Current Liability Interest Rates

[Guest lerieleech]

Say we have a calendar year 2005 valuation. The corporate bond weighted average interest rate at 1/05 was 6.10%. 90 percent of that rate is 5.49%. Let's say that for 412 purposes, 6.10% is used to calculate current liability.

What is the permissible range of interest rates for calculating current liability under 404? Must the rate be the same as for 412? Does it matter if the size of the plan is less than or greater than 100 participants?

This is one of those instances where "I see how you're doing it, but I can't find a citation that says you can do it that way."

Thanks.

[david rigby]

Under PFEA (that is, only for plan years beginning in 2004 and 2005, unless extended). the CL rate for 404 purposes may be within the range as defined pre-PFEA.

At least in this case, size does not matter.

[FAPInJax]

Interestingly enough, I received an email from the IRS stating that practitioners can NOT compute the range and must rely on the IRS website. This is because extra precision is being maintained by the IRS which is not released to the public.

[Blinky the 3-eyed Fish]

To the original question I have a citation for you, read Notices 2004-34 and 2004-78. I can't remember which, but one of them describes the rule. Thus for the UCL calculation you can use a rate as low as 4.59% for a 1/05 valuation.

[Guest lerieleech]

Thanks everyone.

Blinky, are you sure about that citation?

I read through Notice 2004-34 (I think that's the one you mean), and I didn't see anything about allowing the old rates to be used. And there is no reference to Section 404.

[Guest lerieleech]

OK, I found it.

It's in IRS Notice 2004-42.