Part III. Administrative, Procedural, and Miscellaneous

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

Notice 2012–10

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), and the 24-month average 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 cor

porate 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 December 2011 is 4.71 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%

January 2012 5.72 5.15 5.72

monthly corporate bond yield curve, and the 24-month average corporate bond 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 December 2011 data is in Table I at the end of this notice. The spot first, second, and third segment rates for the month of December 2011 are, respectively, 2.07, 4.45, and 5.24. The three 24-month average corporate bond segment rates applicable for January 2012 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. Section 430(h)(2)G) set forth a transitional rule applicable to plan years beginning in 2008 and 2009 under which the segment rates were blended with the corporate bond weighted average described above, including an election under § 430(h)(2)(G)(iv) for an employer to use the segment rates without the transitional rule.

Notice 2007–81, 2007–2 C.B. 899, provides guidelines for determining the

Second Segment

1.98 5.07 6.19

The transitional rule of § 430(h)(2)(G) does not apply to plan years beginning after December 31, 2009. Therefore, for a

plan year beginning after 2009 with a lookback month to January 2012, the funding segment rates are the three 24-month aver

age corporate bond segment rates applicable for January 2012, listed above without blending for any transitional period.

2012–5 I.R.B. 343 January 30, 2012

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 December 2011 is 2.98 percent. The Service has determined this rate as the average of the daily determinations of yield on the 30-year Treasury bond maturing in November 2041.

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%

January 2012 4.08 3.67 4.29

termining the minimum present value segment rates. Pursuant to that notice, the minimum present value transitional segment rates determined for December 2011, taking into account the December 2011 30-year Treasury rate of 2.98 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 rates are the monthly spot segment rates 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 de

First Segment

Second Segment

2011 2.25 4.16 4.79 2012 2.07 4.45 5.24

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 .

January 30, 2012 344 2012–5 I.R.B.

Table I

Monthly Yield Curve for December 2011

Derived from December 2011 Data

Maturity Yield Maturity Yield Maturity Yield Maturity Yield Maturity Yield

2012–5 I.R.B. 345 January 30, 2012

required by section 6045B(c). The Service has learned that a number of questions have arisen following the release of the final Form 8937 and instructions and recognizes that the release date provides a very limited timeframe remaining before the due date of the form.

Accordingly, the Service will permit an issuer to publicly report an organizational action by posting either Form 8937 or the required information in a readily accessible format to an area of its primary public Web site. The Service will treat the issuer as having filed Form 8937 and furnished issuer statements to stockholders or nominees on the date of posting of the Form 8937 or the required information. Further, the Service will not impose penalties for reporting incorrect information under sections 6721 and 6722 on issuers that must file information returns and furnish statements under section 6045B provided that they make good-faith efforts to timely post the Form 8937 or the required information on their primary public Web sites or file accurate Forms 8937 and furnish the corresponding issuer statements. The potential impact of the issues addressed in this notice will be considered in assessing reasonable cause with respect to broker reporting required under section 6045(g).

This transitional relief is limited to reporting organizational actions occurring in 2011. This transitional relief does not apply to issuers of stock in a regulated investment company, which are not subject to the issuer reporting requirements for 2011 organizational actions.

DRAFTING INFORMATION

The principal author of this notice is Carlton King of the Office of Associate Chief Counsel (Procedure & Administration). For further information regarding this notice, please contact Carlton King at (202) 622–4910 (not a toll-free call).

Transitional Relief for Section 6045B Issuer Returns and Statements for 2011 Organizational Actions

Notice 2012–11

PURPOSE

This notice provides transitional relief from information reporting requirements in section 6045B of the Internal Revenue Code that apply to issuers of stock with respect to organizational actions that affect the basis of the stock. This notice provides that posting either Form 8937, Report of Organizational Actions Affecting Basis of Securities, or the required information in a readily accessible format to an issuer’s primary public Web site will satisfy an issuer’s requirement to file and furnish Form 8937 for organizational actions occurring in 2011. This notice also provides that the Internal Revenue Service will not impose penalties for reporting incorrect information against issuers under sections 6721 or 6722 related to filing and furnishing Form 8937 for 2011 organizational actions provided that they make good-faith efforts in timely posting the Form 8937 or the required information on the issuers’ primary public Web sites or filing accurate Forms 8937 and furnishing the corresponding issuer statements.

BACKGROUND

Section 403 of the Energy Improvement and Extension Act of 2008, Div. B of Pub. L. No. 110–343, 122 Stat. 3765, enacted on October 3, 2008, added section 6045B to the Code. Section 6045B provides that, for organizational actions beginning in 2011, an issuer of stock must

file a return with the Service to describe any organizational action (such as a stock split, merger, or acquisition) that affects the basis of a specified security. Under section 6045B(d) and section 6045(g)(3)(B), in 2011, a specified security is limited to stock in a corporation. The issuer generally must file the return within 45 days after the organizational action. The issuer must also furnish a corresponding statement to each nominee of the stockholder (or to each stockholder if there is no nominee) by January 15th of the year following the calendar year of the organizational action.

Because January 15, 2012, is a Sunday and January 16, 2012, is a Federal holiday, issuers must furnish the required statements to stockholders or nominees by January 17, 2012. Further, the Service announced that issuers may report 2011 organizational actions without penalty if Form 8937 is filed by January 17, 2012. Notice 2011–18, 2011–11 I.R.B. 549 (March 14, 2011). An issuer is not required to file an issuer return with the Service or furnish issuer statements to stockholders or nominees if it posts the return on its primary public Web site in a readily accessible format by the filing date. Treas. Reg. § 1.6045B–1(a)(3), (b)(4).

The requirements under section 6045B do not apply to issuers of stock in a regulated investment company until 2012.

TRANSITIONAL INFORMATION REPORTING REQUIREMENTS FOR ISSUERS OF STOCK REPORTING ORGANIZATIONAL ACTIONS TAKEN IN 2011

Section 6721 imposes a penalty on any issuer of stock that does not timely file a correct issuer return with the Service as required by section 6045B(a). Section 6722 imposes a penalty on any issuer of stock that does not timely furnish correct issuer statements to stockholders or nominees as

January 30, 2012 346 2012–5 I.R.B.