IRS Releases Updated Pension Funding Rates for September 2025

What Plan Sponsors Need to Know About Yield Curves, Segment Rates, and 30 Year Treasury Assumptions

The IRS has issued Notice 2025-47, updating the corporate bond yield curve, minimum present value segment rates, and 24 month average segment rates that apply to defined benefit pension plans. These rates drive critical calculations for minimum funding, lump sum payouts, and multiemployer plan funding limitations, and they will be used by actuaries and plan sponsors for valuations occurring in late 2025 and early 2026.

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Updated Monthly Corporate Bond Yield Curve for August 2025

The IRS published the August 2025 corporate bond yield curve, derived from market data and shown in Table 2025-8 on page 4 of the notice. The curve outlines yields for maturities from 0.5 years through 100 years and is used for plans that elect monthly spot rates instead of 24 month averages.

Key spot segment rates for August 2025 are:

• First segment, 4.20 percent

• Second segment, 5.29 percent

• Third segment, 6.08 percent

These rates apply for minimum present value calculations under section 417(e)(3), including lump sum distributions.

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Updated 24 Month Average Corporate Bond Segment Rates

The IRS also updated the 24 month average segment rates for September 2025, which are critical for minimum funding under section 430.

Unadjusted 24 month average rates:

• First segment, 4.81 percent

• Second segment, 5.35 percent

• Third segment, 5.69 percent

Because the law requires these averages to remain within 95 to 105 percent of the 25 year average segment rates, the IRS released adjusted values depending on the plan year.

Adjusted 24 month average segment rates for September 2025:

• Plan years beginning in 2024, 4.81, 5.35, 5.69

• Plan years beginning in 2025, 4.81, 5.31, 5.69

• Plan years beginning in 2026, 4.81, 5.25, 5.69

The downward adjustments in the second segment for 2025 and 2026 reflect the required corridor around the 25 year averages, which for 2026 are 3.22 percent, 5.00 percent, and 5.70 percent.

These rates affect the funding target, target normal cost, and overall minimum required contributions.

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30 Year Treasury Rates for Multiemployer Plan Funding

Multiemployer defined benefit plans rely on the weighted average 30 year Treasury rate when determining the full funding limitation under section 431.

For plan years beginning in September 2025:

• 30 year Treasury weighted average, 4.22 percent

• Permissible range, 3.80 to 4.43 percent

These values were computed based on daily Treasury yields for August 2025.

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Minimum Present Value Segment Rates for Lump Sum Calculations

Under section 417(e), lump sum distributions must be calculated using monthly spot segment rates, not 24 month averages. For August 2025, the IRS confirmed:

• First segment, 4.20 percent

• Second segment, 5.29 percent

• Third segment, 6.08 percent

These rates influence lump sum payouts and can have substantial financial impacts on both plans and participants.

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How Margen Helps Employers and Actuaries Use IRS Pension Rates

Pension funding rules depend on precise interest rate applications. Margen helps plan sponsors, actuaries, and administrators interpret and apply IRS rules by answering detailed questions like:

• "Which segment rate set applies to our plan year and valuation date?"

• "How does switching from 24 month averages to the monthly yield curve affect our minimum required contribution?"

• "What lump sum interest rates apply for distributions paid this quarter?"

Margen automatically references the latest IRS notices and applies the correct statutory rules, ensuring your calculations are accurate, compliant, and always up to date.

For full details, see IRS Notice 2025-47.