n-02-74.pdf

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Part III --- Administrative, Miscellaneous, and Procedural

Weighted Average Interest Rate Update

Notice 2002-74

Sections 412(b)(5)(B) and 412(l)(7)(C)(i) of the Internal Revenue Code provide that the
interest rates used to calculate current liability for purposes of determining the full funding limitation
under § 412(c)(7) and the required contribution under § 412(l) must be within a permissible range
around 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 and the resulting permissible range of interest rates used to calculate current liability
for the purpose of the full funding limitation of § 412(c)(7) of the Code.

Section 417(e)(3)(A)(ii)(II) of the Code defines the applicable interest rate, which must be
used for purposes of determining the minimum present value of a participant’s benefit under
§ 417(e)(1) and (2), as the annual rate of interest on 30-year Treasury securities for the month
before the date of distribution or such other time as the Secretary may by regulations prescribe.
Section 1.417(e)-1(d)(3) of the Income Tax Regulations provides that the applicable interest rate for
a month is the annual interest rate on 30-year Treasury securities as specified by the Commissioner
for that month in revenue rulings, notices or other guidance published in the Internal Revenue
Bulletin.

The rate of interest on 30-year Treasury Securities for October 2002 is 4.93 percent.
Pursuant to Notice 2002-26, 2002-15 I.R.B. 743, the Service has determined this rate as the
monthly average of the daily determination of yield on the 30-yearTreasury bond maturing in
February 2031.

Section 405 of the Job Creation and Worker Assistance Act of 2002 amended § 412(l)(7)(C)
of the Code to provide that for plan years beginning in 2002 and 2003 the permissible range is
extended to 120 percent.

The following rates were determined for the plan years beginning in the month shown below.
90% to 110% 90% to 120%
Weighted Permissible Permissible
Month Year Average Range Range

November 2002 5.58 5.02 to 6.14 5.02 to 6.70

Drafting Information

The principal author of this notice is Todd Newman of the Employee Plans, Tax Exempt and
Government Entities Division. For further information regarding this notice, please contact the
Employee Plans’ taxpayer assistance telephone service at 1-877-829-5500 (a toll-free number),
between the hours of 8:00 a.m. and 6:30 p.m. Eastern time, Monday through Friday. Mr. Newman
may be reached at 1-202-283-9888 (not a toll-free number).