Notice 2020-45

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 single-employer plans (except for CSEC

Bulletin No. 2020–27 3 June 29, 2020

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. 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 May 2020 data is in Table 2020-5 at the end of this notice. The spot first, second, and third segment rates for the month of May 2020 are, respectively, 1.08, 2.78, and 3.47.

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 percentag

es 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 2019 and 2020 were published in Notice 2018-73, 2018-40 I.R.B. 526, and Notice 2019-51, 2019-41 I.R.B. 866, respectively.

24-MONTH AVERAGE CORPORATE BOND SEGMENT RATES

The three 24-month average corporate bond segment rates applicable for June 2020 without adjustment for the 25-year 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

June 2020 2.54 3.61 4.09

Based on § 430(h)(2)(C)(iv), the 2020, adjusted to be within the applicable 24-month averages applicable for June minimum and maximum percentages of

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

Adjusted 24-Month Average Segment Rates For Plan Years Applicable First

Second Segment

First Segment

Third Segment

Beginning In

Applicable

Month

2019 June 2020 3.74 5.35 6.11

2020 June 2020 3.64 5.21 5.94

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 May 2020 is 1.38 percent. The Service determined this rate as the aver

age of the daily determinations of yield on the 30-year Treasury bond maturing in February 2050 determined each day through May 12, 2020 and the yield on the 30-year Treasury bond maturing in May 2050 determined each day for the balance of the month. For plan years beginning in June 2020, the weighted average of the rates of interest on 30-year Treasury securities and the permissible range of rates used to calculate current liability are as follows:

Permissible Range

90% to 105%

Treasury Weighted Average Rates For Plan Years 30-Year Treasury

Beginning In

30-Year Treasury Weighted Average

June 2020 2.59 2.33 to 2.72

1 Pursuant 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)).

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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 pres

ent value segment rates. Pursuant to that notice, the minimum present value segment rates determined for May 2020 are as follows:

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

May 2020 1.08 2.78 3.47

DRAFTING INFORMATION

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

ciate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). 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 202-3178702 (not toll-free numbers).

Bulletin No. 2020–27 5 June 29, 2020

Table 2020-5

Monthly Yield Curve for May 2020

Derived from May 2020 Data

Maturity Yield Maturity Yield Maturity Yield Maturity Yield Maturity Yield 0.5 0.67 20.5 3.34 40.5 3.49 60.5 3.55 80.5 3.58 1.0 0.80 21.0 3.35 41.0 3.49 61.0 3.55 81.0 3.58 1.5 0.92 21.5 3.35 41.5 3.49 61.5 3.55 81.5 3.58 2.0 1.01 22.0 3.36 42.0 3.50 62.0 3.55 82.0 3.58 2.5 1.08 22.5 3.36 42.5 3.50 62.5 3.55 82.5 3.58 3.0 1.13 23.0 3.37 43.0 3.50 63.0 3.55 83.0 3.58 3.5 1.19 23.5 3.37 43.5 3.50 63.5 3.55 83.5 3.58 4.0 1.26 24.0 3.38 44.0 3.50 64.0 3.56 84.0 3.58 4.5 1.34 24.5 3.38 44.5 3.51 64.5 3.56 84.5 3.58 5.0 1.43 25.0 3.39 45.0 3.51 65.0 3.56 85.0 3.58 5.5 1.54 25.5 3.39 45.5 3.51 65.5 3.56 85.5 3.58 6.0 1.65 26.0 3.39 46.0 3.51 66.0 3.56 86.0 3.58 6.5 1.78 26.5 3.40 46.5 3.51 66.5 3.56 86.5 3.58 7.0 1.90 27.0 3.40 47.0 3.51 67.0 3.56 87.0 3.58 7.5 2.03 27.5 3.41 47.5 3.52 67.5 3.56 87.5 3.59 8.0 2.16 28.0 3.41 48.0 3.52 68.0 3.56 88.0 3.59 8.5 2.28 28.5 3.42 48.5 3.52 68.5 3.56 88.5 3.59 9.0 2.39 29.0 3.42 49.0 3.52 69.0 3.56 89.0 3.59 9.5 2.50 29.5 3.42 49.5 3.52 69.5 3.56 89.5 3.59 10.0 2.60 30.0 3.43 50.0 3.52 70.0 3.56 90.0 3.59 10.5 2.69 30.5 3.43 50.5 3.53 70.5 3.57 90.5 3.59 11.0 2.78 31.0 3.44 51.0 3.53 71.0 3.57 91.0 3.59 11.5 2.85 31.5 3.44 51.5 3.53 71.5 3.57 91.5 3.59 12.0 2.92 32.0 3.44 52.0 3.53 72.0 3.57 92.0 3.59 12.5 2.98 32.5 3.45 52.5 3.53 72.5 3.57 92.5 3.59 13.0 3.04 33.0 3.45 53.0 3.53 73.0 3.57 93.0 3.59 13.5 3.08 33.5 3.45 53.5 3.53 73.5 3.57 93.5 3.59 14.0 3.12 34.0 3.46 54.0 3.53 74.0 3.57 94.0 3.59 14.5 3.16 34.5 3.46 54.5 3.54 74.5 3.57 94.5 3.59 15.0 3.19 35.0 3.46 55.0 3.54 75.0 3.57 95.0 3.59 15.5 3.21 35.5 3.47 55.5 3.54 75.5 3.57 95.5 3.59 16.0 3.24 36.0 3.47 56.0 3.54 76.0 3.57 96.0 3.59 16.5 3.26 36.5 3.47 56.5 3.54 76.5 3.57 96.5 3.59 17.0 3.27 37.0 3.47 57.0 3.54 77.0 3.57 97.0 3.59 17.5 3.29 37.5 3.48 57.5 3.54 77.5 3.57 97.5 3.59 18.0 3.30 38.0 3.48 58.0 3.54 78.0 3.58 98.0 3.59 18.5 3.31 38.5 3.48 58.5 3.54 78.5 3.58 98.5 3.59 19.0 3.32 39.0 3.48 59.0 3.55 79.0 3.58 99.0 3.59 19.5 3.33 39.5 3.49 59.5 3.55 79.5 3.58 99.5 3.60 20.0 3.34 40.0 3.49 60.0 3.55 80.0 3.58 100.0 3.60

June 29, 2020 6 Bulletin No. 2020–27

ority Guidance Plan each year to identify and prioritize the tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance. The 2020-2021 Priority Guidance Plan will identify guidance projects that the Treasury Department and the Service intend to actively work on as priorities during the period from July 1, 2020, through June 30, 2021.

The Treasury Department and the Service recognize the importance of public input in formulating a Priority Guidance Plan that focuses resources on guidance items that are most important to taxpayers and tax administration. Published guidance plays an important role in increasing voluntary compliance by helping to clarify ambiguous areas of the tax law. The published guidance process is most successful if the Treasury Department and the Service have the benefit of the experience and knowledge of taxpayers and practitioners who must apply the rules implementing the tax laws.

In reviewing recommendations and selecting additional projects for inclusion on the 2020-2021 Priority Guidance Plan, the Treasury Department and the Service will consider the following:

1. Whether the recommended guidance resolves significant issues relevant to a broad class of taxpayers;
2. Whether the recommended guidance reduces controversy and lessens the burden on taxpayers or the Service;
3. Whether the recommended guidance relates to recently enacted legislation;
4. Whether the recommendation involves existing regulations or other guidance that is outdated, unnecessary, ineffective, insufficient, or unnecessarily burdensome and that should be modified, streamlined, expanded, replaced, or withdrawn;
5. Whether the recommended guidance would be in accordance with Executive Order 13771 (82 FR 9339), Executive Order 13777 (82 FR 12285), Executive Order 13789 (82 FR 19317), or other executive orders.
6. Whether the recommended guidance promotes sound tax administration;

Treatment of Amounts Paid to Section 170(c) Organizations under Employer Leave-Based Donation Programs to Aid Victims of the Coronavirus Disease (COVID-19) Pandemic