This article pertains to looking up segment rates and spot rates for computing target liabilities and (using ProVal’s Administration Factors Tool) minimum lump sum present values under the Pension Protection Act of 2006 (PPA), as amended (where applicable) by the Moving Ahead for Progress in the 21st Century Act (MAP-21), as well as to looking up spot rates to override the valuation interest rates (that otherwise would be used) for shortfall amortization calculations.

Target Liability Interest Rates

Under the” PPA” law selection, depending on whether the Segment rates option or the Spot rate curve option has been selected for target liability interest rates, clicking the Look up button accesses either the “Look up PPA segment rates” dialog box or the “Look up PPA full spot yield curve” dialog box, respectively. For guidance, see Internal Revenue Service pronouncements, including Notices 2007-81, 2012-55 and 2012-61. (Under the “Pre-PPA and PPA” law selection, the Look up button is accessible only if the spot rate curve has been selected under the Target Liabilities topic.)

For the “PPA” law selection, the “Look up PPA segment rates” dialog box furnishes a list, according to the Year and Month that a set of six segment rates, three for Funding (i.e., adjusted for MAP-21) and three for Max Tax (i.e., not adjusted for MAP-21), is Applicable for, of the historical segment interest rates for computing target liabilities for minimum required and maximum tax deductible contributions, respectively. Up to 16 rows of rates are shown for a given plan year (for each month in the plan year plus the four prior, “look back”, months), based on the year selected for the Plan year begins in parameter. For plan years beginning in 2012 or later, the funding segment rates displayed reflect the applicable 25-year average corridor values. If the selected plan year is 2010, rates displayed for months in 2009 are the corporate bond rates without blending, i.e., do not reflect the funding transition rule of PPA, which blends segment rates with (the pre-PPA current liability basis) corporate bond rates. Each row displays, for Funding and Max Tax, the First Segment, Second Segment and Third Segment rates applicable for the month and selected plan year. Click the row corresponding to the calendar month for which you wish to look up the applicable interest rates and then click the Paste button; ProVal will paste the six segment rates applicable for that month into the Interest Rates dialog box. (Note that if, because there is a “look back” month, you need minimum funding and max tax rates whose lookups are for different plan years, you may look up and paste into one of the Funding and Max Tax columns but will need to type values into the other column.)

The “Look up PPA corporate bond yield curve” dialog box furnishes a list, according to the Year and Month that the curve rates are Applicable for, of the historical full spot yield curves (should you intend to substitute them) for computing target liabilities for the minimum required contribution. Each row displays, for lllustrative mid-year durations 0.5, 1.5, 2.5, 3.5, 10.5, 20.5 and 30.5, the yield (or spot rate) applicable for the month for (mid-year) maturities of 0.5, 1.5, 2.5, 3.5, 10.5, 20.5 and 30.5, respectively. ProVal ignores the yields applicable for beginning-of-year maturities (1.0, 2.0, 3.0, etc.). (Regarding the data underlying the spot rates, note that, for example, the maturities ProVal displays as applicable for the month of January 2010 are from Table I of Notice 2010-14, “Monthly Yield Curve Derived For December 2009 Derived from December 2009 Data”.) Click the row corresponding to the calendar month for which you wish to look up the applicable yield curve and then click the Paste button; ProVal will paste 100 values, corresponding to the yields (applicable for that month) at maturities of 0.5, 1.5, 2.5, 3.5, …10.5, …, 20.5, …, 30.5, … 98.5 and 99.5, into the Interest Rates dialog box (“PPA” law selection) or the Target Liabilities dialog box (“Pre-PPA and PPA” law selection). The yields at maturities of 0.5, 1.5, 2.5, 3.5, …, 10.5, …, 20.5, …, 30.5, … 98.5 and 99.5 will be pasted into the text fields for values at the durations 0, 1, 2, 3, …, 10, …, 20, …, 30, …, 98 and 99, respectively, shown in the From column of the grid for the Spot rate curve parameter.

When accessed from the Shortfall Amortization topic of the Asset & Funding Policy, the “Look up PPA corporate bond yield curve” dialog box furnishes a list, according to the Year and Month that the curve rates are Applicable for, of the historical spot yield rates for durations 1.0, 2.0, 3.0, 4.0, 5.0 and 6.0, should you wish to use them in shortfall amortization calculations instead of the target liability rates specified under the Interest Rates topic of Valuation Assumptions. Each row displays, for Beginning-of-year durations 1.0, 2.0, 3.0, 4.0, 5.0 and 6.0, the yield (or spot rate) applicable for the month for maturities of 1.0, 2.0, 3.0, 4.0, 5.0 and 6.0, respectively. (Note that, for example, the maturities ProVal displays as applicable for the month of January 2010 are from Table I of Notice 2010-14, “Monthly Yield Curve Derived For December 2009 Derived from December 2009 Data”.) Click the row corresponding to the calendar month for which you wish to look up the applicable spot rate and then click the Paste button; ProVal will paste 6 values, corresponding to the yields (applicable for that month) at maturities of 1.0, 2.0, 3.0, 4.0, 5.0 and 6.0, into the Shortfall Amortization dialog box (“PPA” law selection). The yields at maturities of 1.0, 2.0, 3.0, 4.0, 5.0 and 6.0, respectively, will be pasted into the text fields, in the Interest Rate column of the grid for the Override amortization interest rates parameter, for rows 1, 2, 3, 4, 5 and 6 of the Year column.

Minimum Lump Sum Interest Rates

Depending on whether the Segment-style rates option or the Variable Rate spot rates option has been selected for minimum lump sum present values (under the Administration Factors Tool), clicking the Look up button accesses either the “Look up Minimum lump sum segment rates” dialog box or the “Look up PPA corporate bond yield curve” dialog box, respectively. For guidance, see Internal Revenue Service pronouncements, including, for example, Notice 2007-81.

The “Look up Minimum lump sum segment rates” dialog box lists, for computing minimum lump sum present values under Internal Revenue Code Section 417(e)(3), by calendar Year and Month, the Current Month Rate for each of the three segments. Each row displays the First Segment, Second Segment and Third Segment rates for the month. For months prior to January 2012, rates displayed reflect the transition rule of PPA that blends segment rates with the (pre-PPA) GATT rate basis. Click the row corresponding to the calendar month for which you wish to look up the current month rates and then click the Paste button; ProVal will paste the three segment rates for that month into the Mortality and Interest Rates dialog box.

Looking up spot rates for computing minimum lump sum present values operates in a fashion similar to that described above for target liability interest rates.