December 31, 2007 Interest Rate Update
The immediate interest rate for valuing lump sum payments for the month of January 2008 is 3.00%. The deferred interest rate I1 is 4.00%, I2 is 4.00%, and I3 is 4.00%. (The immediate interest rate for December 2007 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: On February 2, 2007, the Internal Revenue Service (IRS) published final regulations containing updated mortality tables for determining current liability under section 412(l)(7) of the Code and section 302(d)(7) of ERISA for plan years beginning on or after January 1, 2007. As a result, in accordance with section 4006(a)(3)(E)(iii)(II) of ERISA, the applicable percentage for premium payment years beginning on or after January 1, 2007, increases from 85 to 100 percent.
PBGC has now revised the rate for premium payment years beginning in January 2007 to reflect the increase in the applicable percentage. For more information, see Technical Update 07-1.
On August 17, 2006, the Pension Protection Act of 2006 ("PPA") was signed into law. PPA provides that for plan years beginning in 2006 and 2007, the required interest rate to be used to determine the variable rate premium is the applicable percentage (85% for 2006 and 100% for 2007) of the annual rate of interest determined by the Secretary of the Treasury on amounts invested conservatively in long-term investment grade corporate bonds (the "composite corporate bond rate") for the month preceding the beginning of the plan year for which premiums are being paid.
The required interest rate for determining the variable rate premium amount for premium payment years commencing in December 2007 is 6.14%. (The required rate for November 2007 was 6.14%).
The select and ultimate interest rates for valuing annuity benefits in single-employer plans and multiemployer plans for the month of January 2008 are 5.42% for the first 20 years following the date of plan termination and 4.49% thereafter, respectively. (The select interest rate for December 2007 was 5.37% for the first 20 years and the ultimate rate was 5.04%).
The interest rate that PBGC will charge on employer liability, unpaid contributions, and unpaid premiums, for the calendar quarter beginning January 1, and ending March 31, 2008, is 7.00%. (The interest rate for October 1 to December 31, 2007 was 8.00%).
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 January 1, and ending March 31, 2008, is 7.25%. (The interest rate for October 1 to December 31, 2007 was 8.25%).
This page was updated on December 31, 2007.