IRS Updates Weighted Average Interest Rate

September 7, 2004 ( - On Friday the Internal Revenue Service published guidance on key interest rates used in US pension fund calculations.

>The Weighted Average Interest Rates Update in  Notice 2004-60 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.   It also provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II), and the weighted average interest rate and permissible ranges of interest rates based on the 30-year Treasury securities rate.

>Sections 412(b)(5)(B)(ii) and 412(l)(7)(C)(i), as amended by the Pension Funding Equity Act of 2004 , 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 or 2005 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 four-year period ending on the last day before the beginning of the plan year.  

>In the notice the IRS states that the composite corporate bond rate for August 2004 is 5.82%, a rate that, pursuant to Notice 2004-34 (see  Agencies Release Pension Funding Implementation Rules ), the IRS says it has determined as the average of the monthly yields for the included corporate bond indices for that month.

>The Weighted Average Interest Rate Table is  HERE

>The Composite Corporate Bond Rate Table is  HERE