Part III. — Internal Revenue Bulletin 2018-50

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

Notice 2018–86

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

Section 430 specifies the minimum funding requirements that apply to singleemployer plans (except for CSEC plans under § 414(y)) 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. ²⁰⁸ 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 October 2018 data is in Table 2018-10 at the end

of this notice. The spot first, second, and third segment rates for the month of October 2018 are, respectively, 3.33, 4.39, and 4.72.

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 2021, the applicable minimum percentage is 90% and the applicable maximum percentage is 110%. The 25-year average segment rates for plan years beginning in 2017, 2018, and 2019 were published in Notice 2016–54, 2016–40 I.R.B. 429, Notice 2017–50, 2017–41 I.R.B. 280, and Notice 2018–73, 2018–40 I.R.B. 526, respectively.

24-MONTH AVERAGE CORPORATE BOND SEGMENT RATES

The three 24-month average corporate bond segment rates applicable for November 2018 without adjustment for the 25year average segment rate limits are as follows:

24-Month Average Segment Rates Without 25-Year Average Adjustment Applicable Month First Segment Second Segment Third Segment

November 2018 2.43 3.89 4.49

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

2018, adjusted to be within the applicable minimum and maximum percentages of

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

Adjusted 24-Month Average Segment Rates For Plan Years

Beginning In Applicable Month First Segment Second Segment Third Segment

2017 November 2018 4.16 5.72 6.48

2018 November 2018 3.92 5.52 6.29

2019 November 2018 3.74 5.35 6.11

30-YEAR TREASURY SECURITIES INTEREST RATES

Section 431 specifies the minimum funding requirements that apply to multiemployer plans pursuant to § 412. Section 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 average interest rate. The rate of interest on 30-year Treasury securities for October 2018 is 3.34 percent. The Service determined this rate as the average of the daily determinations of yield on the 30-year

208Pursuant 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)).

December 10, 2018 982 Bulletin No. 2018–50

Treasury bond maturing in August 2048. For plan years beginning in November

2018, the weighted average of the rates of interest on 30-year Treasury securities and

Treasury Weighted Average Rates

the permissible range of rates used to calculate current liability are as follows:

Permissible Range

For Plan Years Beginning In

Years Beginning In Weighted Average 90% to 105%

November 2018 2.90 2.61 to 3.04

30-Year Treasury Weighted Average

MINIMUM PRESENT VALUE SEGMENT RATES

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

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

ment rates determined for October 2018 are as follows:

Minimum Present Value Segment Rates Month First Segment Second Segment Third Segment

October 2018 3.33 4.39 4.72

DRAFTING INFORMATION

The principal author of this notice is Tom Morgan of the Office of the Associ

ate 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 Paul Stern at 202-317-8702 (not toll-free numbers).

Bulletin No. 2018–50 983 December 10, 2018

Table 2018–10 Monthly Yield Curve for October 2018

Derived from October 2018 Data

Maturity Yield Maturity Yield Maturity Yield Maturity Yield Maturity Yield

December 10, 2018 984 Bulletin No. 2018–50

2018 Required Amendments List for Qualified Retirement Plans

Notice 2018–91

I. PURPOSE

This notice contains the Required Amendments List for 2018 (2018 RA List). Section 5 of Rev. Proc. 2016–37, 2016–29 I.R.B. 136, provides that, in the case of an individually designed plan, the remedial amendment period for a disqualifying provision arising as a result of a change in qualification requirements generally is extended to the end of the second calendar year that begins after the issuance of the Required Amendments List (RA List) in which the change in qualification requirements appears. There are no entries listing changes in qualification requirements on the 2018 RA List.

II. BACKGROUND

Section 401(b) of the Internal Revenue Code (Code) provides a remedial amendment period during which a plan may be amended retroactively to comply with the qualification requirements under § 401(a). Section 1.401(b)–1 describes the disqualifying provisions that may be amended retroactively and the remedial amendment period during which retroactive amendments may be adopted. Those regulations also grant the Commissioner the discretion to designate certain plan provisions as disqualifying provisions and to extend the remedial amendment period.

Sections 5.05(3) and 5.06(3) of Rev. Proc. 2016–37 extend the remedial amendment period for individually designed plans to correct disqualifying provisions that arise as a result of a change in qualification requirements. Under section 5.05(3), the remedial amendment period for a plan that is not a governmental plan (as defined in § 414(d)) is extended to the end of the second calendar year that begins after the issuance of the RA List on which the change in qualification requirements appears. Section 5.06(3) provides a

special rule for governmental plans that could further extend the remedial amendment period in some cases.

Section 8.01 of Rev. Proc. 2016–37 provides that the plan amendment deadline with respect to a disqualifying provision described in section 5 of Rev. Proc. 2016–37 is the date on which the remedial amendment period ends with respect to that disqualifying provision.

Section 9 of Rev. Proc. 2016–37 provides that the Department of the Treasury (the Treasury Department) and the Internal Revenue Service (IRS) intend to publish an RA List annually. In general, a change in qualification requirements will not appear on an RA List until guidance with respect to that change (including, in certain cases, model amendments) has been provided in regulations or in other guidance published in the Internal Revenue Bulletin. However, in the discretion of the Treasury Department and the IRS, a change in qualification requirements may be included on an RA List in other circumstances, such as in cases in which a statutory change is enacted and the Treasury Department and the IRS anticipate that no guidance will be issued.

III. CONTENT OF RA LIST

In general, an RA List includes statutory and administrative changes in qualification requirements that are first effective during the plan year in which the list is published. ²⁰⁹ However, an RA List does not include guidance issued or legislation enacted after the list has been prepared and also does not include:

Statutory changes in qualification requirements for which the Treasury Department and the IRS expect to issue guidance (which would be included on an RA List issued in a future year);
Changes in qualification requirements that permit (but do not require) optional plan provisions (in contrast to changes in the qualification requirements that cause existing plan provisions, which may include optional plan provisions previously adopted, to

become disqualifying provisions); ²¹⁰

Changes in the tax laws affecting qualified plans that do not change the qualification requirements under § 401(a) (such as changes to the tax treatment of plan distributions, or changes to the funding requirements for qualified plans). Annual, monthly, or other periodic changes to (1) the various dollar limits that are adjusted for cost of living increases as provided in § 415(d) or other Code provisions, (2) the spot segment rates used to determine the applicable interest rate under § 417(e)(3), and (3) the applicable mortality table under § 417(e)(3), are treated as included on the RA List for the year in which such changes are effective even though they are not directly referenced on that RA List. The Treasury Department and the IRS anticipate that few plans have language that will need to be amended on account of these changes.

IV. 2018 REQUIRED AMENDMENTS LIST

There are no entries listing changes in qualification requirements on the 2018 RA List.

V. DRAFTING INFORMATION

The principal author of this notice is Angelique Carrington of the Office of Associate Chief Counsel (Tax Exempt and Government Entities). For further information regarding this notice, contact Ms. Carrington at (202) 317-4148 (not a tollfree number).

26 CFR 601.204: Changes in accounting periods and in methods of accounting.(Also Part I, §§ 263A, 471; 1.263A–1, 1.263A–2, 1.263A–3, 1.471–3.)

Rev. Proc. 2018–56