Sections 412(b)(5)(B) and 412(l)(7)(C)(i) of the Internal Revenue Code
generally provide that the interest rates used to calculate current liability
for purposes of determining the full funding limitation under § 412(c)(7)
and the required contribution under § 412(l) must be within a permissible
range around the weighted average of the rates of interest on 30-year Treasury
securities during the four-year period ending on the last day before the beginning
of the plan year.
Notice 88-73, 1988-2 C.B. 383, provides guidelines for determining the
weighted average interest rate and the resulting permissible range of interest
rates used to calculate current liability for the purpose of the full funding
limitation of § 412(c)(7) of the Code.
Section 417(e)(3)(A)(ii)(II) defines the applicable interest rate, which
must be used for purposes of determining the minimum present value of a participant’s
benefit under § 417(e)(1) and (2), as the annual rate of interest
on 30-year Treasury securities for the month before the date of distribution
or such other time as the Secretary may by regulations prescribe. Section
1.417(e)-1(d)(3) of the Income Tax Regulations provides that the applicable
interest rate for a month is the annual interest rate on 30-year Treasury
securities as specified by the Commissioner for that month in revenue rulings,
notices or other guidance published in the Internal Revenue Bulletin.
The rate of interest on 30-year Treasury securities for December 2005
is 4.65 percent. Pursuant to Notice 2002-26, 2002-1 C.B. 743, the Service
has determined this rate as the monthly average of the daily determination
of yield on the 30-year Treasury bond maturing in February 2031.
The following 30-year Treasury rates were determined for the plan years
beginning in the month shown below.
|For Plan Years
||90% to 105%
||90% to 110%
||4.37 to 5.10
||4.37 to 5.34
The principal authors of this notice are Paul Stern and Tony Montanaro
of the Employee Plans, Tax Exempt and Government Entities Division. For further
information regarding this notice, please contact the Employee Plans’
taxpayer assistance telephone service at 1-877-829-5500 (a toll-free number),
between the hours of 8:30 a.m. and 4:30 p.m. Eastern time, Monday through
Friday. Mr. Stern may be reached at 1-202-283-9703. Mr. Montanaro may be
reached at 1-202-283-9714. The telephone numbers in the preceding sentences
are not toll-free.
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