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Compliance January 5, 2005
IRS Release Corporate Bond and 30-Year Treasury Interest Rates
January 5, 2005 (PLANSPONSOR.com) - The Internal
Revenue Service (IRS) has released the corporate bond
weighted average interest rate and the interest rate on
30-year Treasuries, important for those who manage defined
benefit retirement accounts.
Reported by Kip McDaniel
>Notice 2005-9 relates to plan years beginning in January, 2005, and provides guidance on the corporate bond and 30-year Treasury rates and the permissible range of interest rates specified under sections 412 and 417 of the IRS Code.
>Sections 412(b)(5)(B)(ii) and 412(I)(7)(C)(i),as amended by the Pension Funding Equity Act of 2004 (See Whew! Bush Signs Pension Relief ) provide that the interest rates used to calculate current liability and to determine required contributions must be within a permissible range on the weighted average of the rates of interest on amounts invested conservatively in long-term investment grade bonds during a 40-year period ending on the final day before the start of the plan year, according to an IRS news release. For plan years beginning in January, the corporate bond weighted average is 6.1%, with the permissible range at 5.49% to 6.1%.
>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 benefits as the annual rate of interest on the 30-year Treasury securities for the moth before the date of distribution. For January 2005, the 30-year Treasury weighted average is 5.1%, with the 90% to 105% permissible range at 4.59% to 5.35% and the 90% to 110% permissible range at 4.59% to 5.61%.
For a copy of the guidance, please see http://www.irs.gov/pub/irs-drop/n-05-09.pdf .