n-06-111.pdf

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Part III --- Administrative, Miscellaneous, and Procedural

Weighted Average Interest Rates Update

Notice 2006-111

This notice provides guidance as to the corporate bond weighted average interest rate and
the permissible range of interest rates specified under § 412(b)(5)(B)(ii)(II) of the Internal Revenue
Code. In addition, it provides guidance as to the interest rate on 30-year Treasury securities under
§ 417(e)(3)(A)(ii)(II).

CORPORATE BOND WEIGHTED AVERAGE INTEREST RATE

Sections 412(b)(5)(B)(ii) and 412(l)(7)(C)(i), as amended by the Pension Funding Equity Act
of 2004 and by the Pension Protection Act of 2006, provide that the interest rates used to calculate
current liability and to determine the required contribution under § 412(l) for plan years beginning in
2004 through 2007 must be within a permissible range based on the weighted average of the rates
of interest on amounts invested conservatively in long term investment grade corporate bonds
during the 4-year period ending on the last day before the beginning of the plan year.

Notice 2004-34, 2004-1 C.B. 848, provides guidelines for determining the corporate bond
weighted average interest rate and the resulting permissible range of interest rates used to
calculate current liability. That notice establishes that the corporate bond weighted average is
based on the monthly composite corporate bond rate derived from designated corporate bond
indices. The methodology for determining the monthly composite corporate bond rate as set forth
in Notice 2004-34 continues to apply in determining that rate. See Notice 2006-75, 2006-36 I.R.B.
366.

The composite corporate bond rate for November 2006 is 5.77 percent. Pursuant to Notice
2004-34, the Service has determined this rate as the average of the monthly yields for the included
corporate bond indices for that month.

The following corporate bond weighted average interest rate was determined for plan years
beginning in the month shown below.

Corporate
For Plan Years Bond 90% to 100%
Beginning in: Weighted Permissible
Month Year Average Range

December 2006 5.79 5.21 to 5.79

30-YEAR TREASURY SECURITIES INTEREST RATE

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 November 2006 is 4.69 percent. 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 2036.

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 877-829-5500 (a toll-
free number), between the hours of 8:30 a.m. and 4:30 p.m. Eastern time, Monday through Friday.
Mr. Stern may be reached at 202-283-9703. Mr. Montanaro may be reached at 202-283-9714. The
telephone numbers in the preceding sentences are not toll-free.