If your pension lump sum changed, or your employer picked this moment to offer a buyout, segment rate history explains a lot of it. The three IRS 417(e) segment rates come from the corporate bond market, and they've swung hard since 2020.
The 2020 low
The Federal Reserve cut rates to near zero in March 2020, and corporate bond yields followed. The November 2020 segment rates were 0.53%, 2.31% and 3.09%. That's the lowest Segment 2 in the IRS table we track back to November 2011.
Holding the IRS 2026 mortality table fixed, a $3,000/month pension starting at 65 was worth about $580,000 as a lump sum at those rates, the highest of any November rate set from 2011 through 2025 in our calculator.
The 2022 jump
The Fed started raising rates in March 2022. By November 2022, the segment rates were 5.09%, 5.60% and 5.41%. The same $3,000/month pension at 65 dropped to about $433,000 on those rates, about $147,000 less than on November 2020 rates. Same pension. Same person. Only the discount rate changed.
That's the core of lump sum math: the present value depends on interest rates, not just your benefit. Rising rates shrink lump sums even when the plan is fully funded and paying normally.
2023 to 2026
November 2023 brought the highest Segment 2 of the period, 5.76%, and the same pension's value bottomed at about $424,000. Rates eased after that. The November 2025 rates, which many calendar-year plans use for 2026, are 4.07%, 5.15% and 6.01%. Segments 1 and 2 are lower than in November 2023 and Segment 3 is higher, and the $3,000 pension is worth about $442,500.
Historical segment rate table
These are the IRS 417(e) minimum present value segment rates for each November, from the IRS table. A calendar-year plan with a November lookback uses them for the following year.
| November (plan year) | Segment 1 (0-5 yr) | Segment 2 (5-20 yr) | Segment 3 (20+ yr) |
|---|---|---|---|
| Nov 2018 (2019) | 3.43% | 4.46% | 4.88% |
| Nov 2019 (2020) | 2.04% | 3.09% | 3.68% |
| Nov 2020 (2021) | 0.53% | 2.31% | 3.09% |
| Nov 2021 (2022) | 1.02% | 2.72% | 3.08% |
| Nov 2022 (2023) | 5.09% | 5.60% | 5.41% |
| Nov 2023 (2024) | 5.50% | 5.76% | 5.83% |
| Nov 2024 (2025) | 4.66% | 5.25% | 5.57% |
| Nov 2025 (2026) | 4.07% | 5.15% | 6.01% |
Source: IRS, Minimum Present Value Segment Rates (IRC 417(e)(3)). Plans with other lookback months use other months' rates.
What each segment covers
Segment 1 discounts payments due within five years of the valuation date. Segment 2 covers payments 5 to 20 years out. Segment 3 covers everything after 20 years. Younger retirees have more of their payments in Segment 3, so that rate matters more for them. The mortality table is set separately; for 2026 distributions it's the table in IRS Notice 2025-40.
Monthly rates, not averages
The 417(e) rates are a single month's corporate bond yield curve, split into three segments. There's no averaging. That's different from the funding segment rates under IRC 430, which are 24-month averages held inside a corridor and used for plan funding, not for your lump sum. So when bond yields move, the 417(e) rates move right away, and lump sums follow at the next stability period.
The 417(e) rates also aren't the Fed funds rate. They track corporate bond yields, which respond to Fed policy but don't move in lockstep with it.
The lookback month and stability period
Your plan picks a stability period (a month, a quarter or a year) and a lookback month up to five months before it starts. In a calendar-year plan with an annual stability period and a November lookback, every lump sum paid in 2026 uses November 2025 rates, whether you retire in February or November. A plan with a monthly stability period updates its rates every month.
To get different rates, your benefit has to start in a different stability period. But waiting also makes you older, and a lump sum at 66 is worth less than one at 65 on the same rates, because there's a year less of payments to value. Rates have to move a fair amount for waiting to pay off.
Why employers care about rates
Rates matter to plan sponsors too. A sponsor that pays lump sums in a high-rate year pays less for the same benefits. On our example, the $3,000 pension at 65 cost about $424,000 to settle on November 2023 rates against about $580,000 on November 2020 rates, roughly 27% less. That doesn't make a window a bad deal for you, but it's context when you compare an offer against the annuity.
Before the PPA
Before the Pension Protection Act of 2006, the minimum lump sum used the 30-year Treasury rate. The PPA switched to the three corporate bond segment rates, phasing them in from 2008 through 2011 and using them fully from 2012.
What a rate change does in dollars
Present value is convex in the discount rate: a 1-point move matters more in dollars when rates are low than when they're high. Some figures from our calculator, using November 2025 rates as the base:
- Raising only Segment 2 by 1 point cuts the $3,000/month lump sum at 65 from about $442,500 to $418,300, about 5.5%.
- Dropping Segment 2 to 3.0% (215 basis points lower) raises it to about $506,700.
- Dropping all three segments by 1 point raises a $3,500/month lump sum by about $47,000 at 65, $54,000 at 62 and $65,000 at 57.
- From November 2021 rates to November 2022 rates, the $3,000 pension at 65 fell from about $563,000 to $433,000, a 23% drop in one year.
To see your own sensitivity, run the calculator at current rates, move Segment 2 by half a point and run it again.
Best and worst years
For a $3,000/month pension at 65, holding the 2026 mortality table fixed, November 2020 rates gave about $580,000, about 37% more than the roughly $424,000 on November 2023 rates. A sponsor that settled that benefit for 1,000 retirees on November 2020 rates would have paid about $147 million more than on November 2022 rates. For the retiree, the lesson is to compare any offer with the value of the annuity, not to treat a given year's number as what the pension is "really" worth.
Checking your plan's calculation
Ask for a formal lump sum calculation well before your election deadline and check four things: the segment rates match your plan's lookback month, the monthly benefit matches your statement, the mortality table is the current IRS table, and the start date matches your intended retirement date. Errors are much easier to fix before the deadline than through ERISA's claims process afterward.
Funding and windows
Higher rates also lower the value a plan puts on its obligations, though funding uses averaged rates, so the effect is slower. Under IRC 436, a plan whose funding percentage falls below 80% can pay only part of a benefit as a lump sum, and below 60% none at all. A better-funded plan has more room to offer windows.
Break-even at different rates
The break-even question is how long a lump sum lasts if you invest it and draw the same monthly amount the pension would pay. For the $3,000 pension at 65, assuming a 5% return:
- On November 2020 rates, the $580,000 lump sum would last until about 96.
- On November 2025 rates, the $442,500 lump sum lasts until about 84.
On the IRS 2026 table, half of 65-year-olds live past about 87. In 2021 the lump sum was hard to beat. In 2026 the annuity looks much better for anyone in average or better health.
Use the present value calculator to value your pension at current rates, the lump sum vs. annuity calculator to compare a specific offer with the annuity, and the pension buyout calculator to weigh a window against staying in the plan.