IRS Updates Yield Curve and Segment Rates for Pension Funding in Notice 2025-43

The IRS has released Notice 2025-43, an important update for employers, actuaries, and retirement plan administrators who rely on corporate bond segment rates and yield curves to calculate minimum funding requirements for defined benefit pension plans. This notice provides the monthly corporate bond yield curve for July 2025, the 24 month average segment rates for August 2025, and the updated 30 year Treasury rates used in various pension calculations.

These updates affect how plans determine target normal cost, funding targets, and minimum present value calculations under sections 430, 431, and 417(e) of the Internal Revenue Code. If you handle pension funding compliance, these figures directly influence liabilities, contributions, and valuation assumptions for 2025 and 2026 plan years.

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Updated Corporate Bond Yield Curve for July 2025

The IRS provides a full monthly yield curve derived from July 2025 data, appearing in Table 2025-7 on page 4. Yields increase gradually across maturities, starting at 4.44 percent for 0.5 year maturities and rising above 6.30 percent for longer durations, reflecting current interest rate conditions.

The key spot segment rates extracted from this curve are:

• First segment: 4.38 percent

• Second segment: 5.41 percent

• Third segment: 6.13 percent

These rates are essential when plans elect to use the monthly yield curve instead of 24 month averages under section 430(h)(2)(D).

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24 Month Average Corporate Bond Segment Rates for August 2025

For most single employer defined benefit plans, funding calculations rely on the 24 month average segment rates, subject to adjustment under the 25 year average stabilization rules.

The unadjusted 24 month average segment rates for August 2025 are:

• First segment: 4.86 percent

• Second segment: 5.36 percent

• Third segment: 5.67 percent

After applying the 95 to 105 percent corridors from section 430(h)(2)(C)(iv), the IRS provides adjusted rates for both 2024 and 2025 plan years. For plan years beginning in 2025, the adjusted second segment rate is 5.31 percent, while the first and third segments remain unchanged at 4.86 percent and 5.67 percent.

Understanding which set of adjusted rates applies to your plan year is critical for accurate minimum funding valuations.

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Updated 30 Year Treasury Rates for Multiemployer Plan Funding

For multiemployer plans, section 431 requires use of the weighted average 30 year Treasury rate to determine the plan's full funding limitation. The IRS reports that the 30 year Treasury rate for July 2025 is 4.92 percent, based on the average daily yields of the May 2055 bond.

For plan years beginning in August 2025, the weighted average rate is 4.17 percent, with a permissible range of 3.75 to 4.38 percent.

These numbers influence current liability calculations and funding thresholds for multiemployer plans.

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Minimum Present Value Segment Rates for Lump Sum Calculations

Section 417(e) requires plans to use minimum present value segment rates for certain distributions, such as lump sum payouts. For July 2025, the IRS provides the following rates:

• First segment: 4.38 percent

• Second segment: 5.41 percent

• Third segment: 6.13 percent

These rates align with the spot rates derived from the July 2025 yield curve and directly impact participant lump sum values for applicable months.

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How Margen Helps You Manage Pension Funding and Compliance

Pension funding calculations involve multiple moving pieces. Margen simplifies this by transforming complex IRS data into actionable insights tailored to your plan. You can ask Margen questions like:

• "Which segment rates apply to our 2026 plan year valuation?"

• "How do the July 2025 yield curve rates affect lump sum payouts?"

• "What are our funding target changes using the adjusted August 2025 segment rates?"

Margen automatically pulls the latest IRS notices and applies the correct statutory rules, helping you validate actuarial assumptions and ensure compliance with sections 430, 431, and 417(e) with confidence.

For full details, see IRS Notice 2025-43.