October 15, 2004 Interest Rate Update
The immediate interest rate for valuing lump sum payments for the month of November 2004 is 2.75%. The deferred interest rate I1 is 4.00%, I2 is 4.00%, and I3 is 4.00%. (The immediate interest rate for October 2004 was 3.00% for lump sum payments; the deferred interest rate I1 was 4.00%, I2 was 4.00%, and I3 was 4.00%.)
NOTE: The provisions of the Job Creation and Worker Assistance Act of 2002 that temporarily increased the required interest rate to be used to determine the variable-rate premium to 100 percent (from 85 percent) of the annual yield on 30-year Treasury securities expired at the end of 2003.
The Pension Funding Equity Act of 2004, which was signed into law by the President on April 10, 2004, changed the rules for determining the required interest rate for premium payment years beginning in 2004 and 2005. For premium payment years beginning in 2004 and 2005, the required interest rate is the "applicable percentage" (currently 85 percent) of the annual rate of interest determined by the Secretary of the Treasury on amounts invested conservatively in long-term investment grade corporate bonds for the month preceding the beginning of the plan year for which premiums are being paid. On April 12, 2004, the Internal Revenue Service issued Notice 2004-34 announcing the composite bond rates needed to determine the required interest rates for premium payment years beginning in January through April 2004. (See Table 1 of IRS Notice 2004-34.)
The required interest rate for determining the variable rate premium amount for premium payment years commencing in October 2004 is 4.79%. (The required rate for September 2004 was 4.95%.)
The select and ultimate interest rates for valuing annuity benefits in single-employer plans and multiemployer plans for the month of November 2004 are 3.80% for the first 20 years following the date of plan termination and 5.00% thereafter, respectively. (The select interest rate for October 2004 was 4.00% for the first 20 years and the ultimate rate was 5.00%.)
The interest rate that PBGC will charge on employer liability, unpaid contributions, and unpaid premiums, for the calendar quarter beginning October 1, and ending December 31, 2004, is 5%. (The interest rate for July 1 to September 30, 2004 was 4%.)
The interest rate to be charged by multiemployer pension plans on withdrawal liability payments that are overdue or in default, or that is to be credited by such plans on overpayments of withdrawal liability during the calendar quarter beginning October 1, and ending December 31, 2004, is 4.5%. (The interest rate for July 1 to September 30, 2004 was 4%.)
This page will be updated on November 15, 2004.