Federal rates; adjusted federal rates; adjusted federal long-term rate and the long-term exempt rate. For purposes of sections 382, 1274, 1288, and other sections of the Code, tables set forth the rates for September 2017.

This revenue procedure provides the monthly national average premium for qualified health plans that have a bronze level of coverage and are offered through Exchanges for taxpayers to use in determining their maximum individual shared responsibility payment under § 5000A(c)(1)(B) of the Internal Revenue Code and § 1.5000A–4 of the Income Tax Regulations.

This notice sets forth updates on the corporate bond monthly yield curve, the corresponding spot segment rates for August 2017 used under § 417(e)(3)(D), the 24-month average segment rates applicable for July 2017, and the 30-year Treasury rates. These rates reflect the application of § 430(h)(2)(C)(iv), which was added by the Moving Ahead for Progress in the 21st Century Act, Public Law 112–141 (MAP-21) and amended by section 2003 of the Highway and Transportation Funding Act of 2014 (HATFA).

The notice provides model amendments that a sponsor of a qualified defined benefit plan may use to amend its plan document to offer bifurcated benefit distribution options to participants in accordance with final regulations issued under § 417(e) of the Internal Revenue Code.

This revenue ruling provides various prescribed rates for federal income tax purposes for September 2017 (the current month). Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the short-term, mid-term, and long-term adjusted applicable federal rates (adjusted AFR) for the current month for purposes of section 1288(b). Table 3 sets forth the adjusted federal long-term rate and the long-term tax-exempt rate described in section 382(f). Table 4 contains the appropriate percentages for determining the low-income housing credit described in section 42(b)(1) for buildings placed in service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%. Finally, Table 5 contains the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520.

This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the Internal Revenue Code. In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I).

Generally, except for certain plans under sections 104 and 105 of the Pension Protection Act of 2006 and CSEC plans under § 414(y), § 430 of the Code specifies the minimum funding requirements that apply to single-employer plans pursuant to § 412. Section 430(h)(2) specifies the interest rates that must be used to determine a plan’s target normal cost and funding target. Under this provision, present value is generally determined using three 24-month average interest rates (“segment rates”), each of which applies to cash flows during specified periods. To the extent provided under § 430(h)(2)(C)(iv), these segment rates are adjusted by the applicable percentage of the 25-year average segment rates for the period ending September 30 of the year preceding the calendar year in which the plan year begins.^[1] However, an election may be made under § 430(h)(2)(D)(ii) to use the monthly yield curve in place of the segment rates.

Notice 2007–81, 2007–44 I.R.B. 899, provides guidelines for determining the monthly corporate bond yield curve, and the 24-month average corporate bond segment rates used to compute the target normal cost and the funding target. Consistent with the methodology specified in Notice 2007–81, the monthly corporate bond yield curve derived from July 2017 data is in Table I at the end of this notice. The spot first, second, and third segment rates for the month of July 2017 are, respectively, 1.97, 3.66, and 4.37.

The 24-month average segment rates determined under § 430(h)(2)(C)(i) through (iii) must be adjusted pursuant to § 430(h)(2)(C)(iv) to be within the applicable minimum and maximum percentages of the corresponding 25-year average segment rates. For plan years beginning before 2021, the applicable minimum percentage is 90% and the applicable maximum percentage is 110%. The 25-year average segment rates for plan years beginning in 2015, 2016, and 2017 were published in Notice 2014–50, 2014–40 I.R.B. 590, Notice 2015–61, 2015–39 I.R.B. 408, and Notice 2016–54, 2016–40 I.R.B. 429, respectively.

The three 24-month average corporate bond segment rates applicable for August 2017 without adjustment for the 25-year average segment rate limits are as follows:

Based on § 430(h)(2)(C)(iv), the 24-month averages applicable for August 2017 adjusted to be within the applicable minimum and maximum percentages of the corresponding 25-year average segment rates, are as follows:

Generally for plan years beginning after 2007, § 431 specifies the minimum funding requirements that apply to multiemployer plans pursuant to § 412. Section 431(c)(6)(B) specifies a minimum amount for the full-funding limitation described in § 431(c)(6)(A), based on the plan’s current liability. Section 431(c)(6)(E)(ii)(I) provides that the interest rate used to calculate current liability for this purpose must be no more than 5 percent above and no more than 10 percent below the weighted average of the rates of interest on 30-year Treasury securities during the four-year period ending on the last day before the beginning of the plan year. Notice 88–73, 1988–2 C.B. 383, provides guidelines for determining the weighted average interest rate. The rate of interest on 30-year Treasury securities for July 2017 is 2.88 percent. The Service determined this rate as the average of the daily determinations of yield on the 30-year Treasury bond maturing in May 2047. For plan years beginning in the month shown below, the weighted average of the rates of interest on 30-year Treasury securities and the permissible range of rates used to calculate current liability are as follows:

In general, the applicable interest rates under § 417(e)(3)(D) are segment rates computed without regard to a 24-month average. Notice 2007–81 provides guidelines for determining the minimum present value segment rates. Pursuant to that notice, the minimum present value segment rates determined for July 2017 are as follows:

The principal author of this notice is Tom Morgan of the Office of the Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the IRS participated in the development of this guidance. For further information regarding this notice, contact Mr. Morgan at 202-317-6700 or Tony Montanaro at 202-317-8698 (not toll-free calls).

This notice provides model amendments that a sponsor of a qualified defined benefit plan may use to amend its plan document to offer bifurcated benefit distribution options to participants in accordance with final regulations issued under § 417(e) of the Internal Revenue Code (see T.D. 9783, 2016–39 I.R.B. 396, published in the Federal Register on September 9, 2016 (81 FR 62359)). Stakeholders have indicated that providing model amendments would be helpful in light of the changes to the determination letter program that are set forth in Rev. Proc. 2016–37, 2016–29 I.R.B. 136.

Although a plan sponsor may use the model language in this notice to provide a bifurcated distribution option to participants in accordance with the final regulations, a plan that provides for a bifurcated distribution option is not required to include this specific model language. The sponsor of a plan that currently provides for bifurcated distributions under plan terms that comply with the provisions of § 1.417(e)–1(d)(7), relating to either implicit or explicit bifurcation, does not need to amend those plan terms. In addition, use of the model language by an employer that has adopted a pre-approved plan will not cause the plan to fail to be identical to the pre-approved plan.

Section 417 provides rules regarding survivor annuity forms of distribution that must be offered under qualified defined benefit plans. Section 417(e)(3) and § 1.417(e)–1(d)(2) and (3) specify the applicable mortality table and the applicable interest rate to be used to determine the minimum present value of a benefit distributed in the form of a lump sum. These minimum present value requirements apply for purposes of § 411(a)(11) and § 417(e)(1), which permit the distribution of a benefit under a plan to a participant in a lump sum without the consent of the participant or the participant’s spouse if the present value of the benefit does not exceed $5,000. The minimum present value requirements also apply when determining the dollar amount of a lump sum or other accelerated form of distribution elected by a participant.

Under § 1.417(e)–1(d)(6), an exception from the minimum present value requirements of § 417(e)(3) applies to a distribution paid in the form of an annuity that does not decrease during the life of the participant (other than specified permitted decreases). If an optional form of benefit is eligible for this exception, the requirement to use the § 417(e)(3) actuarial assumptions to determine the amount of the benefit payable in the optional form does not apply, and the actuarial assumptions that are used for this purpose must instead satisfy the requirements of § 411(a) that they not result in an impermissible forfeiture of the accrued benefit. See § 1.411(a)–4T(a).

To facilitate the payment of benefits partly in the form of an annuity and partly as a single sum (or other accelerated form), the Department of the Treasury and the Internal Revenue Service (IRS) amended the regulations under § 417(e) to permit plans to simplify the calculation of the amount of certain optional forms of benefit. The change was made to encourage sponsors of plans that include single sum distribution options to offer participants the additional option to bifurcate their benefits in order to receive a portion in an annuity form (providing financial protection against unexpected longevity) and the remainder in an accelerated form (providing increased liquidity during retirement).

Section 1.417(e)–1(d)(7) provides rules under which the participant’s accrued benefit may be “bifurcated” (into two or more parts), so that the minimum present value requirements of § 417(e)(3) apply only to the portion of the participant’s accrued benefit that is paid in the accelerated form. Section 1.417(e)–1(d)(7) applies to distributions with annuity starting dates in plan years beginning on or after January 1, 2017, or, if the taxpayer elects, to earlier periods.

Section 1.417(e)–1(d)(7)(ii)(A) and (B) provides two acceptable bifurcation methods that a plan sponsor may choose to include in plan terms. Under the explicit bifurcation method, a plan permits a participant to elect to divide his or her accrued benefit into two or more portions, and the minimum present value rules of § 417(e)(3) are applied separately to each portion of the accrued benefit as if it were the participant’s entire benefit. Under the implicit bifurcation method, a plan permits a participant to elect the payment of a single-sum amount if the remaining portion of the participant’s accrued benefit is no less than the total accrued benefit reduced by the actuarial equivalent of the single sum (determined using the actuarial assumptions that apply under § 417(e)(3)). Section 1.417(e)–1(d)(7)(iii) sets forth rules of operation for these bifurcation methods, including rules describing certain circumstances under which the implicit bifurcation method is not available.

The appendix to this notice provides model language that may be used for each of these methods, as applicable to the plan. The model language provides for the payment of the minimum amounts required to be paid in order to comply with the rules of § 1.417(e)–1(d)(7). A plan may provide for amounts that exceed the minimum amounts required to be paid pursuant to § 1.417(e)–1(d)(7), but the treatment specified under section III.A of this notice does not apply to a plan amendment that differs from the model language in order to provide greater amounts.

Section 411(d)(6) prohibits a plan amendment that decreases a participant’s accrued benefit. With respect to benefits attributable to service before an amendment, a plan amendment that effectively eliminates or reduces an early retirement benefit or retirement-type subsidy or that eliminates an optional form of benefit will be treated as reducing accrued benefits under § 411(d)(6). However, the last sentence of § 411(d)(6)(B) states that the Secretary may, by regulations, provide that § 411(d)(6)(B) does not apply to a plan amendment that eliminates an optional form of benefit (other than a plan amendment that has the effect of eliminating or reducing an early retirement benefit or a retirement-type subsidy). Section 1.417(e)–1(d)(7)(iv) exercises this authority with respect to certain amendments adopted to implement a bifurcated distribution option pursuant to § 1.417(e)–1(d)(7). Pursuant to this authority, § 1.417(e)–1(d)(7)(iv) provides that § 411(d)(6) is not violated as a result of an amendment to a plan to implement a bifurcated distribution option if certain conditions are satisfied. This relief applies with respect to a plan amendment adopted on or before December 31, 2017, if, for plan years beginning before January 1, 2017, the § 417(e)(3) applicable interest rate and applicable mortality table were used to calculate the amount of a distribution that was made to settle a portion of the accrued benefit under the plan, and, pursuant to § 1.417(e)–1(d)(7), the requirements of § 417(e)(3) and § 1.417(e)–1(d) are not required to be applied to the distribution.

The principal authors of this notice are Diane S. Bloom and Linda S. F. Marshall of the Office of Associate Chief Counsel (Tax Exempt and Government Entities). Ms. Bloom and Ms. Marshall can be reached at (202) 317-6700 (not a toll-free number).

Effective for annuity starting dates on or after ________ [insert date], if a participant so elects, the participant’s accrued benefit will be divided and distributed as described below:

A participant may elect to divide his or her accrued benefit to the following extent: _______________________________________

[describe the permissible divisions of the accrued benefit].

A participant may elect a combination of distribution options for the divided portions of his or her accrued benefit to the following extent: ________________________________

[describe available distribution options and designate any limit on the distribution options that may be combined for an accrued benefit that is bifurcated].

If a participant elects to divide his or her accrued benefit, the amount of the distribution payable with respect to each specified portion of the accrued benefit is determined in accordance with the method for calculating the amount of a distribution payable in the optional form elected for that portion as if that portion were the participant’s entire accrued benefit.

Effective for annuity starting dates on or after ________ [insert date], if a participant so elects, the participant will receive a portion of his or her accrued benefit in the form of a single-sum payment as described below. For any participant who so elects, the remainder of the participant’s accrued benefit not payable in the form of a single-sum payment, expressed in the form of ________ [insert plan’s normal form of benefit] commencing when the participant attains normal retirement age (or at the current date, if later) will be equal to the excess of:

A participant may elect to receive as a single-sum payment the following amount: ___________________________________________

[describe (as a dollar figure or as a formula) the amount that may be distributed as a single-sum payment].

A participant who elects to receive a single-sum payment pursuant to this [section] may elect to receive the remainder of his or her accrued benefit in any of the following forms of payment: ____________________________________

[describe available distribution options and any limit on the distribution options under which the remainder of the participant’s benefit may be paid].

If a participant elects to receive a portion of his or her accrued benefit in the form of a single-sum payment, then the amount of the distribution payable with respect to the remainder of the benefit is determined in accordance with the method for calculating the amount of a distribution payable in the optional form elected for that remainder as if that remainder were the participant’s entire accrued benefit.

This revenue procedure provides the monthly national average premium for qualified health plans that have a bronze level of coverage and are offered through Exchanges for taxpayers to use in determining their maximum individual shared responsibility payment under § 5000A(c)(1)(B) of the Internal Revenue Code and § 1.5000A–4 of the Income Tax Regulations.

.01 Section 5000A provides that if a taxpayer, or an individual for whom the taxpayer is liable, is without minimum essential coverage for one or more months in a taxable year, then the taxpayer is liable for the individual shared responsibility payment when filing his or her federal income tax return, unless an exemption applies. See § 5000A(a), (b)(1). In general, under § 5000A a taxpayer is liable for any individual who is a dependent, as defined in § 152, of the taxpayer. See §§ 5000A(b)(3)(A) and 1.5000A–1(c). Married individuals who file a joint return for a taxable year are jointly liable for any individual shared responsibility payment for a month included in the taxable year. See §§ 5000A(b)(3)(B) and 1.5000A–1(c)(3).

.02 For each taxable year, the individual shared responsibility payment is the lesser of (1) the sum of the monthly penalty amounts, or (2) the sum of the monthly national average bronze plan premiums for the shared responsibility family. See § 1.5000A–4(a). The monthly national average bronze plan premium means, for a month for which a shared responsibility payment is imposed, 1/12 of the annual national average premium for qualified health plans that (1) have a bronze level of coverage, (2) would provide coverage for the taxpayer’s shared responsibility family members, and (3) are offered through Exchanges for plan years beginning in a calendar year with or within which the taxable year ends. See §§ 5000A(c)(1)(B) and 1.5000A–4(c). Shared responsibility family means, for a month in a taxable year, all nonexempt individuals for whom the taxpayer and the taxpayer’s spouse, if the taxpayer is married and files a joint return with the spouse, are liable for the shared responsibility payment under § 5000A for that taxable year. See § 1.5000A–1(d)(17).

.03 Revenue Procedure 2014–46, 2014–12 C.B. 367, describes the methodology used to determine the monthly national average bronze plan premium and provides the premium amount for 2014. Revenue Procedure 2015–15, 2015–5 I.R.B. 564, provides the premium amount for 2015. Revenue Procedure 2016–43, 2016–36 I.R.B. 316, provides the premium amount for 2016.

.01 Monthly National Average Bronze Plan Premium. For purposes of § 5000A(c)(1)(B) and § 1.5000A–4, the monthly national average premium for qualified health plans that have a bronze level of coverage and are offered through Exchanges is $272 per individual.

.02 Maximum Monthly National Average Bronze Plan Premium. For purposes of § 5000A(c)(1)(B) and § 1.5000A–4, the maximum monthly national average premium for qualified health plans that have a bronze level of coverage and are offered through Exchanges is $1,360 for a shared responsibility family with five or more members.

This revenue procedure is effective for taxable years ending after December 31, 2016.

Revenue Procedure 2016–43 is superseded.

The principal author of this revenue procedure is James Beatty of the Office of Associate Chief Counsel (Income Tax and Accounting). For further information regarding this revenue procedure, contact Mr. Beatty at (202) 317-7006 (not a toll-free number).