Section 807.--Rules for Certain Reserves

Section 807.--Rules for Certain Reserves

Rev. Rul. 2017-03

For purposes of § 807(d)(4) of the Internal Revenue Code, for taxable years

beginning after December 31, 2015, 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 2016 and 2017, and a supplement to the table in Part IV of

Rev. Rul. 92-19, providing the applicable federal interest rates under § 807(d) for 2016

and 2017. This ruling does not supplement Parts I and II of Rev. Rul. 92-19.

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This is the twenty-fifth 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

996-1 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); Rev. Rul. 2013-4, 2013-9 I.R.B. 520

(2012 and 2013); Rev. Rul. 2014-4, 2014-5 I.R.B. 449 (2013 and 2014); Rev. Rul.

2015-2, 2015-3 I.R.B. 321 (2014 and 2015); and Rev. Rul. 2016-02, 2016-4 I.R.B. 284

(2015 and 2016).

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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

2017

10 or fewer

3.75**

More than 10

3.75**

but not more than 20

More than 20

3.50**

Source: Rates calculated from the monthly averages, ending June 30, 2016, of

Moody’s Composite Yield on Seasoned Corporate Bonds.

*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

ut not more than 20

More than 20

3.50**

Source: Rates calculated from the monthly averages, ending June 30, 2016, of

Moody’s Composite Yield on Seasoned Corporate Bonds.

*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 2017 of 1.46 percent,

the valuation interest rate to be used for this product under § 807 is the applicable rate

specified in this table.

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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

2016

4.00*

Source: Rates calculated from the monthly averages, ending June 30, 2016, of

Moody’s Composite Yield on Seasoned Corporate Bonds.

*As this prevailing state assumed interest rate exceeds the applicable federal interest

rate for 2016 of 1.56 percent, the valuation interest rate of 4.00 percent is to be used for

this product under § 807.

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Part III, Schedule C24 - 2016

STATUTORY VALUATION INTEREST RATES

BASED ON NAIC STANDARD VALUATION LAW

FOR 2016 CALENDAR YEAR BUSINESS

___GOVERNED BY THE 1980 AMENDMENTS___

C

prevailing state assumed interest rate exceeds the applicable federal interest

rate for 2016 of 1.56 percent, the valuation interest rate of 4.00 percent is to be used for

this product under § 807.

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Part III, Schedule C24 - 2016

STATUTORY VALUATION INTEREST RATES

BASED ON NAIC STANDARD VALUATION LAW

FOR 2016 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:

Cash

Future

Valuation Interest Rate

Settlement

Interest

Guarantee Duration

For Plan Type

Options?

Guarantee?

(years)

___A B C______

Yes

Yes

5 or fewer

4.00* 3.75* 3.75*

More than 5, but not

4.00* 3.75* 3.75*

more than 10

More than 10, but not

4.00* 3.75* 3.75*

more than 20

More than 20

3.75* 3.50* 3.50*

Yes

No

5 or fewer

4.25* 4.00* 3.75*

More than 5, but not

4.00* 4.00* 3.75*

more than 10

More than 10, but not

4.00* 3.75* 3.75*

more than 20

More than 20

3.75* 3.50* 3.50*

No

Yes or No

5 or fewer

4.00*

More than 5, but not

4.00* NOT

more than 10

APPLICABLE

More than 10, but not

4.00*

more than 20

More than 20

3.75*

Source: Rates calculated from the monthly averages, ending June 30, 2016, of

Moody’s Composite Yield on Seasoned Corporate Bonds.

*As these rates exceed the applicable federal interest rate for 2016 of 1.56 percent, the

valuation interest rate to be used for this product under § 807 is the applicable rate

specified in the above table

e than 20

3.75*

Source: Rates calculated from the monthly averages, ending June 30, 2016, of

Moody’s Composite Yield on Seasoned Corporate Bonds.

*As these rates exceed the applicable federal interest rate for 2016 of 1.56 percent, the

valuation interest rate to be used for this product under § 807 is the applicable rate

specified in the above table.

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Part III, Schedule D24 -- 2016

STATUTORY VALUATION INTEREST RATES

BASED ON NAIC STANDARD VALUATION LAW

FOR 2016 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:

Cash Future

Valuation Interest Rate

Settlement

Interest

Guarantee Duration

For Plan Type

Options?

Guarantee?

(years)

A B C_____

Yes

Yes

5 or fewer

4.25* 4.25* 3.75*

More than 5, but not

4.25* 4.25* 3.75*

more than 10

More than 10, but not

4.00* 4.00* 3.75*

more than 20

More than 20

3.75* 3.75* 3.50*

Yes

No

5 or fewer

4.50* 4.25* 3.75*

More than 5, but not

4.25* 4.25* 3.75*

more than 10

More than 10, but not

4.25* 4.00* 3.75*

more than 20

More than 20

4.00* 4.00* 3.75*

Source: Rates calculated from the monthly averages, ending June 30, 2016, of

Moody’s Composite Yield on Seasoned Corporate Bonds.

* As these rates exceed the applicable federal interest rate for 2016 of 1.56 percent, the

valuation interest rate to be used for this product under § 807 is the applicable rate

specified in the above table.

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Part IV. Applicable Federal Interest Rates

from the monthly averages, ending June 30, 2016, of

Moody’s Composite Yield on Seasoned Corporate Bonds.

* As these rates exceed the applicable federal interest rate for 2016 of 1.56 percent, the

valuation interest rate to be used for this product under § 807 is the applicable rate

specified in the above table.

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Part IV. Applicable Federal Interest Rates.

TABLE OF

APPLICABLE FEDERAL INTEREST RATES

_______FOR PURPOSES OF § 807_______

Year

Interest Rate

2016

1.56

2017

1.46

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;

Rev. Rul. 2013-26, 2013-50 I.R.B. 628 for the 2014 rate; Rev. Rul. 2014-31, 2014-50

I.R.B. 935 for the 2015 rate; Rev. Rul. 2015-25, 2015-49, I.R.B. 695 for the 2016 rate;

and Rev. Rul. 2016-27, 2016-49, I.R.B. 781 for the 2017 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 2016 and 2017 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 Sharon Y. Horn of the Office of

Associate Chief Counsel (Financial Institutions and Products). For further information

regarding this revenue ruling contact Ms. Horn at (202) 317-6995 (not a toll-free call).