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IRS Supplements Interest Rate Schedules for Insurance Reserve Computation

JAN. 13, 2014

Rev. Rul. 2014-4; 2014-5 I.R.B. 449

DATED JAN. 13, 2014

DOCUMENT ATTRIBUTES

Institutional Authors
Internal Revenue Service
Code Sections
Section 807
Subject Areas/Tax Topics
Insurance
Jurisdictions
United States
Language
English
Tax Analysts Document Number
Doc 2014-765
Tax Analysts Electronic Citation
2014 TNT 9-6

Citations: Rev. Rul. 2014-4; 2014-5 I.R.B. 449

Part I

Section 807. -- Rules for Certain Reserves

For purposes of § 807(d)(4) of the Internal Revenue Code, for taxable years beginning after December 31, 2012, this ruling supplements the schedules of prevailing state assumed interest rates set forth in Rev. Rul. 92-19, 1992-1 C.B. 227. This information is to be used by insurance companies in computing their reserves for (1) life insurance and supplementary total and permanent disability benefits, (2) individual annuities and pure endowments, and (3) group annuities and pure endowments. As § 807(d)(2)(B) requires that the interest rate used to compute these reserves be the greater of (1) the applicable federal interest rate, or (2) the prevailing state assumed interest rate, the table of applicable federal interest rates in Rev. Rul. 92-19 is also supplemented.

Following are supplements to schedules A, B, C, and D to Part III of Rev. Rul. 92-19, providing prevailing state assumed interest rates for insurance products with different features issued in 2013 and 2014, and a supplement to the table in Part IV of Rev. Rul. 92-19, providing the applicable federal interest rates under § 807(d) for 2013 and 2014. This ruling does not supplement Parts I and II of Rev. Rul. 92-19.

This is the twenty-second supplement to the interest rates provided in Rev. Rul. 92-19. Earlier supplements were published in Rev. Rul. 93-58, 1993-2 C.B. 241 (interest rates for insurance products issued in 1992 and 1993); Rev. Rul. 94-11, 1994-1 C.B. 196 (1993 and 1994); Rev. Rul. 95-4, 1995-1 C.B. 141 (1994 and 1995); Rev. Rul. 96-2, 1996-1 C.B. 141 (1995 and 1996); Rev. Rul. 97-2, 1997-1 C.B. 134 (1996 and 1997); Rev. Rul. 98-2, 1998-1 C.B. 259 (1997 and 1998); Rev. Rul. 99-10, 1999-1 C.B. 671 (1998 and 1999); Rev. Rul. 2000-17, 2000-1 C.B. 842 (1999 and 2000); Rev. Rul. 2001-11, 2001-1 C.B. 780 (2000 and 2001); Rev. Rul. 2002-12, 2002-1 C.B. 624 (2001 and 2002); Rev. Rul. 2003-24, 2003-1 C.B. 557 (2002 and 2003); Rev. Rul. 2004-14, 2004-1 C.B. 511 (2003 and 2004); Rev. Rul. 2005-29, 2005-1 C.B. 1080 (2004 and 2005); Rev. Rul. 2006-25, 2006-1 C.B. 882 (2005 and 2006); Rev. Rul. 2007-10, 2007-1 C.B.660 (2006 and 2007); Rev. Rul. 2008-19, 2008-1 C.B. 669 (2007 and 2008); Rev. Rul. 2009-3, 2009-5 I.R.B. 382 (2008 and 2009); Rev. Rul. 2010-7, 2010-8 I.R.B. 417 (2009 and 2010); Rev. Rul. 2011-23, 2011-43 I.R.B. 585 (2010 and 2011); Rev. Rul. 2012-6, 2012-6 I.R.B. 349 (2011 and 2012); and Rev. Rul. 2013-4, 2013-9 I.R.B. 520 (2012 and 2013).

Part III. Prevailing State Assumed Interest Rates -- Products Issued in Years After 1982.^*

Schedule A

STATUTORY VALUATION INTEREST RATES

BASED ON THE 1980 AMENDMENTS TO THE

NAIC STANDARD VALUATION LAW

A. Life insurance valuation:

Guarantee Duration (years) Calendar Year of Issue 2014

_____________________________________________________________________

10 or fewer 3.75^**

More than 10 but not more than 20 3.75^**

More than 20 3.50^**

_____________________________________________________________________

Source: Rates calculated from the monthly averages, ending June 30,

2013, of Moody's Composite Yield on Seasoned Corporate Bonds.

FOOTNOTES TO SCHEDULE A

^* The terms used in the schedules in this ruling and in Part III of Rev. Rul. 92-19 are those used in the Standard Valuation Law; the terms are defined in Rev. Rul. 92-19.

^** As these rates exceed the applicable federal interest rate for 2014 of 1.79 percent, the valuation interest rate to be used for this product under § 807 is the applicable rate specified in this table.

END OF FOOTNOTES TO SCHEDULE A

Part III, Schedule B

STATUTORY VALUATION INTEREST RATES BASED ON THE 1980

AMENDMENTS TO THE NAIC STANDARD VALUATION LAW

B. Single premium immediate annuities and annuity benefits involving life contingencies arising from other annuities with cash settlement options and from guaranteed interest contracts with cash settlement options:

Calendar Year of Issue Valuation Interest Rate

______________________________________________________________________

2013 4.00*

Source: Rates calculated from the monthly averages, ending June 30,

2013, of Moody's Composite Yield on Seasoned Corporate Bonds.

*As this prevailing state assumed interest rate exceeds the

applicable federal interest rate for 2013 of 2.16 percent, the

valuation interest rate of 4.00 percent is to be used for this

product under § 807.

Part III, Schedule C24 -- 2013

STATUTORY VALUATION INTEREST RATES

BASED ON NAIC STANDARD VALUATION LAW

FOR 2013 CALENDAR YEAR BUSINESS GOVERNED

BY THE 1980 AMENDMENTS

C. Valuation interest rates for other annuities and guaranteed interest contracts that are valued on an issue year basis:

Valuation Interest

Rate For Plan Type

Cash Future _______________________

Settlement Interest Guarantee Duration

Options? Guarantee? (years) A B C

______________________________________________________________________________

Yes Yes 5 or fewer 4.00^* 3.75^* 3.50^*

More than 5, but 3.75^* 3.75^* 3.50^*

not more than 10

More than 10, but 3.75^* 3.50^* 3.50^*

not more than 20

More than 20 3.50^* 3.50^* 3.50^*

Yes No 5 or fewer 4.00^* 3.75^* 3.75^*

More than 5, but 4.00^* 3.75^* 3.75^*

not more than 10

More than 10, but 3.75^* 3.75^* 3.50^*

not more than 20

More than 20 3.50^* 3.50^* 3.50^*

No Yes or No 5 or fewer 4.00^*

More than 5, but 3.75^* NOT

not more than 10 APPLICABLE

More than 10, but 3.75^*

not more than 20

More than 20 3.50^*

______________________________________________________________________________

Source: Rates calculated from the monthly averages, ending June 30,

2013, of Moody's Composite Yield on Seasoned Corporate Bonds.

FOOTNOTE TO TABLE

^* As these rates exceed the applicable federal interest rate for

2013 of 2.16 percent, the valuation interest rate to be used for this product

under § 807 is the applicable rate specified in the above table.

END OF FOOTNOTE TO TABLE

Part III, Schedule D24 -- 2013

STATUTORY VALUATION INTEREST RATES

BASED ON NAIC STANDARD VALUATION LAW

FOR 2013 CALENDAR YEAR BUSINESS

GOVERNED BY THE 1980 AMENDMENTS

D. Valuation interest rates for other annuities and guaranteed interest contracts that are contracts with cash settlement options and that are valued on a change in fund basis:

Valuation Interest

Rate For Plan Type

Cash Future _______________________

Settlement Interest Guarantee Duration

Options? Guarantee? (years) A B C

______________________________________________________________________________

Yes Yes 5 or fewer 4.00^* 4.00^* 3.75^*

More than 5, but 4.00^* 4.00^* 3.75^*

not more than 10

More than 10, but 4.00^* 3.75^* 3.50^*

not more than 20

More than 20 3.75^* 3.75^* 3.50^*

Yes No 5 or fewer 4.25^* 4.00^* 3.75^*

More than 5, but 4.00^* 4.00^* 3.75^*

not more than 10

More than 10, but 4.00^* 4.00^* 3.75^*

not more than 20

More than 20 3.75^* 3.75^* 3.50^*

______________________________________________________________________________

Source: Rates calculated from the monthly averages, ending June 30,

2013, of Moody's Composite Yield on Seasoned Corporate Bonds.

FOOTNOTE TO TABLE

^* As these rates exceed the applicable federal interest

rate for 2013 of 2.16 percent, the valuation interest rate to be used

for this product under § 807 is the applicable rate

specified in the above table.

END OF FOOTNOTE TO TABLE

Part IV. Applicable Federal Interest Rates.

TABLE OF

APPLICABLE FEDERAL INTEREST RATES

FOR PURPOSES OF § 807

______________________________________________________________________

Year Interest Rate

______________________________________________________________________

2013 2.16

2014 1.79

______________________________________________________________________

Sources: Rev. Rul. 2004-106, 2004-2 C.B. 893, for the 2005 rate; Rev.

Rul. 2005-77, 2005-2 C.B. 1071, for the 2006 rate; Rev. Rul. 2006-61,

2006-2 C.B 1028 for the 2007 rate; Rev. Rul. 2007-70, 2007-2 C.B.

1158 for the 2008 rate; Rev. Rul. 2008-53, 2008-2 C.B. 1231 for the

2009 rate; Rev. Rul. 2009-38, 2009-49 I.R.B. 736, for the 2010 rate;

Rev. Rul. 2010-29, 2010-50 I.R.B. 818 for the 2011 rate; Rev. Rul.

2011-31, 2011-49 I.R.B. 829 for the 2012 rate; Rev. Rul. 2012-31,

2012-49 I.R.B. 636 for the 2013 rate; and Rev. Rul. 2013-26, 2013-50

I.R.B. 628 for the 2014 rate.

EFFECT ON OTHER REVENUE RULINGS

Rev. Rul. 92-19 is supplemented by the addition to Part III of that ruling of prevailing state assumed interest rates under § 807 for certain insurance products issued in 2013 and 2014 and is further supplemented by an addition to the table in Part IV of Rev. Rul. 92-19 listing applicable federal interest rates. Parts I and II of Rev. Rul. 92-19 are not affected by this ruling.

DRAFTING INFORMATION

The principal author of this revenue ruling is Alexis A. MacIvor of the Office of Associate Chief Counsel (Financial Institutions and Products). For further information regarding this revenue ruling contact her at (202) 317-6995 (not a toll-free call).

DOCUMENT ATTRIBUTES

Institutional Authors
Internal Revenue Service
Code Sections
Section 807
Subject Areas/Tax Topics
Insurance
Jurisdictions
United States
Language
English
Tax Analysts Document Number
Doc 2014-765
Tax Analysts Electronic Citation
2014 TNT 9-6

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