The advisory rate for a particular classification code may vary significantly from one year to the next. The annual rate filing process calculates a maximum deviation or "swing limit" to prevent severe changes in advisory rate from year to year. Swing limits are calculated for each of the five Industry Groups. The formula is:
Maximum deviation = effect of the final change in rate level by industry group plus or minus 25% (rounded to nearest 1%).
To introduce stability in class ratemaking, the change in an individual class rate is subject to limitations from year to year; these limitations are called "swing limits". For instance, if we were dealing with a classification involving manufacturing, then the change in that class rate from the previous rate filing would be based on the average change for all manufacturing classes plus or minus a change no greater than 25% above or below the average change.
For example, if the overall change for the manufacturing class is +10%, then the rate change for any class must fall within the range of -15% to +35 % (+10% ± 25%). If the indicated change in the class rate falls outside this range, then the rate is limited to either the upper or lower swing limit. If the class rate has been limited to an upper swing limit, then the class rate would have been inadequate during the time the swing limit had been imposed.
Even though individual codes have limits applied, those limits get distributed back across the entire industry group.
Swing limits are typically found in the Technical Supplement, Appendix B-II, of the annual advisory rate filing.
Swing Limits by Code 1-1-2018
For the January 1, 2018 advisory rate filing, here is a list of codes subject to swing limits.
Manufacturing +13% to -37%
Contracting +11% to -39%
Office & Clerical +11% to -39%
Goods & Services +12% to -38%
Miscellaneous +13% to -37%