Max deduction under unfunded current liability for 2006

[Guest Rae]

I understand that for single-employer plans for 2006 and 2007, the maximum deduction limit under unfunded current liability is changed to 150% of the plan's current liability, less the plan's assets.

Let's assume no amendments in the past two years and that we're not talking about a terminating PBGC-covered plan.

I'm stumbling on the interest rate that can be used to determine the current liability for this purpose. For 2004 and 2005, we could use the lowest interest rate in the old OBRA current liability range (so 4.59% for PYB 1/1/05). My reading of the PPA leads me to conclude that for 2006 and 2007, the lowest interest rate we can use for this purpose is now 90% of the weighted average of the corporate bond interest rate (so this would have been 5.49% for PYB 1/1/05 if in effect then and will be somewhere close to 5.15% for PYB 1/1/06). I arrive at this based on the fact that PPA removed IRC 404(a)(1)(F).

Does anybody else agree? Thanks much.

[Guest Steve C]

I think you're right - 90% to 100% of the weighted average corp bond rate. I haven't looked, but we may also have to use the same rate chosen from that range for minimum funding (as pre-2004).