The Interest Rates topic provides the following options for defining the interest assumption to be used in your calculations:
Static Rate, to use the same (i.e., a constant, or single) interest rate for all years after the member’s current age up to the date of each benefit payment, regardless of the benefit payment dates. To choose an interest rate on the “GATT” basis, which was the interest basis typically used for U.S. minimum lump sum present values under the law in effect prior to the Pension Protection Act of 2006 (PPA), click the GATT rates button, which accesses the “Look up 30-year Treasury rates” dialog box. Looking up, and pasting into the text field, a GATT interest rate for calculation of minimum lump sum present values is done in similar fashion to looking up segment rates for minimum lump sum present values under PPA (see Looking up PPA interest rates for more information). Alternatively, you may type the desired rate in the text field.
Variable Rate, to use rates that depend on duration from the current age to the year associated with the interest rate. If, for the Input is parameter, you select the forward rates option, then the rate specified at a particular duration is used for all discounting at that duration for all payments made at or after that duration from the current age. For example, if 0.06 is entered at duration 2-3, indicating the time interval from 2 to 3 years after current age, then all benefit payments made at time 2 or later are discounted at 6% for the year running from time 2 to time 3. If you select the spot rates option, then the rate specified at a particular duration is used to discount benefit payments made at that duration for the entire period back to the current age. For example, if 0.06 is entered at duration 2-3, indicating the time interval from 2 to 3 years after the current age, then all benefit payments made at or after time 2 but before time 3 are discounted at 6% for all years back to time 0. If the spot rates option is selected, the PPA rates button is accessible; click it to enter the “Look up PPA corporate bond yield curve” dialog box, in which you can see an illustrative selection of the historical U.S. PPA spot rate curves. By clicking Paste, you can paste them directly into the grid. For further discussion see Looking up PPA interest rates .
Segment-style rates, to enter U.S. PPA minimum lump sum present value segment rates or, more generally, to use rates with the duration structure of PPA segment interest rates, that is, a 1st segment rate for benefit payments made at durations less than 5 years after the member’s current age, a 2nd segment rate for benefit payments made at durations at least 5 years after the current age but less than 20 years after, and a 3rd segment rate for benefit payments made at durations at least 20 years after the current age. Coding to match the U.S. PPA minimum lump sum segment rates is accomplished by a three-row grid, one for each segment rate. If the Segment-style rates option is selected, the PPA rates button is accessible; click it to enter the “Look up Minimum lump sum segment rates” dialog box, in which you can look up historical PPA segment rates for calculating statutory minimum present values for lump sum benefit payments (see Looking up PPA interest rates for more information). Alternatively, you may type the desired rates in the text fields.
PBGC-style rates, to enter U.S. lump sum present value interest rates on the PBGC basis or, more generally, to use interest rates that vary by year according to whether the year is during the benefit payment period or is during a deferral period, and if within a deferral period according to how many years prior to benefit commencement the year occurs. In the Immediate rate text field, enter the interest rate to be used once payments commence. Enter in the Prior 7 years (K1) text field the (deferred) interest rate to be used for the first 7 years prior to when payments commence. Enter in the Prior 8 years (K2) text field the (deferred) interest rate to be used for the next 8 years prior to when payments commence. Enter in the All Prior years (K3) text field the (deferred) interest rate to be used for the remaining years, that is, all years at least 15 years prior to when payments commence. To choose interest rates in accordance with the PBGC basis, click the PBGC rates button, to access the “Look up PBGC-style annuity rates” dialog box, which contains rates published through December 2007. Looking up, and pasting into the text field, PBGC interest rates for calculation of minimum lump sum present values is done in similar fashion to looking up segment rates for minimum lump sum present values under PPA (see Looking up PPA interest rates for more information). Alternatively, you may type the desired rates in the text fields.
Enter all interest rates as numbers between 0 and 0.40 (not as percentages).