n-17-13.pdf

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Part III --- Administrative, Miscellaneous, and Procedural
Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

Notice 2017-13

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 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I).

YIELD CURVE AND SEGMENT RATES

Generally, except for certain plans under sections 104 and 105 of the Pension Protection
Act of 2006 and CSEC plans under § 414(y), § 430 of the Code specifies the minimum funding
requirements that apply to single-employer plans 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 2016 data is in
Table I at the end of this notice. The spot first, second, and third segment rates for the month of
December 2016 are, respectively, 2.04, 4.03, and 4.82.

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. For plan years beginning before
2021, the applicable minimum percentage is 90% and the applicable maximum percentage is
110%. The 25-year average segment rates for plan years beginning in 2015, 2016, and 2017 were
published in Notice 2014-50, 2014-40 I.R.B. 590, Notice 2015-61, 2015-39 I.R.B. 408, and Notice
2016-54, 2016-40 I.R.B. 429, respectively.

24-MONTH AVERAGE CORPORATE BOND SEGMENT RATES

The three 24-month average corporate bond segment rates applicable for January 2017
without adjustment for the 25-year average segment rate limits are as follows:

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

Applicable
Month

First
Segment

Second
Segment

Third
Segment

January 2017

1.57

3.77

4.73

Based on § 430(h)(2)(C)(iv), the 24-month averages applicable for January 2017 adjusted to
be within the applicable minimum and maximum percentages of the corresponding 25-year average
segment rates, are as follows:

For Plan
Years
Beginning In

Adjusted 24-Month Average Segment
Rates
Applicable Month
First Second Third
Segment Segment Segment
2015 January 2017 4.72 6.11 6.81

2016 January 2017 4.43 5.91 6.65

2017 January 2017 4.16 5.72 6.48

30-YEAR TREASURY SECURITIES INTEREST RATES

Generally for plan years beginning after 2007, § 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) provides 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 2016 is 3.11 percent. The Service determined this rate as
the average of the daily determinations of yield on the 30-year Treasury bond maturing in
November 2046. For plan years beginning in the month shown below, 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:

For Plan Years
Beginning in

30-Year
Treasury
Weighted
Average

Permissible Range
Month Year 90% to 105%

January 2017 2.90 2.61 3.05

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 present value segment rates. Pursuant to that notice, the minimum present value
segment rates determined for December 2016 are as follows:

First
Segment

Second
Segment

Third
Segment

2.04 4.03 4.82

DRAFTING INFORMATION

The principal author of this notice is Tom Morgan of the Office of the Associate Chief
Counsel (Tax Exempt and Government Entities). 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 Tony Montanaro at 202-317-8698 (not toll-free calls).

Table I

Monthly Yield Curve for December 2016
Derived from December 2016 Data

Maturity Yield

Maturity Yield

Maturity Yield

Maturity Yield

Maturity Yield
0.5 1.12

20.5 4.60

40.5 4.85

60.5 4.93

80.5 4.98
1.0 1.41

21.0 4.62

41.0 4.85

61.0 4.94

81.0 4.98
1.5 1.67

21.5 4.63

41.5 4.85

61.5 4.94

81.5 4.98
2.0 1.88

22.0 4.64

42.0 4.86

62.0 4.94

82.0 4.98
2.5 2.06

22.5 4.65

42.5 4.86

62.5 4.94

82.5 4.98
3.0 2.21

23.0 4.65

43.0 4.86

63.0 4.94

83.0 4.98
3.5 2.34

23.5 4.66

43.5 4.86

63.5 4.94

83.5 4.98
4.0 2.46

24.0 4.67

44.0 4.87

64.0 4.94

84.0 4.98
4.5 2.58

24.5 4.68

44.5 4.87

64.5 4.94

84.5 4.98
5.0 2.71

25.0 4.69

45.0 4.87

65.0 4.95

85.0 4.98
5.5 2.83

25.5 4.69

45.5 4.88

65.5 4.95

85.5 4.99
6.0 2.96

26.0 4.70

46.0 4.88

66.0 4.95

86.0 4.99
6.5 3.08

26.5 4.71

46.5 4.88

66.5 4.95

86.5 4.99
7.0 3.20

27.0 4.72

47.0 4.88

67.0 4.95

87.0 4.99
7.5 3.32

27.5 4.72

47.5 4.89

67.5 4.95

87.5 4.99
8.0 3.44

28.0 4.73

48.0 4.89

68.0 4.95

88.0 4.99
8.5 3.55

28.5 4.74

48.5 4.89

68.5 4.95

88.5 4.99
9.0 3.65

29.0 4.74

49.0 4.89

69.0 4.96

89.0 4.99
9.5 3.75

29.5 4.75

49.5 4.89

69.5 4.96

89.5 4.99
10.0 3.84

30.0 4.75

50.0 4.90

70.0 4.96

90.0 4.99
10.5 3.92

30.5 4.76

50.5 4.90

70.5 4.96

90.5 4.99
11.0 4.00

31.0 4.77

51.0 4.90

71.0 4.96

91.0 4.99
11.5 4.07

31.5 4.77

51.5 4.90

71.5 4.96

91.5 4.99
12.0 4.13

32.0 4.78

52.0 4.91

72.0 4.96

92.0 4.99
12.5 4.19

32.5 4.78

52.5 4.91

72.5 4.96

92.5 4.99
13.0 4.24

33.0 4.79

53.0 4.91

73.0 4.96

93.0 5.00
13.5 4.29

33.5 4.79

53.5 4.91

73.5 4.97

93.5 5.00
14.0 4.33

34.0 4.80

54.0 4.91

74.0 4.97

94.0 5.00
14.5 4.37

34.5 4.80

54.5 4.91

74.5 4.97

94.5 5.00
15.0 4.40

35.0 4.81

55.0 4.92

75.0 4.97

95.0 5.00
15.5 4.43

35.5 4.81

55.5 4.92

75.5 4.97

95.5 5.00
16.0 4.45

36.0 4.81

56.0 4.92

76.0 4.97

96.0 5.00
16.5 4.48

36.5 4.82

56.5 4.92

76.5 4.97

96.5 5.00
17.0 4.50

37.0 4.82

57.0 4.92

77.0 4.97

97.0 5.00
17.5 4.52

37.5 4.83

57.5 4.92

77.5 4.97

97.5 5.00
18.0 4.54

38.0 4.83

58.0 4.93

78.0 4.97

98.0 5.00
18.5 4.55

38.5 4.83

58.5 4.93

78.5 4.97

98.5 5.00
19.0 4.57

39.0 4.84

59.0 4.93

79.0 4.98

99.0 5.00
19.5 4.58

39.5 4.84

59.5 4.93

79.5 4.98

99.5 5.00
20.0 4.59

40.0 4.84

60.0 4.93

80.0 4.98

100.0 5.00