Part III. — Internal Revenue Bulletin 2008-48

Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

Notice 2008–105

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 as in effect for plan years beginning before 2008. It also provides guidance on the corporate bond monthly yield curve (and the corresponding spot segment rates), the 24-month average segment rates, and the funding transitional segment rates under § 430(h)(2). In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008, the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I), and the min

For Plan Years

Corporate Bond Weighted

imum present value segment rates under § 417(e)(3)(D) as in effect for plan years beginning after 2007.

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 and by the Pension Protection Act of 2006 (PPA), 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 through 2007 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, 2004–1 C.B. 848, provides guidelines for determining the 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 methodology for determining the monthly composite corporate bond rate as set forth in Notice 2004–34 continues to apply in determining that rate. See Notice 2006–75, 2006–2 C.B. 366. The composite corporate bond rate for October 2008 is 7.90 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.

Beginning in Permissible Range

Month Year

Average 90% to 100%

November 2008 6.20 5.58 6.20

monthly corporate bond yield curve, the 24-month average corporate bond segment rates, and the funding transitional segment rates used to compute the target normal cost and the funding target. Pursuant to Notice 2007–81, the monthly corporate bond yield curve derived from October 2008 data is in Table I at the end of this notice. The spot first, second, and third segment rates for the month of October 2008 are, respectively, 7.35, 8.61, and 7.26. The three 24-month average corporate bond segment rates applicable for November 2008 under the election of § 430(h)(2)(G)(iv) are as follows:

Third Segment

YIELD CURVE AND SEGMENT RATES

Generally for plan years beginning after 2007 (except for delayed effective dates for certain plans under sections 104, 105, and 106 of PPA), § 430 of the Code specifies the minimum funding requirements that apply to single employer plans pursuant to § 412. Section 430(h)(2) specifies the interest rates that must be used to determine a plan’s target normal cost and funding target. Under this provision, present value is generally determined using three 24-month average interest rates

First Segment

(“segment rates”), each of which applies to cash flows during specified periods. However, an election may be made under § 430(h)(2)(D)(ii) to use the monthly yield curve in place of the segment rates. For plan years beginning in 2008 and 2009, a transitional rule under § 430(h)(2)(G) provides that the segment rates are blended with the corporate bond weighted average as specified above. An election may be made under § 430(h)(2)(G)(iv) to use the segment rates without applying the transitional rule.

Notice 2007–81, 2007–44 I.R.B. 899, provides guidelines for determining the

Second Segment

5.17 6.28 6.62

December 1, 2008 1208 2008–48 I.R.B.

The transitional segment rates under § 430(h)(2)(G) applicable for November 2008, taking into account the corporate

For Plan Years

Beginning in

First Segment

bond weighted average of 6.20 stated above, are as follows:

Second Segment

Third Segment

2008 5.86 6.23 6.34 2009 5.51 6.25 6.48

amount for the full-funding limitation described in section 431(c)(6)(A), based on the plan’s current liability. Section 431(c)(6)(E)(ii)(I) provides that the interest rate used to calculate current liability for this purpose must be no more than 5 percent above and no more than 10 percent below 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. The following rates were determined for plan years beginning in the month shown below.

30-YEAR TREASURY SECURITIES INTEREST RATES

Section 417(e)(3)(A)(ii)(II) (prior to amendment by PPA) 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

For Plan Years

rate of interest 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 October 2008 is 4.17 percent. The Service has determined this rate as the monthly average of the daily determination of yield on the 30-year Treasury bond maturing in May 2038.

Generally for plan years beginning after 2007, § 431 specifies the minimum funding requirements that apply to multiemployer plans pursuant to § 412. Section 431(c)(6)(B) specifies a minimum

30-Year Treasury Weighted

Beginning in Permissible Range

Month Year

Average 90% to 105%

November 2008 4.68 4.21 4.91

ing the minimum present value segment rates. Pursuant to that notice, the minimum present value transitional segment rates determined for October 2008, taking into account the October 2008 30-year Treasury rate of 4.17 stated above, are as follows:

Third Segment

MINIMUM PRESENT VALUE SEGMENT RATES

Generally for plan years beginning after December 31, 2007, the applicable interest rates under § 417(e)(3)(D) are segment rates computed without regard to a

For Plan Years

Beginning in

24-month average. For plan years beginning in 2008 through 2011, the applicable interest rate is the monthly spot segment rate blended with the applicable rate under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning in 2007. Notice 2007–81 provides guidelines for determin

First Segment

Second Segment

2008 4.81 5.06 4.79 2009 5.44 5.95 5.41

DRAFTING INFORMATION

The principal author of this notice is Tony Montanaro of the Employee Plans,

Tax Exempt and Government Entities Division. Mr. Montanaro may be e-mailed at RetirementPlanQuestions@irs.gov .

2008–48 I.R.B. 1209 December 1, 2008

Table I

Monthly Yield Curve for October 2008

Maturity Yield Maturity Yield Maturity Yield Maturity Yield Maturity Yield

December 1, 2008 1210 2008–48 I.R.B.

The user fee required by Rev. Proc. 2008–8, 2008–1 I.R.B. 233, or its successors, must be sent with such requests.

.03 Necessary Procedural Docu- ments .—A request will not be considered unless it complies with (1) and (2) below.

(1) The request must contain a declaration in the following form: “Under the penalties of perjury, I declare that I have examined this request, including accompanying documents, and to the best of my knowledge and belief, the facts presented in support of the request are true, correct, and complete.” This declaration must be signed by an authorized trustee who is a current member of the Board. The signature of an individual with a power of attorney will not suffice for the declaration. See § 9.02(13) of Rev. Proc. 2008–4.

(2) Because an application for an extension constitutes a request for a ruling, compliance with § 6110 is also required. Section 601.201 of the Statement of Procedural Rules sets forth the requirements applicable to requests for rulings and determination letters which are subject to § 6110. Section 601.201(e) furnishes specific instructions to applicants.

The applicant must provide with the request either a statement of proposed deletions and the statutory basis for each proposed deletion, or a statement that no information other than names, addresses, and taxpayer identifying numbers need be deleted.

.04 Notification .—The applicant must provide a copy of a written notification to each employee organization representing employees covered by the plan, to each contributing employer, and to each participant, beneficiary, and alternate payee of the plan, that an application for an extension of the amortization period under § 431(d) has been submitted to the Service. The original of this notice must bear a signature by an authorized trustee who is a current member of the Board and must be in substantially the form set forth in the Model Notice found in the Appendix A to this revenue procedure. The Service does not require the applicant to furnish any information in addition to that required by the Model Notice in the Appendix A to plan participants, beneficiaries, alternate payees, or employee organizations as part of the extension application process, but additional information may, of course, be

26 CFR 601.201: Rulings and determination letters. (Also: Part I, § 431.)

Rev. Proc. 2008–67