n-03-17.pdf

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Part III --- Administrative, Miscellaneous, and Procedural

Weighted Average Interest Rate Update

Notice 2003-17

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) 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 February 2003 is 4.81 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-year Treasury 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

March 2003 5.49 4.94 to 6.03 4.94 to 6.58

Drafting Information

The principal authors of this notice are Tony Montanaro and Paul Stern 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. Montanaro may be reached at 1-202-283-9714 and Mr. Stern may be reached at 1-202-
283-9703. The telephone numbers in the preceding sentence are not toll-free.