Secretary 
to the Board within 14 days after the mailing of the decision on 
reconsideration. Upon receipt of a notice of an appeal the Board may 
designate one of its officers or employees to receive evidence and 
report to the Board under the procedures set forth in part 319 of this 
chapter.
    (b) Request for reconsideration. Any appeal filed under this part 
shall not relieve the employer from filing any reports or paying any 
contribution required under this part nor stay the collection thereof. 
Upon the request of an employer, the Board may relieve the employer of 
any obligation required under this part pending an appeal. Unless 
specifically provided by the Board, such relief shall not stay the 
accrual of interest on any disputed amount as provided for in 
Sec. 345.122 of this part.


Sec. 345.125  Records.

    Every employer subject to the payment of contributions for any 
calendar quarter shall, with respect to each such quarter, keep such 
permanent records as are necessary to establish the total amount of 
compensation payable to its employees, for a period of at least five 
calendar years after the date the contribution report to which the 
compensation relates was required to be filed, or the date the 
contribution is paid, whichever is later. The record should be in such 
form as to contain the information required to be shown on the 
quarterly contribution report. All records required by the regulations 
in this part shall be kept at a safe and convenient location accessible 
to inspection by the Board or any of its officers or employees, or by 
the Inspector General of the Railroad Retirement Board. Such records 
shall be at all times open for inspection by such officers or 
employees.

(Approved by the Office of Management and Budget under control 
number 3220-0012)


Sec. 345.126  Liens.

    If any employer, after demand, neglects or refuses to pay a 
contribution required under this part, the amount of such contribution 
(including any interest, penalties, additional amount, or additions to 
such contribution, together with any costs that may accrue in addition 
thereto) shall be a lien in favor of the United States upon all 
property and rights to property, whether real or personal, belonging to 
such employer.

Subpart C--Individual Employer Records


Sec. 345.201  Individual employer record defined.

    Effective January 1, 1990, the Board will establish and maintain a 
record, hereinafter known as an Individual Employer Record, for each 
employer subject to this part. As used in this subpart, ``Individual 
Employer Record'' means a record of each employer's benefit ratio; 
reserve ratio; 1-year compensation base; 3-year compensation base; 
unallocated charge; reserve balance; net cumulative contribution 
balance; and cumulative benefit balance. See Sec. 345.302 of this part 
for a definition of these terms. Whenever a new employer begins paying 
compensation with respect to which contributions are payable under this 
part, the Board will establish and maintain an individual employer 
record for such employer.


Sec. 345.202  Consolidated employer records.

    (a) Establishing a consolidated employer record. Two or more 
employers that are under common ownership or control may request the 
Board to consolidate their individual employer records into a joint 
individual employer record. Such joint individual employer record shall 
be treated as though it were a single employer record. A request for 
such consolidation shall be made to the Director of Unemployment and 
Sickness Insurance, and such consolidation shall be effective 
commencing with the calendar year following the year of the request.
    (b) Discontinuance of a consolidated employer record. Two or more 
employers that have established and maintained a consolidated employer 
record will be permitted to discontinue such consolidated record only 
if the

[[Page 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.


Sec. 345.203  Merger or combination of employers.

    In the event of a merger or combination of two or more employers, 
or an employer and non-employer, the individual employer record of the 
employer surviving the merger (or any person that becomes an employer 
as the result of the merger or combination) shall consist of the 
combination of the individual employer records of the entities 
participating in the merger.


Sec. 345.204  Sale or transfer of assets.

    (a) In the event property of an employer is sold or transferred to 
another employer (or to a person that becomes an employer as the result 
of the sale or transfer) or is partitioned among two or more employers 
or persons, the individual employer record of such employer shall be 
prorated among the employer or employers that receive the property 
(including any person that becomes an employer by reason of such 
transaction or partition), in accordance with any agreement among the 
respective parties (including an agreement that there shall be no 
proration of the employer record). Such agreement shall be subject to 
the approval of the Board.
    (b) There shall be no transfer of the employer record where an 
employer abandons a line of track in accordance with the provisions of 
the Interstate Commerce Act and the applicable regulations thereunder, 
and a new entity, found by the Board to be an ``employer'' under part 
301 of this chapter, is formed to operate or continue service over such 
line; the Board will assign to such entity a new-employer contribution 
rate in accordance with section 8(a)(1)(D) of the RUIA and Sec. 345.304 
of this part.


Sec. 345.205  Reincorporation.

    The cumulative benefit balance, net cumulative contribution 
balance, 1-year compensation base, and 3-year compensation base of an 
employer that reincorporates or otherwise alters its corporate identity 
in a transaction not involving a merger, consolidation, or unification 
will attach to the reincorporated or altered identity.


Sec. 345.206  Abandonment.

    If an employer abandons property or discontinues service but 
continues to operate as an employer, the employer's individual employer 
record shall continue to be calculated as provided in this subpart 
without retroactive adjustment.


Sec. 345.207  Defunct employer.

    If the Board determines that an employer has permanently ceased to 
pay compensation with respect to which contributions are payable under 
this part, the Board will, on the date of such determination, transfer 
the employer's net cumulative contribution balance as a subtraction 
from, and the cumulative benefit balance as an addition to, the system 
unallocated charge balance and will cancel all other accumulations of 
the employer. The Board's determination that an employer is defunct 
will be based on evidence indicating that the employer has ceased all 
operations as an employer and has terminated its status as an employer. 
In making its determination, the Board will consider evidence as 
described in part 202 of this chapter with respect to termination of 
employer status under the Railroad Retirement Act. Mere failure of an 
employer to pay contributions due under this part does not indicate 
that such employer is defunct.


Sec. 345.208  System records.

    Effective January 1, 1990, the Board will establish and maintain 
records necessary to determine pooled charges, pooled credits, and 
unallocated charges for the experience rating system and will publish a 
notice with respect thereto no later than October 15 of each year. See 
Sec. 345.302 of this part for the definition of these terms.

Subpart D--Contribution Rates


Sec. 345.301  Introduction.

    (a) General. Effective January 1, 1993, each employer that is 
subject to this part will have an experience-rated rate of contribution 
computed as set forth in Sec. 345.303 of this part. A transitional rate 
of contribution applies to each such employer for 1991 and 1992, in 
accordance with 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 ``new-employer'' contribution rate as computed in Sec. 345.304 
of this part. An employer's experience-rated contribution rate will be 
not less than 0.65 percent nor more than 12.5 percent. Not later than 
October 15 of each year, the Board will notify each employer of its 
experience-rated contribution rate for the following calendar year.
    (b) Components of an experience-rated contribution rate. An 
employer's experience-rated contribution rate for each calendar year 
beginning with 1993 will be based upon the following charges:
    (1) An allocated charge based upon the amount of benefits paid to 
employees of such employer; this charge is explained in subpart E of 
this part;
    (2) An unallocated charge based upon a proportionate share of the 
system unallocated charge balance, the computation of which is 
explained in Sec. 345.302(p) of this part;
    (3) A pooled charge, also referred to as risk-sharing, to cover the 
cost of benefit payments that are chargeable to a base year employer 
but are not captured by the contribution rate assigned to such employer 
because it is paying contributions at the maximum rate of contribution; 
the formula for computing the pooled charge is set forth in 
Sec. 345.302(j) of this part;
    (4) A surcharge of 1.5, 2.5, or 3.5 percent, or a pooled credit, 
depending on the balance to the credit of the Account as of June 30 of 
a given year; and
    (5) An addition of 0.65 percent to the rate of contribution to 
cover the expenses incurred by the Board in administering the RUIA.
    (c) Maximum rate of contribution. Notwithstanding any provision of 
this part, an employer's contribution rate for any calendar year shall 
be limited to 12 percent, except when a surcharge of 3.5 percent is in 
effect with respect to that calendar year. If a 3.5 percent surcharge 
is in effect, the maximum contribution limit with respect to that 
calendar year is 12.5 percent. The surcharge rate for a calendar year 
will be 3.5 percent when the balance to the credit of the Account is 
less than zero. The Board will compute the surcharge rate in accordance 
with Sec. 345.302(n) of this part.


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

    (a) Account. The Railroad Unemployment Insurance Account 
established by section 10 of the Railroad Unemployment Insurance Act 
(RUIA) and maintained by the Secretary of the Treasury in the 
unemployment trust fund established pursuant to section 904 of the 
Social Security Act. Benefits paid under the RUIA for an employee's 
days of unemployment or days of sickness are paid from this Account.
    (b) Benefit ratio. This ratio is computed for each employer as of 
any given June 30 by dividing all benefits charged to the employer 
under subpart E of this part during the 12 calendar quarters ending on 
such June 30 by the employer's three-year compensation base as of such 
June 30, as computed under paragraph (q) of this section. The

[[Page 20078]]

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 pro-rata increase in the rate of contribution assigned to each 
employer that is not already paying contributions at the maximum rate. 
A pooled charge will become applicable to each such employer during a 
calendar year when the Account loses income because one or more other 
employers are paying contributions at the maximum rate (12 or 12.5 
percent) rather than at the higher experience-based rate that their 
benefit charges would otherwise require. The pooled charge ratio thus 
picks up the cost of benefits paid to employees of employers whose rate 
of contribution is capped at the maximum rate. The pooled charge ratio 
for a calendar year is the same for all employers whose rate is less 
than the maximum and is computed as follows:
    (1) Step 1. For each employer paying contributions at the maximum 
contribution limit under Sec. 345.301(c) of this part, compute the 
amount of contributions that such employer would have paid if its 
experience-based rate were applied to its one-year compensation base as 
of the preceding June 30 and by then deducting from such amount the 
amount derived by applying the maximum contribution rate to the same 
one-year compensation base. For the purposes of this computation, the 
experience-based rate is the rate computed for such employer under 
Sec. 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 Sec. 345.303(a) of this part, is 
less than zero, the percentage rate by which the employer's rate was 
raised in order to bring that rate to the minimum rate of zero is 
multiplied by the employer's 1-year compensation base. The total of the 
amounts so computed is subtracted from the aggregate amount computed in 
Step 2 of this paragraph (j).
    (4) Step 4. Divide the net aggregate amount computed at Step 3 of 
this paragraph (j) by the system compensation base as of the preceding 
June 30, excluding from such base the one-year compensation base of 
each employer whose experience-based contribution rate, computed at 
Step 6 of Sec. 345.303(a) of this part, exceeds the maximum 
contribution limit. The result is the pooled charge ratio for the 
current calendar year. This ratio is computed to four decimal places.
    (k) Pooled credit ratio. Effective January 1, 1991, and on the 
first of each subsequent calendar year, the Board will reduce each 
employer's rate of contribution, as computed under Sec. 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.

[[Page 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 Sec. 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.


Sec. 345.303  Computation of rate.

    (a) With respect to compensation in a calendar year that begins 
after December 31, 1992, the Board will compute, by October 15, 1992, 
and by October 15 of each subsequent year, a contribution rate for each 
employer (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

[[Page 20080]]

preceding that June 30, whichever date is later, and ending on that 
June 30.
    (2) The amount computed under paragraph (c)(1) of this section 
shall be increased to an amount that bears the same ratio to the amount 
so computed as 12 bears to the number of calendar quarters on which the 
computation is based.


Sec. 345.304  New-employer contribution rates.

    (a) An employer whose coverage under the RUIA becomes effective 
after December 31, 1989, is considered a ``new employer'' for the 
purposes of this part and will be assigned a contribution rate as 
computed under this section. The Board shall determine 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:
[GRAPHIC] [TIFF OMITTED] TR03MY96.047

    (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:
[GRAPHIC] [TIFF OMITTED] TR03MY96.048

    (e) Subsequent calendar years. The rate of contribution with 
respect to months after the third full calendar year shall be 
determined under Sec. 345.303 of this part.
    (f) Meaning of symbols. For the purpose of the formulas in 
paragraphs (c) and (d) of this section, ``R'' is the applicable 
contribution rate being computed; ``A2'' is the contribution rate that 
would have been determined under paragraph (b) of this section if the 
employer's second calendar year had been its first full calendar year; 
``A3'' is the contribution rate that would have been determined under 
paragraph (b) of this section, if the employer's third calendar year 
had been such employer's first full calendar year; ``B'' is the 
contribution rate for the employer as determined under Sec. 345.303 of 
this part for the employer's second full calendar year; and ``C'' is 
the contribution rate for the employer as determined under Sec. 345.303 
of this part for the employer's third full calendar year.
    (g) Special rule for certain computations. For purposes of 
computing ``B'' and ``C'' in the formulas in this section, the 
percentage rate computed under Sec. 345.303 shall not be reduced under 
Step 8 of that section; and any computations that, under Sec. 345.303, 
are to be made on the basis of a 4-quarter or 12-quarter period ending 
on a given June 30 shall be made on the basis of a period commencing 
with the first day of the first calendar quarter that begins after the 
date on which the employer first began paying compensation subject to 
this part and ending on that June 30, and the amount so computed shall 
be increased to an amount that bears the same ratio to the amount so 
computed as four or twelve, as appropriate, bears to the number of 
calendar quarters in the period on which the computation was based.


Sec. 345.305  Notification and proclamations.

    (a) Quarterly notifications to employers. Not later than the last 
day of any calendar quarter that begins after March 31, 1990, the Board 
will notify each employer of its cumulative benefit balance and its net 
cumulative contribution balance as of the end of the preceding calendar 
quarter, as computed in accordance with Sec. 345.302(f) and (h) of this 
part as of the last day of such preceding calendar quarter rather than 
as of a given June 30 if such last day is not a June 30.
    (b) Annual notifications to employers. Not later than October 15, 
1990, and October 15 of each year thereafter, the Board will notify 
each employer of its benefit ratio, reserve ratio, one-year 
compensation base, three-year compensation base, unallocated charge, 
and reserve balance as of the preceding June 30, as computed in 
accordance with this part, and of the contribution rate applicable to 
the employer for the following calendar year as computed under the 
applicable section of this part.
    (c) Proclamations. Not later than October 15, 1990, and October 15 
of each year thereafter, the Board shall proclaim--
    (1) The balance 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.


Sec. 345.306  Availability of information.

    Upon request of an employer subject to this part, the Board will 
make available to such employer any information that is necessary to 
verify the accuracy of its rate of contribution, as determined by the 
Board, including information necessary to verify the accuracy of the 
data maintained by the Board in the employer's individual employer 
record.


Sec. 345.307  Rate protest.

    (a) Request for reconsideration. An employer may appeal a 
determination of a contribution rate computed under this part by filing 
a request for reconsideration with the Director of Unemployment and 
Sickness Insurance within 90 days after the date on which the Board 
notified the employer of its rate of contribution for the next ensuing 
calendar year. Within 45 days of the receipt of a request for 
reconsideration the Director shall issue a decision on the protest.
    (b) Appeal to the Board. An employer aggrieved by the decision of 
the Director of Unemployment and Sickness Insurance under paragraph (a) 
of this section may appeal to the Board. Such

[[Page 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 Sec. 345.118 of this part.

Subpart E--Benefit Charging


Sec. 345.401   General rule.

    Effective January 1, 1990, all benefits paid to an employee for his 
or her days of unemployment or days of sickness will be charged to the 
base year employer of such employee, except as hereinafter provided in 
this part. The Board will make the charge by adding the gross amount of 
the benefits payable to an employee on the basis of a claim for 
benefits to that employee's base year employer's cumulative benefit 
balance. The benefit charge does not depend on whether the employee 
receiving the benefit payment is a current employee of the base year 
employer.


Sec. 345.402   Strikes or work stoppages.

    If benefits are payable to an employee for days of unemployment 
resulting from a strike or work stoppage growing out of a labor 
dispute, the Board will charge the benefit payment to the system 
unallocated charge balance, not to the cumulative benefit balance of 
the employee's base year employer. For the purposes of this section, 
the phrase ``strike or work stoppage growing out of a labor dispute'' 
does not include an employee's protected refusal to work under section 
212(b) of the Federal Railroad Safety Act of 1970 (45 U.S.C. 441(b)).


Sec. 345.403   Multiple base year employers.

    (a) General rules for benefit charging. All benefits paid to an 
employee who had more than one base year employer shall be charged to 
the cumulative benefit balances of such employers, as follows:
    (1) If the employer at the time of the claim is the same as the 
last employer in the base year, benefits will be charged in reverse 
chronological order, but the amount charged to each base year employer 
shall not exceed the amount of compensation paid by such employer to 
the employee in the base year;
    (2) In all other cases, benefits will be charged in the same ratio 
as the compensation paid to such employee by the employer bears to the 
total of such compensation paid to such employee by all such employers 
in the base year; benefit charging in accordance with this method shall 
apply whether the base year employment was with successive employers or 
with concurrent employers.
    (b) Excess benefit payments. If, in applying the rule in paragraph 
(a)(1) of this section, there remain benefit payments, in whole or in 
part, that cannot be charged to any base year employer, the amount of 
benefits paid in excess of those chargeable under paragraph (a)(1) 
shall be charged to the system unallocated charge balance.
    (c) Board records as basis for charging multiple base year 
employers. Where an employee has more than one base year employer, the 
Board will use records compiled on the basis of employer reports filed 
under Sec. 345.110 of this part for the purpose of determining whether 
the employer at the time of the claim for benefits is the last employer 
in the base year and for other purposes related to benefit charging 
under this subpart. If, in a particular case, such records do not 
contain all the data necessary to determine the charge, the Board will 
request the necessary data from the base year employers who may be 
liable for the charge.


Sec. 345.404   Adjustments.

    (a) Recovery of benefits charged to base year employer. Where the 
Board recovers a benefit payment that it had previously charged, in 
whole or in part, to one or more base year employers, the Board will 
subtract the amount of the recovery from the cumulative benefit 
balances of the employers of the employee to whom such amount was paid 
as a benefit in proportion to the amount by which each such employer's 
cumulative benefit balance was increased as a result of the payment of 
the benefit.
    (b) Recovery of other benefit payments. Where the Board recovers a 
benefit payment that was not charged, in whole or in part, to any base 
year employer, or was made before January 1, 1990, the Board will treat 
the amount of the recovery as a subtraction from the system unallocated 
charge balance.
    (c) Payment of interest or other debt collection-related charges. 
The Board will not adjust a base year employer's cumulative benefit 
balance to reflect payment by a debtor of interest or other charges 
assessed by the Board under Sec. 200.7 of this chapter with respect to 
the collection of a debt arising from a benefit payment charged to such 
employer and later found to be recoverable by the Board.
    (d) Limitations. The Board will adjust a base year employer's 
cumulative benefit balance only when the Board actually recovers, by 
cash payment or setoff, a debt that represents a benefit payment that 
was charged, in whole or in part, to such employer. No adjustment shall 
be made--
    (1) If the Board waives recovery of a debt in accordance with part 
340 of this chapter, or
    (2) If the Board finds that a debt is uncollectible, or
    (3) To the extent of the amount not recovered by the Board by 
reason of a compromise settlement of a debt.


Sec. 345.405   Notices to base year employers.

    (a) Prepayment notification. When the Board receives an employee's 
claim for unemployment or sickness benefits, the Board will give the 
employee's base year employer notice of the claim and an opportunity to 
provide information to the Board with respect to the employee's 
eligibility for benefits for the period of time covered by the claim.
    (b) Notice of claim determination. After the base year employer has 
had an opportunity to provide information in accordance with the 
prepayment notification process described in paragraph (a) of this 
section, the office of the Board that is adjudicating the employee's 
claim for benefits will determine whether to pay or to deny benefits on 
the claim. Such office will send notice to the base year employer 
showing what determination was made on the claim. If benefits are found 
to be payable, the amount of the payment will be charged to the 
cumulative benefit balance of the base year employer in accordance with 
the provisions of this subpart. If the base year employer disagrees 
with the payment of benefits, it may request reconsideration in 
accordance with part 320 of this chapter.
    (c) Quarterly notice of benefit charges. As soon as practical 
following the end of each calendar quarter, the Board will send to each 
employer a report of its cumulative benefit balance computed as

[[Page 20082]]

of the end of such quarter. The computation of such balance will 
reflect the following:
    (1) The total amount of unemployment and sickness benefit payments 
made after December 31, 1989, that have been charged to the employer as 
the base year employer of the employees who received the benefits; 
minus
    (2) The total amount realized in recovery of such benefits; plus
    (3) The total amount of the unallocated charges assigned to such 
base year employer after December 31, 1989; minus
    (4) The total amount realized in recovery of such unallocated 
charges.


Sec. 345.406   Defunct employer.

    Whenever the Board determines, pursuant to Sec. 345.207 of this 
part, that an employer is defunct, the Board will add the amount of 
such employer's benefit charges, as shown in its cumulative benefit 
balance, to the system unallocated charge balance.

    Dated: 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