CFR

138.240—Procedure for calculating limit of liability adjustments for inflation.

(a) Formula for calculating a cumulative percent change in the Annual CPI-U. The Director, NPFC, calculates the cumulative percent change in the Annual CPI-U from the year the limit of liability was established, or last adjusted by statute or regulation, whichever is later (i.e., the Previous Period), to the most recently published Annual CPI-U (i.e., the Current Period), using the following escalation formula:

Percent change in the Annual CPI-U = [(Annual CPI-U for Current Period−Annual CPI-U for Previous Period) ÷ Annual CPI-U for Previous Period] × 100.

This cumulative percent change value is rounded to one decimal place.

(b) Significance threshold. Not later than every three years from the year the limits of liability were last adjusted for inflation, the Director, NPFC, will evaluate whether the cumulative percent change in the Annual CPI-U since that date has reached a significance threshold of 3 percent or greater. For any three-year period in which the cumulative percent change in the Annual CPI-U is less than 3 percent, the Director, NPFC, will publish a notice of no inflation adjustment to the limits of liability in the Federal Register. If this occurs, the Director, NPFC, will recalculate the cumulative percent change in the Annual CPI-U since the year in which the limits of liability were last adjusted for inflation each year thereafter until the cumulative percent change equals or exceeds the threshold amount of 3 percent. Once the 3-percent threshold is reached, the Director, NPFC, will increase the limits of liability, by regulation, for all source categories (including any new limit of liability established by statute or regulation since the last time the limits of liability were adjusted for inflation) by an amount equal to the cumulative percent change in the Annual CPI-U from the year each limit was established, or last adjusted by statute or regulation, whichever is later. Nothing in this paragraph shall prevent the Director, NPFC, in the Director's sole discretion, from adjusting the limits of liability for inflation by regulation issued more frequently than every three years.

(c) Formula for calculating inflation adjustments. The Director, NPFC, calculates adjustments to the limits of liability in § 138.230 of this part for inflation using the following formula:

New limit of liability = Previous limit of liability (Previous limit of liability × percent change in the Annual CPI-U calculated under paragraph (a) of this section), then rounded to the closest $100.

(d) [Reserved]

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