Part III. Administrative, Procedural, and Miscellaneous

Weighted Average Interest Rates Update

Notice 2004–40

This notice provides guidance as to the corporate bond weighted average interest rate and the permissible range of interest rates specified under § 412(b)(5)(B)(ii)(II) of the Internal Revenue Code. In addition, it provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II), and the weighted average interest rate and permissible ranges of interest rates based on the 30-year Treasury securities rate.

For Plan Years

Beginning in:

CORPORATE BOND WEIGHTED AVERAGE INTEREST RATE

Sections 412(b)(5)(B)(ii) and 412(l)(7) (C)(i), as amended by the Pension Funding Equity Act of 2004, provide that the interest rates used to calculate current liability and to determine the required contribution under § 412(l) for plan years beginning in 2004 or 2005 must be within a permissible range based on the weighted average of the rates of interest on amounts invested conservatively in long term investment grade corporate bonds during the 4-year period ending on the last day before the beginning of the plan year.

Notice 2004–34, 2004–18 I.R.B. 848, provides guidelines for determining the

Corporate

Bond Weighted

corporate bond weighted average interest rate and the resulting permissible range of interest rates used to calculate current liability. That notice establishes that the corporate bond weighted average is based on the monthly composite corporate bond rate derived from designated corporate bond indices.

The composite corporate bond rate for April 2004 is 5.86 percent. Pursuant to Notice 2004–34, the Service has determined this rate as the average of the monthly yields for the included corporate bond indices for that month.

The following corporate bond weighted average interest rate was determined for plan years beginning in the month shown below.

90% to 100% Permissible

Range

Month Year

Average

May 2004 6.36 5.73 to 6.36

imum amount of the deduction allowed under § 404(a)(1).

The rate of interest on 30-year Treasury securities for April 2004 is 5.14 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.

30-YEAR TREASURY SECURITIES WEIGHTED AVERAGE INTEREST RATE

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

For Plan Years

Beginning in:

Month Year

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.

Section 404(a)(1) of the Code, as amended by the Pension Funding Equity Act of 2004, permits an employer to elect to disregard subclause (II) of § 412(b)(5)(B)(ii) to determine the max

30-Year Treasury Weighted

Average

90% to 105% Permissible

Range

90% to 110% Permissible

Range

May 2004 5.17 4.65 to 5.43 4.65 to 5.69

be reached at 1–202–283–9714. The telephone numbers in the preceding sentences are not toll-free.

Drafting Information

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 8:00 a.m. and 6:30 p.m. Eastern time, Monday through Friday. Mr. Stern may be reached at 1–202–283–9703. Mr. Montanaro may

2004-23 I.R.B. 1028 June 7, 2004

income, gain, loss, deduction or credit consistent with the S corporation election on all affected returns;

(5) A signed statement from each of the community property spouses that reads, “Under penalties of perjury, I, [name of community property spouse], declare that I consent to the election to treat [name of S corporation] to be an S corporation under section 1362(a) of the Internal Revenue Code as of [the date that the S corporation intended to be an S corporation] and to the best of my knowledge and belief, the facts presented in support of this election are true, correct, and complete.”

.03 Relief for Failure to File Timely Shareholder Consent to S Corporation Elections . A shareholder that satisfies the requirements of section 4.01 of this revenue procedure will be deemed (1) to have reasonable cause for the failure to consent to the S corporation elections, (2) to have made the request for the extension of time to file a consent within a reasonable time under the circumstances, and (3) to have satisfied the requirement that the interests of the Government will not be jeopardized by treating the election as valid. Accordingly, the shareholder will automatically be granted relief to file the late shareholder consent. The Service will notify the shareholder of the acceptance of the shareholder’s request to file the late shareholder consent or of the denial of a request that fails to satisfy the requirements of this revenue procedure.