Notice 2023-12

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 sin

gle-employer 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. 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 December 2022 data is in Table 2022-12 at the end of this notice. The spot first, second, and third segment rates for the month of December 2022 are, respectively, 4.84, 5.15, and 4.85.

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. The 25-year average segment rates for plan years beginning in 2021, 2022 and 2023 were published in Notice 2020-72, 2020-40 I.R.B. 789, Notice 2021-54, 2021-41 I.R.B. 457, and Notice 2022-40, 2022-40 I.R.B. 266, respectively.

24-MONTH AVERAGE CORPORATE BOND SEGMENT RATES

The three 24-month average corporate bond segment rates applicable for January 2023 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 January 2023 2.13 3.62 3.93

Section 9706(a) of the American Rescue Plan Act of 2021, Pub. L. 117-2 (the ARP), which was enacted on March 11, 2021, changed the 25-year average segment rates and the applicable minimum and maximum percentages used under § 430(h)(2)(C)(iv) of the Code to adjust the 24-month average segment rates. ² Prior to this change, the applicable minimum and maximum percentages were 85% and 115% for a plan year beginning in 2021, and 80% and 120% for a plan year be

ginning in 2022, respectively. After this change, the applicable minimum and maximum percentages are 95% and 105% for a plan year beginning in 2021, 2022, or 2023. In addition, pursuant to this change, any 25-year average segment rate that is less than 5% is deemed to be 5%. ³

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

to have these changes apply to any plan year beginning before January 1, 2022. ⁴

The adjusted 24-month average segment rates set forth in the chart below reflect § 430(h)(2)(C)(iv) of the Code as amended by § 9706(a) of the ARP. These adjusted 24-month average segment rates apply only for plan years for which an election under § 9706(c)(2) of the ARP is not in effect. For a plan year for which such an election does not apply, the 24-month averages applicable

1 Pursuant to § 433(h)(3)(A), the third 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)).

2 Section 80602 of the Infrastructure Investment and Jobs Act, Pub. L. 117-58, makes further changes to the time periods for which specified applicable minimum and maximum percentages apply.

3 Pursuant to this change, the 25-year averages of the first segment rate for 2021 and 2022 are increased to 5.00% because those 25-year averages as originally published are below 5.00%.

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

February 6, 2023 450 Bulletin No. 2023–6

for January 2023, adjusted to be within the applicable minimum and maximum

percentages of the corresponding 25year average segment rates in accordance

with § 430(h)(2)(C)(iv) of the Code, are as follows:

Adjusted 24-Month Average Segment Rates For Plan Years

Beginning In Applicable Month First Segment Second Segment Third Segment

2021 January 2023 4.75 5.36 6.11

2022 January 2023 4.75 5.18 5.92

2023 January 2023 4.75 5.00 5.74

The adjusted 24-month average segment rates set forth in the chart below do not reflect the changes to § 430(h)(2)(C) (iv) of the Code made by § 9706(a) of the ARP. These adjusted 24-month average

segment rates apply only for plan years for which an election under § 9706(c)(2) of the ARP is in effect. For a plan year for which such an election applies, the 24-month averages applicable for January

2023, adjusted to be within the applicable minimum and maximum percentages of the corresponding 25-year average segment rates in accordance with § 430(h)(2) (C)(iv) of the Code, are as follows:

Pre-ARP Adjusted 24-Month Average Segment Rates For Plan Years

Beginning In Applicable Month First Segment Second Segment Third Segment

2021 January 2023 3.32 4.79 5.47

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) pro

vides 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 December 2022 is 3.66 percent. The Service determined this rate as the average of the daily determinations of yield on the 30-year Treasury bond maturing in November 2052. For plan years beginning in January 2023, the weighted average of the rates of interest on 30-year Treasury securities and the permissible range of rate used to calculate current liability are as follows:

Treasury Weighted Average Rates For Plan Years Beginning In 30-Year Treasury Weighted Average Permissible Range 90% to 105%

January 2023 2.43 2.19 to 2.55

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 December 2022 are as follows:

Minimum Present Value Segment Rates Month First Segment Second Segment Third Segment December 2022 4.84 5.15 4.85

Bulletin No. 2023–6 451 February 6, 2023

of this guidance. For further information regarding this notice, contact Mr. Morgan at 202-317-6700 or Tony Montanaro at 626-927-1475 not toll-free calls).

DRAFTING INFORMATION

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

Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). However, other personnel from the IRS participated in the development

February 6, 2023 452 Bulletin No. 2023–6

Table 2022-12 Monthly Yield Curve for December 2022

Derived from December 2022 Data

Maturity Yield Maturity Yield Maturity Yield Maturity Yield Maturity Yield 0.5 4.96 20.5 5.11 40.5 4.82 60.5 4.74 80.5 4.69 1.0 4.94 21.0 5.10 41.0 4.82 61.0 4.74 81.0 4.69 1.5 4.92 21.5 5.08 41.5 4.82 61.5 4.73 81.5 4.69 2.0 4.89 22.0 5.07 42.0 4.82 62.0 4.73 82.0 4.69 2.5 4.85 22.5 5.05 42.5 4.81 62.5 4.73 82.5 4.69 3.0 4.81 23.0 5.04 43.0 4.81 63.0 4.73 83.0 4.69 3.5 4.77 23.5 5.03 43.5 4.81 63.5 4.73 83.5 4.69 4.0 4.75 24.0 5.02 44.0 4.80 64.0 4.73 84.0 4.69 4.5 4.75 24.5 5.01 44.5 4.80 64.5 4.73 84.5 4.69 5.0 4.75 25.0 4.99 45.0 4.80 65.0 4.73 85.0 4.69 5.5 4.78 25.5 4.98 45.5 4.80 65.5 4.72 85.5 4.69 6.0 4.81 26.0 4.98 46.0 4.79 66.0 4.72 86.0 4.69 6.5 4.85 26.5 4.97 46.5 4.79 66.5 4.72 86.5 4.68 7.0 4.90 27.0 4.96 47.0 4.79 67.0 4.72 87.0 4.68 7.5 4.95 27.5 4.95 47.5 4.79 67.5 4.72 87.5 4.68 8.0 5.00 28.0 4.94 48.0 4.78 68.0 4.72 88.0 4.68 8.5 5.05 28.5 4.94 48.5 4.78 68.5 4.72 88.5 4.68 9.0 5.10 29.0 4.93 49.0 4.78 69.0 4.72 89.0 4.68 9.5 5.14 29.5 4.92 49.5 4.78 69.5 4.71 89.5 4.68 10.0 5.17 30.0 4.92 50.0 4.77 70.0 4.71 90.0 4.68 10.5 5.20 30.5 4.91 50.5 4.77 70.5 4.71 90.5 4.68 11.0 5.23 31.0 4.91 51.0 4.77 71.0 4.71 91.0 4.68 11.5 5.25 31.5 4.90 51.5 4.77 71.5 4.71 91.5 4.68 12.0 5.27 32.0 4.89 52.0 4.77 72.0 4.71 92.0 4.68 12.5 5.28 32.5 4.89 52.5 4.76 72.5 4.71 92.5 4.68 13.0 5.28 33.0 4.88 53.0 4.76 73.0 4.71 93.0 4.68 13.5 5.29 33.5 4.88 53.5 4.76 73.5 4.71 93.5 4.68 14.0 5.29 34.0 4.87 54.0 4.76 74.0 4.71 94.0 4.67 14.5 5.28 34.5 4.87 54.5 4.76 74.5 4.70 94.5 4.67 15.0 5.27 35.0 4.87 55.0 4.76 75.0 4.70 95.0 4.67 15.5 5.26 35.5 4.86 55.5 4.75 75.5 4.70 95.5 4.67 16.0 5.25 36.0 4.86 56.0 4.75 76.0 4.70 96.0 4.67 16.5 5.24 36.5 4.85 56.5 4.75 76.5 4.70 96.5 4.67 17.0 5.22 37.0 4.85 57.0 4.75 77.0 4.70 97.0 4.67 17.5 5.21 37.5 4.85 57.5 4.75 77.5 4.70 97.5 4.67 18.0 5.19 38.0 4.84 58.0 4.75 78.0 4.70 98.0 4.67 18.5 5.18 38.5 4.84 58.5 4.74 78.5 4.70 98.5 4.67 19.0 5.16 39.0 4.83 59.0 4.74 79.0 4.70 99.0 4.67 19.5 5.14 39.5 4.83 59.5 4.74 79.5 4.70 99.5 4.67 20.0 5.13 40.0 4.83 60.0 4.74 80.0 4.69 100.0 4.67

Bulletin No. 2023–6 453 February 6, 2023

TRAC program. The EmTRAC program is similar to the TRAC program but was created for employers that wish to submit their own educational programs and tip reporting procedures for approval by the IRS. Notice 2000-21 requested comments on all aspects of the EmTRAC program, and specifically on what types of electronic tip reporting systems would meet the educational requirement.

Those proposed TRAC, TRDA, and EmTRAC programs all provided a commitment that the IRS would provide protection to the employer from section 3121(q) liability ³ by not initiating any tip examinations of the employer for periods in which the agreements were in effect. The proposed TRDAs included a similar commitment for employers with respect to their employees who reported tips at or above the tip rate established for the employee. TRAC agreements did not specifically provide tip examination protection for employees, but the IRS stated, in the series of announcements concerning the TRAC program that were published in 2000, that employees who properly report tips would not be subject to challenge by the IRS. Notice 2000-21 was silent as to the tip examination impact on employees in the EmTRAC program.

In 2001, the IRS issued Announcement 2001-1, which finalized pro forma TRAC and TRDA agreements described in Announcements 2000-19 through 2000-23, and provided that the final versions would be available on http://www.irs.gov. In addition, the IRS issued Notice 2001-1 to supersede Notice 2000-21 and make several non-substantive clarifying changes to the EmTRAC program.

The TRAC, TRDA, and EmTRAC programs have continued largely unchanged and have had substantial participation. The TRAC agreements and TRDAs currently available on the Small Business/ Self-Employed (SB/SE) Division webpage on http://www.irs.gov are similar to

Service Industry Tip Compliance Agreement Program