Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Rules and Regulations 2127 

Special condition 7 requires that 

supercapacitor be disconnected or 

otherwise removed from its charging 

source without the need for crew 

intervention should the supercapacitor 

become overheated or fail in a manner 

that may create a safety hazard. This 

requirement applies to all 

supercapacitor installations and is not 

limited to those whose proper 

functioning is required for the safe 

operation of the airplane. 

The special conditions contain the 

additional safety standards that the 

Administrator considers necessary to 

establish a level of safety equivalent to 

that established by the existing 

airworthiness standards. 

Discussion of Comments 

The FAA issued Notice of Proposed 

Special Conditions No. 25–22–02–SC 

for the Airbus Model A319–133 and 

A321–200 series airplanes, which was 

published in the Federal Register on 

June 1, 2023 (88 FR 35781). The FAA 

received one comment from The Boeing 

Company (Boeing). 

Boeing recommended the FAA add a 

definition of what constitutes a 

supercapacitor and high-capacity 

electrical storage device and to include 

their thresholds such as capacity, 

voltage, and dialectic strength. Boeing 

stated that this clarification of 

supercapacitor terminology will avoid 

any ambiguity and confusion when 

applying special conditions and their 

applicability, specifically with the 

inapplicability to small capacitors that 

are used on various electrical systems 

used in electronics. 

The FAA acknowledges Boeing’s 

recommendation that adding a 

definition of what constitutes a 

supercapacitor is important for 

clarification and to ensure these special 

conditions’ inapplicability to small 

capacitors used in various electrical 

systems in aviation electronics. 

However, the FAA declines to create a 

definition for supercapacitors through 

special conditions. Currently, the FAA 

is not aware of an industry standard 

regarding the design and installation of 

supercapacitors. With no supercapacitor 

industry standard currently available, 

the similarity of the function of the 

supercapacitor closely relates to the 

rechargeable lithium batteries. 

Therefore, the special conditions used 

for lithium batteries are being used for 

this supercapacitor installation. The 

applicant and the FAA will review the 

design and installation of the 

supercapacitor to ensure these special 

conditions will apply only to 

supercapacitors used as energy storage 

devices similar to rechargeable lithium 

batteries. 

Applicability 

As discussed above, these special 

conditions are applicable to the Airbus 

Model A319–133 and A321–200 series 

airplanes. Should Lufthansa apply at a 

later date for a change to the 

supplemental type certificate to include 

another model incorporating the same 

novel or unusual design feature 

included on Type Certificate No. 

A28NM, these special conditions would 

apply to that model as well. 

Under standard practice, the effective 

date of final special conditions would 

be 30 days after the date of publication 

in the Federal Register. However, as the 

certification date for the Airbus Model 

A319–133 and A321–200 series 

airplanes is imminent, the FAA finds 

that good cause exists to make these 

special conditions effective upon 

publication. 

Conclusion 

This action affects only a certain 

novel or unusual design feature on 

Airbus Models A319–133 and A321–200 

series airplanes. It is not a rule of 

general applicability and affects only 

the applicant who applied to the FAA 

for approval of these features on the 

airplane. 

List of Subjects in 14 CFR Part 25 

Aircraft, Aviation safety, Reporting 

and recordkeeping requirements. 

Authority Citation 

The authority citation for these 

special conditions is as follows: 

Authority: 49 U.S.C. 106(f), 106(g), 40113, 

44701, 44702, 44704. 

The Special Conditions 

Accordingly, pursuant to the 

authority delegated to me by the 

Administrator, the following special 

conditions are issued as part of the type 

certification basis for Airbus Model 

A319–133 and A321–200 series 

airplanes, as modified by Lufthansa 

Technik AG. Each supercapacitor 

installation must: 

1. Be designed to preclude the 

occurrence of uncontrolled increases in 

temperature or pressure under all 

foreseeable operating and failure 

conditions to prevent fire and 

explosion. 

2. Not emit explosive or toxic gasses, 

in normal operation or as the result of 

its failure that may accumulate in 

hazardous quantities in any area of the 

airplane. 

3. Meet the requirements of § 25.863. 

4. Not damage surrounding structure 

or adjacent systems, equipment, or 

electrical wiring interconnection system 

(EWIS) components from corrosive 

fluids or gases that may escape to cause 

a hazardous condition. 

5. Have provisions to prevent any 

hazardous effect on surrounding 

structure or adjacent systems, 

equipment, or EWIS components, 

caused by the maximum amount of heat 

it can generate during any failure 

including any individual 

supercapacitors. 

6. Have a means to prevent 

overheating or overcharging of the 

supercapacitor. 

7. Have a means to automatically 

disconnect it from its charging source in 

the event of an over-temperature 

condition or failure. 

8. Have a monitoring and alerting 

feature that alerts the flightcrew when 

the capacity has fallen below acceptable 

levels if its function is required for safe 

operation of the airplane. The flightcrew 

alerting must be in accordance with the 

requirements of § 25.1322. 

9. Have a means to prevent 

insufficient charging if required for safe 

operation of the airplane. 

Note: A supercapacitor installation consists 

of the supercapacitor(s) and any protective, 

monitoring and alerting circuitry or hardware 

inside or outside of the supercapacitor. This 

includes EWIS components as defined by 

§ 25.1701. It also includes any venting or 

cooling system and packaging. For the 

purpose of these special conditions, a 

supercapacitor and the supercapacitor 

installation is referred to as a supercapacitor. 

Issued in Kansas City, Missouri, on January 

8, 2024. 

Patrick R. Mullen, 

Manager, Technical Policy Branch, Policy and 

Standards Division, Aircraft Certification 

Service. 

[FR Doc. 2024–00484 Filed 1–11–24; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 9986] 

RIN 1545–BQ57 

Corporate Bond Yield Curve for 

Determining Present Value 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final regulations. 

SUMMARY: This document sets forth final 

regulations specifying the methodology 


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2128 Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Rules and Regulations 

1Section 302 of the Employee Retirement Income 

Security Act of 1974, Public Law 93–406, 88 Stat. 

829 (1974), as amended (ERISA), sets forth funding 

rules that are parallel to those in section 412 of the 

Code, and section 303 of ERISA sets forth minimum 

funding requirements that apply generally for 

defined benefit plans (other than multiemployer 

plans) that are parallel to those in section 430 of 

the Code. Pursuant to section 101 of Reorganization 

Plan No. 4 of 1978, 5 U.S.C. App., as amended, the 

Secretary of the Treasury has interpretive 

jurisdiction over the subject matter addressed in 

these regulations for purposes of ERISA, as well as 

the Code. Thus, these Treasury regulations issued 

under section 430 of the Code also apply for 

purposes of section 303 of ERISA. 

for constructing the corporate bond 

yield curve that is used to derive the 

interest rates used in calculating present 

value and making other calculations 

under a defined benefit plan, as well as 

for discounting unpaid losses and 

estimated salvage recoverable of 

insurance companies. These regulations 

affect participants in, beneficiaries of, 

employers maintaining, and 

administrators of certain retirement 

plans, as well as insurance companies. 

DATES: 

Effective date: These regulations are 

effective January 12, 2024. 

Applicability date: These regulations 

apply for purposes of determining the 

corporate bond yield curve under 

section 430(h)(2)(D) of the Internal 

Revenue Code for months that begin on 

or after February 1, 2024. 

FOR FURTHER INFORMATION CONTACT: 

Arslan Malik or Linda S.F. Marshall, 

Office of Associate Chief Counsel 

(Employee Benefits, Exempt 

Organizations, and Employment Taxes) 

at (202) 317–6700 (not a toll-free 

number). 

SUPPLEMENTARY INFORMATION: 

Background 

Section 412 of the Internal Revenue 

Code (Code) prescribes minimum 

funding requirements for defined 

benefit pension plans. Section 430 

specifies the minimum funding 

requirements that apply generally to 

defined benefit plans that are not 

multiemployer plans.1 For a plan 

subject to section 430, section 430(a) 

defines the minimum required 

contribution for a plan year by reference 

to the plan’s funding target for the plan 

year. Under section 430(d)(1), a plan’s 

funding target for a plan year generally 

is the present value of all benefits 

accrued or earned under the plan as of 

the first day of that plan year. 

Section 430(h)(2) provides rules 

regarding the interest rates to be used 

under section 430. Section 430(h)(2)(B) 

provides that a plan’s funding target and 

target normal cost for a plan year are 

determined using three interest rates: (1) 

the first segment rate, which applies to 

benefits reasonably determined to be 

payable during the 5-year period 

beginning on the valuation date; (2) the 

second segment rate, which applies to 

benefits reasonably determined to be 

payable during the next 15-year period; 

and (3) the third segment rate, which 

applies to benefits reasonably 

determined to be paid after that 15-year 

period. Under sections 430(h)(2)(C)(i) 

through (iii), each of these segment rates 

is determined for a month on the basis 

of the corporate bond yield curve for the 

month, taking into account only that 

portion of the yield curve that is based 

on bonds maturing during the period for 

which the segment rate is used. 

Section 430(h)(2)(C)(iv), which was 

added to the Code in 2012 by section 

40211 of the Moving Ahead for Progress 

in the 21st Century Act, Public Law 

112–141, 126 Stat. 405, and has been 

modified several times since then (most 

recently in 2021 by section 80602 of the 

Infrastructure Investment and Jobs Act, 

Pub. L. 117–58, 135 Stat. 429), provides 

interest rate stabilization rules under 

which the segment rates are constrained 

by reference to the 25-year average 

segment rates. Under section 

430(h)(2)(C)(iv), if a segment rate for a 

month is less than the applicable 

minimum percentage, or more than the 

applicable maximum percentage, of the 

average of the corresponding segment 

rates for years in the 25-year period 

ending with September 30 of the 

calendar year preceding the calendar 

year in which the plan year begins, then 

the segment rate for that month is equal 

to the applicable minimum percentage 

or the applicable maximum percentage 

of the corresponding 25-year average 

segment rate, whichever is closest. The 

last sentence of section 

430(h)(2)(C)(iv)(I) provides that any 25- 

year average segment rate that is less 

than 5 percent is deemed to be 5 

percent. 

Under section 430(h)(2)(D)(i), the term 

‘‘corporate bond yield curve’’ means, 

with respect to any month, a yield curve 

prescribed by the Secretary for the 

month that reflects the average, for the 

24-month period ending with the month 

preceding such month, of monthly 

yields on investment grade corporate 

bonds with varying maturities and that 

are in the top three quality levels 

available. Section 430(h)(2)(D)(ii) 

permits a plan sponsor to elect to use 

the corporate bond yield curve, rather 

than the segment rates, to determine the 

plan’s minimum required contribution. 

The yield curve that applies pursuant to 

this election is determined without 

regard to 24-month averaging. This 

election, once made, may be revoked 

only with the consent of the Secretary. 

Under section 430(h)(2)(F), the 

Secretary is instructed to publish for 

each month the corporate bond yield 

curve (without regard to the 24-month 

averaging specification), the segment 

rates described in section 430(h)(2)(C), 

and the 25-year averages of segment 

rates used under section 

430(h)(4)(C)(iv). The Secretary is also 

instructed to publish a description of 

the methodology used to determine the 

yield curve and segment rates which is 

sufficiently detailed to enable plans to 

make reasonable projections regarding 

the yield curve and segment rates for 

future months based on the plan’s 

projection of future interest rates. 

Section 1.430(h)(2)–1 was issued in 

2009 to provide rules regarding the 

interest rates to be used under section 

430. T.D. 9467, 74 FR 53004. Section 

1.430(h)(2)–1(d) provides that the 

methodology for determining the yield 

curve is provided in guidance that is 

published in the Internal Revenue 

Bulletin. Notice 2007–81, 2007–2 CB 

899, describes the methodology used by 

the Department of the Treasury 

(Treasury Department) to develop the 

corporate bond yield curve. Section 

1.430(h)(2)–1(d) also provides that the 

yield curve for each month will be set 

forth in guidance published in the 

Internal Revenue Bulletin. Monthly IRS 

notices set forth the corporate bond 

yield curve for the month (without 

regard to the 24-month averaging 

specification), the section 430 segment 

interest rates (before and after 

adjustment pursuant to section 

430(h)(3)(C)(iv)), and the 25-year 

average segment rates (which are 

updated annually). 

Section 417(e)(3) provides 

assumptions for determining minimum 

present value for certain purposes, 

including the determination of a lumpsum that is the present value of an 

annuity, and prescribes an applicable 

interest rate for this purpose. Section 

417(e)(3)(C) provides that the term 

‘‘applicable interest rate’’ means the 

adjusted first, second, and third segment 

rates applied under rules similar to the 

rules of section 430(h)(2)(C) for the 

month before the date of a distribution 

or such other time as the Secretary may 

prescribe by regulations. However, for 

purposes of section 417(e)(3), these rates 

are determined without regard to the 

segment rate stabilization rules of 

section 430(h)(2)(C)(iv). In addition, 

under section 417(e)(3)(D), these rates 

are determined using the average yields 

for a month, rather than the 24-month 

average used under section 430(h)(2)(D). 


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Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Rules and Regulations 2129 

2This commenter suggested that multiple yield 

curves be published for different segments of the 

corporate bond market, such as by industry, sector, 

or region. This suggestion is inconsistent with the 

requirements of section 430(h)(2)(D) and (F), under 

which the Secretary must publish a single corporate 

bond yield curve for each month. In addition, this 

commenter expressed concern about the impact of 

the proposed regulations on the determination of 

the applicable federal rate and any resulting impact 

on the tax-exempt bond market. However, pursuant 

to section 1274(d), the applicable federal rates are 

determined with reference to the yields on Treasury 

securities, not corporate bonds; thus, these 

regulations have no effect on the determination of 

the applicable federal rates. 

3The hump adjustment variable is a 

mathematical function that is a cubic spline in the 

interval from 10 years maturity through 30 years 

maturity made up of two polynomials with a 

smooth junction at 20 years maturity. 

4Under Notice 2007–81 and the regulations, the 

data for durations equal to or below 1⁄2 year that is 

used to construct the daily corporate bond yield 

curve consists of AA financial and AA nonfinancial 

commercial paper rates, as reported by the Federal 

Reserve Board. 

5Although section 939A(b) of the Dodd-Frank 

Wall Street Reform and Consumer Protection Act, 

Public Law 111–203, 124 Stat. 1376, generally 

prohibits federal agencies from issuing regulations 

that apply a standard that is based on credit ratings 

from statistical rating organizations, this prohibition 

does not apply to the construction of the daily 

corporate bond yield curve because the use of those 

credit ratings is required by section 430(h)(2)(D) of 

the Code. 

Under section 846(c), the Secretary 

determines the applicable interest rate 

to be used by insurance companies to 

discount unpaid losses on the basis of 

the corporate bond yield curve (as 

defined in section 430(h)(2)(D)(i), 

determined by substituting ‘‘60-month 

period’’ for ‘‘24-month period’’). Under 

§ 1.832–4(c), the applicable interest rate 

determined under section 846(c) is also 

used by insurance companies to 

discount estimated salvage recoverable, 

unless the Commissioner publishes 

applicable discount factors to be used 

for that purpose. 

A notice of proposed rulemaking and 

notice of public hearing (REG–124123– 

22) that would revise the methodology 

for determining the corporate bond 

yield curve was published in the 

Federal Register (88 FR 41047) on June 

23, 2023. Two commenters submitted 

comments on the proposed regulations. 

A public hearing on the proposed 

regulations was scheduled for August 

30, 2023, but was cancelled because no 

one requested to speak. After 

consideration of these comments, these 

final regulations are adopted with minor 

changes to the language from the 

proposed regulations to provide more 

detail on the methodology for 

determining the corporate bond yield 

curve. 

Summary of Comments and 

Explanation of Revisions 

These regulations specify the 

methodology used to develop the 

corporate bond yield curve. This 

methodology is generally the same as 

the methodology set forth in Notice 

2007–81 but includes two refinements 

to take into account changes in the bond 

market since 2007. The regulations also 

amend the existing regulations under 

section 430(h)(2) to reflect the addition 

of the interest rate stabilization rules of 

section 430(h)(2)(C)(iv) and to eliminate 

transition rules that applied to plan 

years beginning before January 1, 2010. 

One commenter expressed support for 

the rules set forth in the proposed 

regulations. The other commenter raised 

various concerns regarding the 

corporate bond yield curve.2 Those 

concerns are discussed in this Summary 

of Comments and Explanation of 

Revisions. 

Under these regulations, as under 

Notice 2007–81, the monthly corporate 

bond yield curve for a month is defined 

as the set of spot rates at specified 

durations. The specified durations are at 

6-month intervals ranging from 6 

months through 100 years, and the spot 

rate at a duration is the yield (when 

compounded semiannually) for a bond 

that matures at that duration with a 

single payment at maturity. Each spot 

rate at a specified duration on the 

monthly corporate bond yield curve for 

a month is equal to the arithmetic 

average for each business day of that 

month of the spot rates at that duration 

on the daily corporate bond yield 

curves. 

Under these regulations, as under 

Notice 2007–81, each spot rate on the 

daily corporate bond yield curve is 

derived from a forward interest rate 

function (that is, the projected 

instantaneous interest rate at each point 

in time) that is defined by the selection 

of five coefficients of B-splines 

determined using the bond data, taking 

into account certain adjustment factors. 

Two of those adjustment factors, 

which are included in the methodology 

set forth in Notice 2007–81, take into 

account the ratings of the bonds used to 

develop the daily corporate bond yield 

curve. The third adjustment factor, 

which was not included in the 

methodology set forth in that notice, is 

a hump adjustment variable that peaks 

at 20 years maturity 3 and serves to 

capture the effects of the hump in spot 

rates that is often seen around 20 years 

maturity. 

Under the methodology used in 

Notice 2007–81, the spot rate at a 

duration t could be calculated directly 

as the discount rate at that duration 

derived from the forward interest rate 

function. However, the addition of the 

hump adjustment variable under the 

proposed regulations means that the 

calculation of the spot rates from the 

discount function and the hump 

adjustment variable requires an 

intermediate step. This intermediate 

step, which was implicit in the 

proposed regulations, involves the 

determination of a par yield curve (that 

is, the curve in which the rate at 

maturity t on the curve is equal to the 

yield for a bond with maturity of t for 

which the price is the same as the 

principal amount) that is calculated 

from the discount function and the 

hump adjustment variable. In response 

to a commenter’s request that the 

regulations specify clear standards for 

the determination of the corporate bond 

yield curve, these regulations describe 

this intermediate step. Accordingly, 

these regulations clarify that the spot 

rates are determined by first setting the 

spot rate at duration of 1⁄2 year on the 

daily corporate bond yield curve as the 

yield at maturity of 1⁄2 year from the 

daily par yield curve, and then 

determining the spot rate for any later 

duration by applying an iterative 

process based on the spot rates at earlier 

durations and the daily par yield curve. 

One commenter asked how the IRS 

handles the situation in which the 

rating of a bond is upgraded or 

downgraded during a month, or a bond 

is rated differently by different rating 

organizations for a single day. Because 

the monthly corporate bond yield curve 

is developed from a set of daily 

corporate bond yield curves, changes in 

ratings during the month are 

automatically taken into account. In the 

case of a bond that is rated differently 

by different ratings organizations on a 

single day, the bond is treated as having 

the average of the ratings for that day. 

These regulations generally adopt the 

specification for the bond data set for a 

month under Notice 2007–81 but 

modify an exclusion from that bond 

data set. Under Notice 2007–81 and 

these regulations, subject to certain 

exclusions, the bonds that are used to 

construct the daily corporate bond yield 

curve for a business day are bonds with 

the following characteristics: (1) 

maturities longer than 1⁄2 year,4 (2) at 

least two payment dates, (3) designated 

as corporate, (4) high quality ratings 

(that is, AAA, AA, or A) as of that 

business day from the nationally 

recognized statistical rating 

organizations,5 (5) at least $250 million 

in par amount outstanding on at least 

one day during the month, (6) payment 

of fixed nominal semiannual coupons 

and the principal amount at maturity, 


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2130 Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Rules and Regulations 

and (7) maturity not later than 30 years 

after that day. 

Under Notice 2007–81 and these 

regulations, the following categories of 

bonds are excluded from the bond data 

set: (1) bonds not denominated in U.S. 

dollars, (2) bonds not issued by U.S. 

corporations, (3) bonds that are capital 

securities (sometimes referred to as 

hybrid preferred stock), (4) bonds 

having variable coupon rates, (5) 

convertible bonds, (6) bonds issued by 

a government-sponsored enterprise 

(such as the Federal National Mortgage 

Association), (7) asset-backed bonds, (8) 

putable bonds, (9) bonds with sinking 

funds, and (10) bonds with a par 

amount outstanding below $250 million 

for the day for which the daily yield 

curve is constructed. 

Notice 2007–81 also excluded callable 

bonds (unless the call feature is makewhole) from the bond data set used to 

construct the daily corporate bond yield 

curve. The regulations generally retain 

this exclusion but narrow it. Under the 

proposed regulations, this exclusion 

does not apply if the call feature is 

exercisable only during the last year 

before maturity. This type of call feature 

has recently become more widely used, 

and the inclusion of bonds with this 

feature in the data set will result in a 

significantly larger pool of bonds that 

more accurately reflects the market for 

high quality corporate bonds. 

One commenter asked how the 

calculation of the yield of a corporate 

bond is affected by any options 

embedded in that bond. The complexity 

of the calculations involved in 

quantifying this effect is the reason that 

corporate bonds with embedded put and 

call options have been generally 

excluded from the set of bonds used to 

determine the corporate bond yield 

curve in the past. However, as noted in 

the preceding paragraph, including 

bonds with a call feature that is 

exercisable only during the last year 

before maturity significantly increases 

the pool of bonds that are taken into 

account in developing the corporate 

bond yield curve, and the Treasury 

Department and the IRS have 

determined that this feature does not 

significantly affect the yields of these 

bonds. Accordingly, no adjustment will 

be made to reflect the effect of this 

feature on bond yields. 

Applicability Date 

These regulations apply for purposes 

of determining the corporate bond yield 

curve under section 430(h)(2)(D) for 

months that begin on or after February 

1, 2024. 

Statement of Availability of IRS 

Documents 

IRS Revenue Rulings, Revenue 

Procedures, and Notices cited in this 

document are published in the Internal 

Revenue Bulletin (or Cumulative 

Bulletin) and are available from the 

Superintendent of Documents, U.S. 

Government Printing Office, 

Washington, DC 20402, or by visiting 

the IRS website at www.irs.gov. 

Special Analyses 

Regulatory Planning and Review 

(Executive Orders 12866 and 13563) 

Pursuant to the Memorandum of 

Agreement, Review of Treasury 

Regulations under Executive Order 

12866 (June 9, 2023), tax regulatory 

actions issued by the IRS are not subject 

to the requirements of section 6 of 

Executive Order 12866, as amended. 

Therefore, a regulatory impact 

assessment is not required. 

Regulatory Flexibility Act 

It is hereby certified that this rule will 

not have a significant economic impact 

on a substantial number of small 

entities. The vast majority of plan 

sponsors of defined benefit plans that 

are subject to section 430 choose to use 

the segment rates under section 

430(h)(2)(C), rather than the corporate 

bond yield curve under section 

430(h)(2)(D), to determine minimum 

required contributions. Furthermore, 

most of the plan sponsors who choose 

to use the corporate bond yield curve for 

this purpose are not small employers. 

Therefore, the methodology set forth in 

these regulations for constructing the 

corporate bond yield curve will not 

have a significant effect on minimum 

required contributions for small 

employers. In addition, the insurance 

companies that are required to use a 

modified version of the corporate bond 

yield curve to discount unpaid losses 

are typically not small employers. 

Accordingly, a regulatory flexibility 

analysis under the Regulatory 

Flexibility Act is not required. 

Pursuant to section 7805(f) of the 

Code, the proposed regulations that 

preceded these regulations were 

submitted to the Chief Counsel for 

Advocacy of the Small Business 

Administration for comment on their 

impact on small business, and no 

comments were received. 

Unfunded Mandates Reform Act 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 requires 

that agencies assess anticipated costs 

and benefits and take certain other 

actions before issuing a final rule that 

includes any Federal mandate that may 

result in expenditures in any one year 

by a State, local, or Tribal government, 

in the aggregate, or by the private sector, 

of $100 million in 1995 dollars, updated 

annually for inflation. These regulations 

do not include any Federal mandate that 

may result in expenditures by State, 

local, or Tribal governments, or by the 

private sector in excess of that 

threshold. 

Executive Order 13132: Federalism 

Executive Order 13132 (Federalism) 

prohibits an agency from publishing any 

rule that has federalism implications if 

the rule either imposes substantial, 

direct compliance costs on State and 

local governments, and is not required 

by statute, or preempts State law, unless 

the agency meets the consultation and 

funding requirements of section 6 of the 

Executive order. These regulations do 

not have federalism implications, 

impose substantial direct compliance 

costs on State and local governments, or 

preempt State law within the meaning 

of the Executive order. 

Congressional Review Act 

Pursuant to the Congressional Review 

Act (5 U.S.C. 801 et seq.), the Office of 

Information and Regulatory Affairs 

designated this rule as not a major rule, 

as defined by 5 U.S.C. 804(2). 

Drafting Information 

The principal authors of these 

regulations are Arslan Malik and Linda 

S.F. Marshall of the Office of Associate 

Chief Counsel (Employee Benefits, 

Exempt Organizations, and Employment 

Taxes). However, other personnel from 

the Treasury Department and the IRS 

participated in the development of these 

regulations. 

List of Subjects in 26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

Adoption of Amendments to the 

Regulations 

Accordingly, the Treasury Department 

and the IRS amend 26 CFR part 1 as 

follows: 

PART 1—INCOME TAXES 

■ Paragraph 1. The authority citation 

for part 1 continues to read in part as 

follows: 

Authority: 26 U.S.C. 7805 * * * 

■ Par. 2. Section 1.430(h)(2)–1 is 

amended by: 

■ 1. Removing the phrase ‘‘and 

transition rules’’ in the last sentence of 

paragraph (a)(1); 

■ 2. Revising paragraph (b)(2); 


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Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Rules and Regulations 2131 

■ 3. Removing the last sentence in 

paragraph (c)(1); 

■ 4. In paragraphs (c)(2)(i) through (iii), 

removing the phrase ‘‘under the 

transition rule of paragraph (h)(4) of this 

section’’ and adding the phrase ‘‘under 

the interest rate stabilization rules in 

section 430(h)(2)(C)(iv)’’ in its place; 

■ 5. Revising paragraph (d); 

■ 6. Removing paragraph (e)(3) and 

redesignating paragraph (e)(4) as 

paragraph (e)(3); 

■ 7. In newly redesignated paragraph 

(e)(3)(ii), removing the phrase ‘‘this 

paragraph (e)(4)’’ and adding the phrase 

‘‘this paragraph (e)(3)’’ in its place; 

■ 8. Redesignating paragraph (e)(5) as 

paragraph (e)(4); and 

■ 9. Revising paragraph (h). 

The revisions read as follows: 

§ 1.430(h)(2)–1 Interest rates used to 

determine present value. 

* * * * * 

(b) * * * 

(2) Benefits payable within 5 years. In 

the case of benefits expected to be 

payable during the 5-year period 

beginning on the valuation date for the 

plan year, the interest rate used in 

determining the present value of the 

benefits that are included in the target 

normal cost and the funding target for 

the plan is the first segment rate with 

respect to the applicable month, as 

described in paragraph (c)(2)(i) of this 

section. 

* * * * * 

(d) Monthly corporate bond yield 

curve—(1) In general—(i) Construction 

of monthly corporate bond yield curve. 

For purposes of this section, the 

monthly corporate bond yield curve for 

a month is defined as the set of spot 

rates at specified durations. The 

specified durations are at 6-month 

intervals ranging from 6 months through 

100 years and the spot rate at a duration 

is the yield (when compounded 

semiannually) for a bond that matures at 

that duration with a single payment at 

maturity. The monthly corporate bond 

yield curve is constructed as the average 

of the spot rates from the set of daily 

corporate bond yield curves as specified 

in paragraph (d)(1)(ii) of this section. 

Each daily corporate bond yield curve is 

constructed using the methodology set 

forth in paragraph (d)(2) of this section 

based on the data described in 

paragraph (d)(3) of this section. The 

yield curve for each month will be 

published in the Internal Revenue 

Bulletin. See § 601.601(d) of this 

chapter. 

(ii) Monthly corporate bond yield 

curve constructed through averaging. 

Each spot rate at a specified duration on 

the monthly corporate bond yield curve 

for a month is equal to the arithmetic 

average, for each business day of that 

month, of the spot rates at that duration 

on the daily corporate bond yield 

curves. 

(2) Construction of the daily corporate 

bond yield curve—(i) In general—(A) 

Calculation of spot rates. The spot rate 

at duration of 1⁄2 year on the daily 

corporate bond yield curve is set equal 

to the yield at maturity of 1⁄2 year from 

the daily par yield curve described in 

paragraph (d)(2)(i)(B) of this section. 

The spot rate for any later duration on 

the daily corporate bond yield curve is 

determined by applying an iterative 

process based on the spot rates at earlier 

durations and the daily par yield curve. 

(B) Calculation of par yield curve. The 

daily par yield curve (that is, the curve 

in which the rate at maturity t on the 

curve is equal to the yield for a bond 

with maturity of t for which the price is 

the same as the principal amount) is 

calculated from the discount function 

described in paragraph (d)(2)(i)(C) of 

this section and the hump adjustment 

variable described in paragraph 

(d)(2)(iii)(D) of this section. 

(C) Derivation of discount function. 

The discount function for a day at 

duration t (denoted d(t)) is derived from 

the forward interest rate function as 

described in paragraph (d)(2)(ii) of this 

section (denoted f(z)) using the 

following equation: 

(ii) Determination of forward interest 

rates—(A) In general. The forward 

interest rate function used to derive the 

discount function is determined as a 

series of cubic polynomials (referred to 

as a cubic spline) that have a smooth 

junction at specified knot points 

(maturities of 0, 1.5, 3, 7, 15, and 30 

years). The requirement that the 

polynomials have a smooth junction at 

a knot point is satisfied if the two 

polynomials that are meeting at the knot 

have the same value, the same 

derivative, and the same second 

derivative at that knot point. 

(B) Constraints on the forward interest 

function. The following three 

constraints are placed on the forward 

interest rate function— 

(1) The second derivative of the 

function is set to 0 at maturity 0. 

(2) The value of the forward interest 

rate function at and after 30 years is 

constrained to equal its average value 

from 15 to 30 years. 

(3) The derivative of the forward 

interest rate function is set to 0 at 

maturity 30 years. 

(iii) Parameters for daily bond price 

model—(A) B-spline coefficients. The 

assumed cubic spline for the forward 

interest rate function can be described 

as a linear combination of B-splines, 

with five parameters, which are 

determined taking into account the two 

coefficients for the bond-quality 

adjustment variables described in 

paragraphs (d)(2)(iii)(B) and (C) of this 

section and the coefficient for the hump 

adjustment variable described in 

paragraph (d)(2)(iii)(D) of this section. 

The five parameters and three 

coefficients are determined using the 

bond data weighted as described in 

paragraph (d)(2)(iv) of this section. After 

this weighting of the bond data, the five 

parameters and three coefficients are 

chosen to minimize the sum of the 

squared differences between the bid 

price for each of the bonds (or ask price 

for commercial paper) and the price 

estimated for each of those bonds 

determined using the specified 

parameters and coefficients, and taking 

into account the bond’s coupon rate, 

number of years until maturity, and 

rating. 

(B) Adjustment factor for share of 

bonds that are AA-rated. The first 

adjustment variable is based on the 

proportion of bonds that are rated AA 

within the universe of bonds in the data 

set that are rated AA or AAA, weighted 

by par value. In the case of an AAArated bond the adjustment variable 

described in this paragraph (d)(2)(iii)(B) 

is equal to the product of the proportion 

described in the preceding sentence and 

the number of years until maturity for 

the bond. In the case of an AA-rated 

bond the adjustment variable described 

in this paragraph (d)(2)(iii)(B) is equal to 

the product of (1- that proportion) and 

the number of years until maturity for 

the bond. In the case of an A-rated bond, 

the adjustment variable described in 

this paragraph (d)(2)(iii)(B) is 0. 

(C) Adjustment factor for share of 

bonds that are A-rated. The second 

adjustment variable is based on the 

proportion of bonds rated A within the 

universe of bonds in the data set, 

weighted by par value. In the case of an 

AAA-rated bond or an AA-rated bond, 

the adjustment variable described in 

this paragraph (d)(2)(iii)(C) is equal to 

the product of the proportion described 

in the preceding sentence and the 

number of years until maturity for the 

bond. In the case of an A-rated bond, the 

adjustment variable described in this 

paragraph (d)(2)(iii)(C) is equal to the 

product of (1- that proportion) and the 

number of years until maturity for the 

bond. 

(D) Hump adjustment variable. The 

hump adjustment variable is a 


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d(t) = exp (-f f(z)dz) 
2132 Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Rules and Regulations 

1Under the Federal Civil Penalties Inflation 

Adjustment Act of 1990, a penalty is a civil 

monetary penalty if (among other things) it is for 

a specific monetary amount or has a maximum 

amount specified by Federal law. Title IV also 

provides (in section 4007) for penalties for late 

payment of premiums, but those penalties are 

neither in a specified amount nor subject to a 

specified maximum amount. 

mathematical function that is a cubic 

spline in the interval from 10 years 

maturity through 30 years maturity 

made up of two polynomials with a 

smooth junction (as described in 

paragraph (d)(2)(ii)(A) of this section) at 

20 years maturity. The spline rises from 

0 at 10 years maturity to 1.0 at 20 years 

maturity, then falls back down to 0 at 30 

years maturity. The hump adjustment 

variable is 0 for maturities less than 10 

years and maturities greater than 30 

years. 

(iv) Weighting of bond data. The bond 

data are weighted in three steps. In the 

first step, equal weights are assigned to 

the commercial paper rates at the short 

end of the curve, and the par amounts 

outstanding of all the bonds are rescaled 

so that their sum equals the sum of the 

weights for commercial paper. In the 

second step, the squared price 

difference for each commercial paper 

rate is multiplied by the commercial 

paper weight, and the squared price 

difference for each bond is multiplied 

by the bond’s rescaled par amount 

outstanding. In the third step, 

applicable for bonds with duration 

greater than 1, the weighted squared 

price difference for each bond from the 

second step is divided by the bond’s 

duration. 

(3) Data used—(i) In general. Except 

as otherwise provided in this paragraph 

(d)(3), the bonds that are used to 

construct the daily corporate bond yield 

curve for a business day are bonds with 

maturities longer than 1⁄2 year, with at 

least two payment dates, and that: 

(A) Are designated as corporate; 

(B) Have high quality ratings (AAA, 

AA, or A) as of that business day from 

the nationally recognized statistical 

rating organizations; 

(C) Have at least $250 million in par 

amount outstanding on at least one day 

during the month; 

(D) Pay fixed nominal semiannual 

coupons and the principal amount at 

maturity; and 

(E) Mature not later than 30 years after 

that business day. 

(ii) Excluded bonds. The following 

types of bonds are not used to construct 

the daily corporate bond yield curve for 

a date: 

(A) Bonds not denominated in U.S. 

dollars; 

(B) Bonds not issued by U.S. 

corporations; 

(C) Bonds that are capital securities 

(sometimes referred to as hybrid 

preferred stock); 

(D) Bonds with variable coupon rates; 

(E) Convertible bonds; 

(F) Bonds issued by a governmentsponsored enterprise (such as the 

Federal National Mortgage Association); 

(G) Asset-backed bonds; 

(H) Callable bonds, unless the call 

feature is make-whole or the call feature 

is exercisable only during the last year 

before maturity; 

(I) Putable bonds; 

(J) Bonds with sinking funds; and 

(K) Bonds with an outstanding par 

amount below $250 million for the day 

for which the daily yield curve is 

constructed. 

(iii) Durations equal to or below 1⁄2

year. The data for durations equal to or 

below 1⁄2 year that is used to construct 

the daily corporate bond yield curve 

consists of AA financial and AA 

nonfinancial commercial paper rates, as 

reported by the Federal Reserve Board. 

* * * * * 

(h) Applicability date. This section 

applies for months that begin on or after 

February 1, 2024. For rules that apply 

for earlier periods, see 26 CFR 

1.430(h)(2)–1 revised as of April 1, 

2023. 

Douglas W. O’Donnell, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: December 27, 2023. 

Lily Batchelder, 

Assistant Secretary of the Treasury (Tax 

Policy). 

[FR Doc. 2024–00552 Filed 1–11–24; 8:45 am] 

BILLING CODE 4830–01–P 

PENSION BENEFIT GUARANTY 

CORPORATION 

29 CFR Parts 4071 and 4302 

RIN 1212–AB45 

Adjustment of Civil Penalties for 

Inflation 

AGENCY: Pension Benefit Guaranty 

Corporation. 

ACTION: Final rule. 

SUMMARY: The Pension Benefit Guaranty 

Corporation is required to amend its 

regulations annually to adjust for 

inflation the maximum civil penalty for 

failure to provide certain notices or 

other material information and for 

failure to provide certain multiemployer 

plan notices. 

DATES:

Effective date: This rule is effective on 

January 12, 2024. 

Applicability date: The increases in 

the civil monetary penalties under 

sections 4071 and 4302 of the Employee 

Retirement Income Security Act 

provided for in this rule apply to such 

penalties assessed after January 12, 

2024. 

FOR FURTHER INFORMATION CONTACT: 

Karen Levin (levin.karen@pbgc.gov), 

Attorney, Regulatory Affairs Division, 

Pension Benefit Guaranty Corporation, 

445 12th Street SW, Washington, DC 

20024–2101; 202–229–3559. If you are 

deaf or hard of hearing or have a speech 

disability, please dial 7–1–1 to access 

telecommunications relay services. 

SUPPLEMENTARY INFORMATION: 

Executive Summary 

Purpose of the Regulatory Action 

This rule is needed to carry out the 

requirements of the Federal Civil 

Penalties Inflation Adjustment Act 

Improvements Act of 2015 and Office of 

Management and Budget guidance M– 

24–07. The rule adjusts, as required for 

2024, the maximum civil penalties 

under 29 CFR parts 4071 and 4302 that 

the Pension Benefit Guaranty 

Corporation (PBGC) may assess for 

failure to provide certain notices or 

other material information and certain 

multiemployer plan notices. 

PBGC’s legal authority for this action 

comes from the Federal Civil Penalties 

Inflation Adjustment Act of 1990 as 

amended by the Federal Civil Penalties 

Inflation Adjustment Act Improvements 

Act of 2015 and from sections 

4002(b)(3), 4071, and 4302 of the 

Employee Retirement Income Security 

Act of 1974 (ERISA). 

Major Provisions of the Regulatory 

Action 

This rule adjusts as required by law 

the maximum civil penalties that PBGC 

may assess under sections 4071 and 

4302 of ERISA. The new maximum 

amounts are $2,670 for section 4071 

penalties and $356 for section 4302 

penalties. 

Background 

PBGC administers title IV of ERISA. 

Title IV has two provisions that 

authorize PBGC to assess civil monetary 

penalties.1 Section 4302, added to 

ERISA by the Multiemployer Pension 

Plan Amendments Act of 1980, 

authorizes PBGC to assess a civil 

penalty of up to $100 a day for failure 

to provide a notice under subtitle E of 

title IV of ERISA (dealing with 

multiemployer plans). Section 4071, 

added to ERISA by the Omnibus Budget 

Reconciliation Act of 1987, authorizes 


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