News & Information

 

FEATURED PRODUCT

Pension and Employee Benefits: Code, ERISA, & Regulations
This series provides an authoritative and comprehensive reference to the full text of benefits-related provisions of the Internal Revenue Code, the full text of ERISA, and related proposed and final regulations, as well as the official IRS and DOL preambles, and Committee Reports.

Learn More »

CCH® PENSION AND BENEFITS — 10/15/07

IRS provides guidance on yield curve and segmented interest rates required by PPA

The IRS has issued a notice providing guidance on the corporate bond yield curve and associated segment rates required to compute the funding target and other items under Code Sec. 430 and ERISA §303 , which were enacted under Pension Protection Act of 2006 (PPA; P.L. 109-280). The notice also provides guidance on the interest rates for determining minimum present values as required under Code Sec. 417(e)(3) and ERISA §205(g)(3).

Determination of segment rates

Under the PPA, the Secretary of the Treasury is required to produce a yield curve and simplified segment rates for investment-quality corporate bonds that are in the top three quality levels for use by private pension plans in determining their funding obligations and the amounts of lump-sum payments to retirees. In the notice, the IRS outlines the methodology used by Treasury in producing the yield curve.

For plans electing not to use the transitional rule under Code Sec. 430(h)(2)(G), or for plans whose first year begins after 2007, the three 24-month average corporate bond segment rates applicable for September 2007 are as follows: First Segment-5.26%; Second Segment-5.82%; Third Segment-6.38%.

For plan years beginning in 2008, the funding transitional segment rates applicable for September 2007, taking into account the corporate bond weighted average of 5.86% for September 2007 published in Notice 2007-68, are as follows: First Segment-5.66%; Second Segment-5.85%; Third Segment-6.03%.

For plan years beginning in 2008, the minimum present value transitional segment rates for August 2007, taking into account the August 2007 30-year Treasury rate of 4.93%, are as follows: First Segment-5.02%; Second Segment-5.18%; Third Segment-5.28%.

The notice provides tables containing the full yield curve and various segment rates for August 2007 together with the 23 months of historical segment rates extending back to September of 2005. The IRS has also advised that each month it will publish a standard notice containing updated monthly yields along with the additional rates required under the provisions of PPA.

For more information on this and related topics, consult the CCH Pension Plan Guide.

Visit our News Library to read more news stories.