§ 138.240 Procedure for updating limits of liability to reflect significant increases in the Consumer Price Index (Annual CPI–U) and statutory changes.

(a) Update and publication. The Director, NPFC, will periodically adjust the limits of liability set forth in § 138.230(a) through (c) to reflect significant increases in the Annual CPI–U, according to the procedure for calculating limit of liability inflation adjustments set forth in paragraphs (b)–(d) of this section, and will publish the inflation-adjusted limits of liability and any statutory amendments to those limits of liability in the Federal Register as amendments to § 138.230. Updates to the limits of liability under this paragraph are effective on the 90th day after publication in the Federal Register of the amendments to § 138.230, unless otherwise specified by statute (in the event of a statutory amendment to the limits of liability) or in the Federal Register notice amending § 138.230.

(b) Formula for calculating a cumulative percent change in the Annual CPI–U.

(1) 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.

(2) The cumulative percent change value calculated using the formula in paragraph (b)(1) of this section is rounded to one decimal place.

(c) 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 using the procedure set forth in paragraph (a) of this section, 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.

(d) Formula for calculating inflation adjustments. The Director, NPFC, calculates adjustments to the limits of liability in § 138.230 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 (b) of this section), then rounded to the closest $100.