The IRS has, in Notice 2002-26, established that the rate is 5.40%, noting that it has determined that rate as the average of the 30-year Treasury Constant Maturity interest rate determined each day through February 18, 2002, and the yield on the 30-year Treasury bond maturing in February 2031, determined each day for the balance of the month.
Last October, the Treasury Department announced it was no longer issuing 30-year Treasury bonds. Since then, however, the IRS has still been issuing a monthly 30-year Treasury bond rate, which is used for various defined benefit plan calculations.
Treasury and the IRS had been developing the methodology for determining the monthly 30-year Treasury bond rate in the absence of the issuance of new securities. Last month it was announced that the new methodology would be based on Federal Reserve statistics, including yields of outstanding 30-year Treasury bonds previously issued.
Effective for March 2002, the IRS says it will determine and publish the rate of interest on 30-year Treasury Securities solely on the basis of the monthly average of the daily determination of yield on the 30-year Treasury bond maturing in February 2031.
The Service will determine and publish the average yield on such basis for an interim period, pending the enactment of legislative changes that address the discontinuance of the 30-year Treasury bond.
The IRS also noted that Section 405 of the Job Creation and Worker Assistance Act of 2002 (“JCWAA”) 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%.
The principal author of IRS Notice 2002-26 is Todd Newman of the Employee Plans, Tax Exempt and Government Entities Division. For further information regarding this notice, you can contact the Employee Plans’ taxpayer assistance telephone service at 1-877-829-5500 between the hours of 8:00 a.m. and 6:30 p.m. Eastern time, Monday through Friday. The IRS also notes that Mr. Newman may be reached at 1-202-283-9888.