Part III. — Internal Revenue Bulletin 2016-18

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

Notice 2016–29

This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the Internal Revenue Code. 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 and the 30year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I).

YIELD CURVE AND SEGMENT RATES

Generally, except for certain plans under sections 104 and 105 of the Pension Protection Act of 2006 and CSEC plans under § 414(y), § 430 of the Code specifies the minimum funding requirements

Applicable

Month

First Segment

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 (“segment rates”), each of which applies to cash flows during specified periods. To the extent provided under § 430(h)(2)(C)(iv), these segment rates are adjusted by the applicable percentage of the 25-year average segment rates for the period ending September 30 of the year preceding the calendar year in which the plan year begins. ¹ However, an election may be made under § 430(h)(2)(D)(ii) to use the monthly yield curve in place of the segment rates.

Notice 2007–81, 2007–44 I.R.B. 899, provides guidelines for determining the 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. Consistent with the methodology specified in Notice 2007–81, the monthly corporate bond yield curve derived from March 2016 data is in Table I at the end of this

notice. The spot first, second, and third segment rates for the month of March 2016 are, respectively, 1.68, 3.87, and 4.84. The 24-month average segment rates determined under § 430(h)(2)(C)(i) through (iii) must be adjusted pursuant to § 430(h)(2)(C)(iv) to be within the applicable minimum and maximum percentages of the corresponding 25-year average segment rates. For plan years beginning before 2018, the applicable minimum percentage is 90% and the applicable maximum percentage is 110%. The 25-year average segment rates for plan years beginning in 2014, 2015, and 2016 were published in Notice 2013–58, 2013–40 I.R.B. 294, Notice 2014–50, 2014–40 I.R.B. 590, and Notice 2015–61, 2015–39 I.R.B. 408, respectively.

24-MONTH AVERAGE CORPORATE BOND SEGMENT RATES

The three 24-month average corporate bond segment rates applicable for April 2016 without adjustment for the 25-year average segment rate limits are as follows:

Third Segment

Second Segment

April 2016 1.47 3.92 4.92

Based on § 430(h)(2)(C)(iv), the 24month averages applicable for April 2016

For Plan

adjusted to be within the applicable minimum and maximum percentages of the

Adjusted 24-Month Average

Segment Rates

corresponding 25-year average segment rates, are as follows:

Years Beginning

First Second Third

In Applicable Month Segment Segment Segment

2015 April 2016 4.72 6.11 6.81

2016 April 2016 4.43 5.91 6.65

Second Segment

Applicable Month

First Segment

30-YEAR TREASURY SECURITIES INTEREST RATES

Generally for plan years beginning after 2007, § 431 specifies the minimum funding requirements that apply to multiemployer plans pursuant to § 412. Sec

tion 431(c)(6)(B) specifies a minimum amount for the full-funding limitation described in § 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

1Pursuant to § 433(h)(3)(A), the 3rd segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount of the full funding limitation under § 433(c)(7)(C)).

Bulletin No. 2016–18 673 May 2, 2016

average interest rate. The rate of interest on 30-year Treasury securities for March 2016 is 2.68 percent. The Service determined this rate as the average of the daily

For Plan Years

Beginning in

determinations of yield on the 30-year Treasury bond maturing in February 2046. For plan years beginning in the month shown below, the weighted average of the

30-Year Treasury Weighted

rates of interest on 30-year Treasury securities and the permissible range of rate used to calculate current liability are as follows:

Permissible Range

Month Year Average 90% to 105%

April 2016 3.08 2.77 3.23

MINIMUM PRESENT VALUE SEGMENT RATES

In general, the applicable interest rates under § 417(e)(3)(D) are segment rates

First Segment

computed without regard to a 24-month average. Notice 2007–81 provides guidelines for determining the minimum present value segment rates. Pursuant to that notice, the minimum present value seg

Second Segment

ment rates determined for March 2016 are as follows:

Third Segment

1.68 3.87 4.84

DRAFTING INFORMATION

The principal author of this notice is Tom Morgan of the Office of the Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the IRS participated in the development of this guidance. For further information regarding this notice, contact Mr. Morgan at 202-317-6700 or Tony Montanaro at 202-317-8698 (not toll-free numbers).

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Table I Monthly Yield Curve for March 2016

Derived from March 2016 Data

Maturity Yield Maturity Yield Maturity Yield Maturity Yield Maturity Yield

Bulletin No. 2016–18 675 May 2, 2016

Designation of Private Delivery Services

Notice 2016–30

This notice updates the list of designated private delivery services (“designated PDSs”) set forth in Notice 2015–38, 2015–21 I.R.B. 21, for purposes of the timely mailing treated as timely filing/ paying rule of section 7502 of the Internal Revenue Code, and provides rules for determining the postmark date for these services. These changes are effective April 11, 2016.

BACKGROUND

Section 7502(f) authorizes the Secretary to designate certain private delivery services (“PDSs”) for the timely mailing treated as timely filing/paying rule of section 7502. Revenue Procedure 97–19, 1997–1 C.B. 644, provided rules to apply to be a designated PDS, as well as setting forth the criteria for eligibility for designation as a PDS. Originally, under Rev. Proc. 97–19, there was a semi-annual application period for designation as a PDS with set dates for announcing the list of designated PDSs to the public. The current rules provide that there is one annual application period to apply for designation, ending on June 30th, and the list of designated PDSs is updated as PDSs are added or removed from the list. See Notice 97–50, 1997–2 C.B. 305, and Notice 99–41, 1999–2 C.B. 325. In addition, the address for submitting applications listed in Rev. Proc. 97–19 was updated in Notice 2015–38, 2015–21 I.R.B. 21.

Notice 97–26, 1997–1 C.B. 413, provided the first list of designated PDSs as well as special rules to determine the date that will be treated as the postmark date for purposes of section 7502, including certain presumption rules and rules for overcoming the presumption. The list of designated PDS services was updated by Notice 97–50, Notice 99–41, Notice 2001–62, 2001–2 C.B. 307, Notice 2002– 62, 2002–2 C.B. 574, Notice 2004–83, 2004–2 C.B. 1030, and Notice 2015–38, 2015–21 I.R.B. 21.

NATURE OF CHANGES

The IRS is adding eight new delivery services to the list of designated delivery services. DHL Express: DHL Express 9:00, DHL Express 10:30, DHL Express 12:00, DHL Express Worldwide, DHL Express Envelope, DHL Import Express 10:30, DHL Import Express 12:00, and DHL Import Express Worldwide are added to the list published in Notice 2015–38. This notice also extends the rules provided in Notice 2015–38 for determining the postmark date for documents delivered by a designated delivery service to the newly designated delivery services referenced above.

LIST OF DESIGNATED PDSs

Effective April 11, 2016, the list of designated PDSs is as follows: DHL Express:

DHL Express 9:00
DHL Express 10:30
DHL Express 12:00
DHL Express Worldwide
DHL Express Envelope
DHL Import Express 10:30
DHL Import Express 12:00
DHL Import Express Worldwide FedEx:
FedEx First Overnight
FedEx Priority Overnight
FedEx Standard Overnight
FedEx 2 Day
FedEx International Next Flight Out
FedEx International Priority
FedEx International First
FedEx International Economy UPS:
UPS Next Day Air Early AM
UPS Next Day Air
UPS Next Day Air Saver
UPS 2nd Day Air
UPS 2nd Day Air A.M.
UPS Worldwide Express Plus
UPS Worldwide Express.

Only the specific delivery services enumerated in this list are designated delivery services for purposes of section 7502(f). DHL Express, FedEx, and UPS are not designated with respect to any type of delivery service not enumerated in this list. Taxpayers are cautioned that merely because a delivery service is provided

by DHL Express, FedEx, or UPS, it does not mean that the service is designated for purposes of the timely mailing treated as timely filing/paying rule of section 7502.

This list of designated PDSs and designated services will remain in effect until further notice. The IRS will publish a subsequent notice setting forth a new list only if a designated PDS (or service) is added to, or removed from, the current list, or if there is a change to the application and/or appeal procedures. Delivery services requesting to be designated in time for an upcoming filing season must submit applications by June 30th of the year preceding that filing season, as required by Rev. Proc. 97–19, as modified by Notice 97–50.

SPECIAL RULES FOR DETERMINING POSTMARK DATE IN THE CASE OF A PDS

Section 7502(f)(2)(C) requires a PDS to either (1) record electronically to its data base (kept in the regular course of its business) the date on which an item was given to the PDS for delivery or (2) mark on the cover of the item the date on which an item was given to the PDS for delivery. Under section 7502(f)(1), the date recorded or the date marked by the PDS under section 7502(f)(2)(C) is treated as the postmark date for purposes of section 7502.

For each PDS designated in this notice, the delivery service records electronically the date on which an item was given to it for delivery, which is treated as the postmark date for purposes of section 7502. Under this notice, the postmark date for an item delivered after the due date is presumed to be the day that precedes the delivery date by an amount of time that equals the amount of time it would normally take for an item to be delivered under the terms of the specific type of delivery service used ( e.g., two days before the actual delivery date for a two-day delivery service). Taxpayers who wish to overcome this presumption must provide information that shows that the date recorded in the delivery service’s electronic database is on or before the due date, such as a written confirmation produced and issued by the delivery service. Each delivery service stores the date recorded in its database only for a finite period, but for no

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less than six months. Senders or recipients using a designated delivery service can obtain information concerning the date recorded by contacting the designated delivery service. Contact information for each delivery service is available on the company’s website.

ADDRESS FOR SUBMITTING APPLICATIONS

The application address first provided in Rev. Proc. 97–19 and modified by Notice 2015–38 remains in effect. Applications must be submitted to:

Internal Revenue Service Postal and Transport Policy Section, PDS MC 7015 NDAL 4050 Alpha Road Dallas, TX 75244

The above address is also where a PDS may write to: (1) obtain administrative review of a letter of denial of designation under section 9.03 of Rev. Proc. 97–19; (2) appeal a letter confirming the denial of designation under section 9.06 of Rev. Proc. 97–19; (3) provide prompt written notification to the IRS of any change in application information under section 10.01 of Rev. Proc. 97–19; and (4) appeal the issuance of a proposed revocation letter under section 12.03 of Rev. Proc. 97–19.

EFFECT ON OTHER DOCUMENTS

Notice 2015–38, 2015–21 I.R.B. 21, is modified and, to the extent modified, superseded.

EFFECTIVE DATE

This notice is effective on April 11, 2016.

FOR FURTHER INFORMATION

The principal author of this notice is Steven L. Karon of the Office of Associate Chief Counsel (Procedure & Administration). For further information regarding this notice contact Steven L. Karon at (202) 317-6834 (not a toll-free number).

26 CFR 601.105: Examination of returns and claims for refund, credit, or abatement; determination of correct tax liability. (Also §§ 36B, 5000A; 1.36B–2T, 1.36B–3, 1.5000A–3.)

Rev. Proc. 2016–24