According to a special editions of the Employee Plans News, defined benefit plans may currently use a reasonable interpretation in selecting a yield curve for plan years before the effective date of the final regulations.
Document Excerpt
Final regulations are being drafted concerning interest rates to be used to value pension liabilities under §430.
The final regulations generally will not be effective for plan years beginning before they are issued.
In accordance with Part 3 of
Notice 2008-21, for plan years beginning before the effective date of the final regulations, plan sponsors must follow applicable statutory provisions and can rely on the proposed regulations for compliance with those statutory provisions. For such plan years, taking into account the items with respect to which guidance is provided in Part III(A) of Notice 2008-21, the IRS will not challenge a reasonable interpretation of an applicable statutory provision under §§430 or 436, as amended in 2008. Therefore in selecting which month’s yield curve is permitted to be used for purposes of valuing pension liabilities in order to determine funding obligations for a plan year that begins before issuance of final regulations, employers may rely on a reasonable interpretation of the funding rules. Determining the plan’s liabilities for such a plan year using interest rates under the corporate bond yield curve (determined without regard to 24 month averaging) for any applicable month represents a reasonable interpretation of the new funding rules in the statute. Thus, for a calendar year plan with a January 1, 2009 valuation date, the IRS will not challenge the use of the monthly yield curve for January 2009, or any one of the four months immediately preceding January 2009.
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