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February 17, 2009

Assumed Rate of Interest

Your Guide



Rate of interest on which an account balance is assumed (or projected) to grow.  The assumed rate of interest must be within IRS approved standards. For instance, when calculating a SEPP using the annuitization or amortization methods, an assumed rate of interest that is not more than 120 percent of the federal mid-term rate (determined in accordance with IRC § 1274(d) for either of the two months immediately preceding the month in which the distribution begins) can be used

An assumed rate of interest is also used to calculate projected earnings for target benefit plan and defined benefit plan assets .

Referring Cite

ERISA §302(c)(3); IRC §412(c)(3), IRC § 401(a), Revenue Ruling 2002-62

Additional Helpful Information

Assumptions that do not use a reasonable rate of interest may result in the computation being disallowed by the IRS


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