n-04-3.pdf

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Part III --- Administrative, Miscellaneous, and Procedural

Weighted Average Interest Rate Update

Notice 2004-3

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 and to determine 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.

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 December 2003 is 5.07 percent.
Pursuant to Notice 2002-26, 2002-1 C.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.

The following rates were determined for the plan years beginning in the month shown below.

90% to 105% 90% to 110%
Weighted Permissible Permissible
Month Year Average Range Range

January 2004 5.25 4.72 to 5.51 4.72 to 5.77

Drafting Information

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