Notice 2021-22

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 aver­ age 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).

This notice does not provide 24-month average segment rates determined under § 430(h)(2)(C)(iv) of the Code reflecting the modifications made by § 9706(a) of the American Rescue Plan Act of 2021, Pub. L. No. 117-2 (ARPA), which was en­

acted on March 11, 2021. Those rates will be provided in future guidance.

YIELD CURVE AND SEGMENT RATES

Section 430 specifies the minimum funding requirements that apply to sin­ gle-employer plans (except for CSEC plans under § 414(y)) pursuant to § 412. Section 430(h)(2) specifies the inter­ est rates that must be used to determine a plan’s target normal cost and funding target. Under this provision, present val­ ue is generally determined using three 24-month average interest rates (“segment rates”), each of which applies to cash flows during specified periods. To the ex­ tent provided under § 430(h)(2)(C)(iv), these segment rates are adjusted by the ap­ plicable percentage of the 25-year average segment rates for the period ending Sep­ tember 30 of the year preceding the cal­ endar 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. Con­ sistent with the methodology specified in Notice 2007-81, the monthly corporate bond yield curve derived from February 2021 data is in Table 2021-2 at the end of this notice. The spot first, second, and third segment rates for the month of Feb­ ruary 2021 are, respectively, 0.51, 2.54, and 3.45.

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 applica­ ble minimum and maximum percentages of the corresponding 25-year average seg­ ment rates. The 25-year average segment rates for plan years beginning in 2020, and 2021 were published Notice 2019-51, 2019-41 I.R.B. 866, and Notice 2020-72, 2020-40 I.R.B. 789, respectively.

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)).

Bulletin No. 2021–15 987 April 12, 2021

24-MONTH AVERAGE CORPORATE BOND SEGMENT RATES

The three 24-month average corporate bond segment rates applicable for March

2021 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 March 2021 1.54 2.89 3.55

AMERICAN RESCUE PLAN ACT

25-YEAR AVERAGE SEGMENT RATES

Section 9706(a) of ARPA changes the 25-year average segment rates and the applicable minimum and maximum per­ centages used under § 430(h)(3)(C)(iv) of the Code to adjust the 24-month av­ erage segment rates. Prior to this change, the applicable minimum and maximum percentages were 90% and 110% for a plan year beginning in 2020, and 85% and 115% for a plan year beginning in

2021, respectively. After this change, the applicable minimum and maximum per­ centages are 95% and 105% for a plan year beginning in 2020 or 2021. In addi­ tion, pursuant to this change, any 25-year average segment rate that is less than 5% is deemed to be 5%.

Pursuant to § 9706(c)(1) of ARPA, these changes apply with respect to plan years beginning on or after January 1, 2020. However, § 9706(c)(2) of ARPA provides that a plan sponsor may elect not to have these changes apply to any plan year beginning before January 1, 2022. ²

The rates set forth in this notice do not reflect the changes to § 430(h)(2)(C)(iv) of the Code made by § 9706(a) of ARPA. Accordingly, the adjusted 24-month aver­ age segment rates set forth in this notice apply only for plan years for which an election under § 9706(c)(2) of ARPA is in effect. For a plan year for which such an election applies, the 24-month aver­ ages applicable for March 2021, adjusted to be within the applicable minimum and maximum percentages of the correspond­ ing 25-year average segment rates in ac­ cordance with § 430(h)(2)(C)(iv) of the Code, are as follows:

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

Second Segment

First Segment

Third Segment

Beginning In

Applicable

Month

2020 March 2021 3.64 5.21 5.94

2021 March 2021 3.32 4.79 5.47

of yield on the 30-year Treasury bond ma­ turing in November 2050 determined each day through February 10, 2021, and the yield on the 30-year Treasury bond ma­ turing in February 2051 determined each day for the balance of the month . For plan years beginning in March 2021, the weighted average of the rates of interest on 30-year Treasury securities and the permissible range of rates used to calcu­ late current liability are as follows:

Permissible Range

90% to 105%

30-YEAR TREASURY SECURITIES INTEREST RATES

Section 431 specifies the minimum funding requirements that apply to multi­ employer 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) pro­ vides that the interest rate used to calcu­ late 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 Trea­ sury securities for February 2021 is 2.04 percent. The Service determined this rate as the average of the daily determinations

Treasury Weighted Average Rates For Plan Years 30-Year Treasury

Beginning In

30-Year Treasury Weighted Average

March 2021 2.25 2.03 to 2.37

2 This election may be made either for all purposes for which the amendments under § 9706 of ARPA apply or solely for purposes of determining the adjusted funding target attainment percentage under § 436 of the Code for the plan year.

April 12, 2021 988 Bulletin No. 2021–15

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 guide­ lines for determining the minimum pres­

ent value segment rates. Pursuant to that notice, the minimum present value seg­ ment rates determined for February 2021 are as follows:

Minimum Present Value Segment Rates Month First Segment Second Segment Third Segment February 2021 0.51 2.54 3.45

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. 2021–15 989 April 12, 2021

Table 2021-2 Monthly Yield Curve for February 2021

Derived from February 2021 Data

Maturity Yield Maturity Yield Maturity Yield Maturity Yield Maturity Yield 0.5 0.18 20.5 3.22 40.5 3.48 60.5 3.58 80.5 3.63 1.0 0.23 21.0 3.23 41.0 3.49 61.0 3.58 81.0 3.63 1.5 0.28 21.5 3.24 41.5 3.49 61.5 3.58 81.5 3.63 2.0 0.35 22.0 3.25 42.0 3.49 62.0 3.58 82.0 3.63 2.5 0.42 22.5 3.26 42.5 3.50 62.5 3.58 82.5 3.63 3.0 0.51 23.0 3.27 43.0 3.50 63.0 3.59 83.0 3.63 3.5 0.61 23.5 3.28 43.5 3.50 63.5 3.59 83.5 3.63 4.0 0.72 24.0 3.29 44.0 3.50 64.0 3.59 84.0 3.63 4.5 0.85 24.5 3.30 44.5 3.51 64.5 3.59 84.5 3.63 5.0 0.98 25.0 3.31 45.0 3.51 65.0 3.59 85.0 3.63 5.5 1.12 25.5 3.31 45.5 3.51 65.5 3.59 85.5 3.64 6.0 1.26 26.0 3.32 46.0 3.52 66.0 3.59 86.0 3.64 6.5 1.41 26.5 3.33 46.5 3.52 66.5 3.60 86.5 3.64 7.0 1.56 27.0 3.34 47.0 3.52 67.0 3.60 87.0 3.64 7.5 1.70 27.5 3.34 47.5 3.52 67.5 3.60 87.5 3.64 8.0 1.84 28.0 3.35 48.0 3.53 68.0 3.60 88.0 3.64 8.5 1.97 28.5 3.36 48.5 3.53 68.5 3.60 88.5 3.64 9.0 2.09 29.0 3.37 49.0 3.53 69.0 3.60 89.0 3.64 9.5 2.21 29.5 3.37 49.5 3.53 69.5 3.60 89.5 3.64 10.0 2.32 30.0 3.38 50.0 3.54 70.0 3.60 90.0 3.64 10.5 2.42 30.5 3.39 50.5 3.54 70.5 3.61 90.5 3.64 11.0 2.51 31.0 3.39 51.0 3.54 71.0 3.61 91.0 3.64 11.5 2.60 31.5 3.40 51.5 3.54 71.5 3.61 91.5 3.64 12.0 2.67 32.0 3.40 52.0 3.55 72.0 3.61 92.0 3.65 12.5 2.74 32.5 3.41 52.5 3.55 72.5 3.61 92.5 3.65 13.0 2.80 33.0 3.42 53.0 3.55 73.0 3.61 93.0 3.65 13.5 2.86 33.5 3.42 53.5 3.55 73.5 3.61 93.5 3.65 14.0 2.90 34.0 3.43 54.0 3.55 74.0 3.61 94.0 3.65 14.5 2.95 34.5 3.43 54.5 3.56 74.5 3.61 94.5 3.65 15.0 2.99 35.0 3.44 55.0 3.56 75.0 3.62 95.0 3.65 15.5 3.02 35.5 3.44 55.5 3.56 75.5 3.62 95.5 3.65 16.0 3.05 36.0 3.45 56.0 3.56 76.0 3.62 96.0 3.65 16.5 3.08 36.5 3.45 56.5 3.56 76.5 3.62 96.5 3.65 17.0 3.10 37.0 3.45 57.0 3.57 77.0 3.62 97.0 3.65 17.5 3.12 37.5 3.46 57.5 3.57 77.5 3.62 97.5 3.65 18.0 3.14 38.0 3.46 58.0 3.57 78.0 3.62 98.0 3.65 18.5 3.16 38.5 3.47 58.5 3.57 78.5 3.62 98.5 3.65 19.0 3.18 39.0 3.47 59.0 3.57 79.0 3.62 99.0 3.65 19.5 3.19 39.5 3.47 59.5 3.57 79.5 3.62 99.5 3.65 20.0 3.20 40.0 3.48 60.0 3.58 80.0 3.63 100.0 3.66

April 12, 2021 990 Bulletin No. 2021–15

Code of 1954, the predecessor of § 143 of the Code) provides that the term “State” includes a possession of the United States and the District of Columbia.

.07 Section 6a.103A-2(f)(5)(i) pro­ vides that an issuer may rely upon the average area purchase price safe harbors published by the Department of the Trea­ sury (Treasury Department) for the statis­ tical area in which a residence is located. Section 6a.103A-2(f)(5)(i) further pro­ vides that an issuer may use an average area purchase price limitation different from the published safe harbor if the issu­ er has more accurate and comprehensive data for the statistical area.

Qualified Mortgage Credit Certificate Program

.08 Section 25(c) permits a State or political subdivision thereof to establish a qualified mortgage credit certificate program. In general, a qualified mortgage credit certificate program is a program under which the issuing authority elects not to issue an amount of private activity bonds that it may otherwise issue during the calendar year under § 146, and in its place, issues mortgage credit certificates to taxpayers in connection with the acqui­ sition of their principal residences. Sec­ tion 25(a)(1) provides, in general, that the holder of a mortgage credit certificate may claim a federal income tax credit equal to the product of the credit rate specified in the certificate and the interest paid or ac­ crued during the tax year on the remaining principal of the indebtedness incurred to acquire the residence. Section 25(c)(2)(A) (iii)(III) generally provides that residenc­ es acquired in connection with the issu­ ance of mortgage credit certificates must meet the purchase price requirements of § 143(e).

Income Limitations for Qualified Mortgage Bonds and Mortgage Credit Certificates

.09 Section 143(f) imposes limitations on the income of mortgagors for whom financing may be provided by qualified mortgage bonds. In addition, § 25(c)(2)(A) (iii)(IV) provides that holders of mortgage credit certificates must meet the income requirement of § 143(f). Generally, under

26 CFR 601.601: Rules and Regulations (Also Part 1, §§ 25, 143, 6a.103A-1(b)(4), 6a.103A-2(f)(5)).