If you are trying to understand why your pension lump sum changed, or why your employer chose this particular moment to offer a buyout, segment rate history is the answer. The three IRS 417(e) segment rates move with the corporate bond market, and their swings over the past six years have produced some of the most dramatic shifts in pension lump sum values since the program was established.
The 2020 to 2021 historic low
The Federal Reserve cut rates to near zero in March 2020. Corporate bond yields followed. By November 2020, the segment rates applicable to 2021 plan years were 0.53%, 2.31%, and 3.09% for segments 1, 2, and 3 respectively. These were the lowest rates in the history of the IRS 417(e) program.
For pension holders, this was a historic window. A $3,000/month pension for a 65-year-old with a 20-year expected retirement was worth approximately $640,000 as a lump sum. Employers who offered buyout windows in 2021 were transferring maximum value to retirees. Some intentionally timed windows to use the rate environment; others used it as an opportunity to shed pension liabilities at their highest possible cost.
The 2022 rate spike
The Fed began hiking rates aggressively in March 2022. By November 2022, the segment rates applicable to 2023 plan years were 5.09%, 5.60%, and 5.41%. That same $3,000/month pension was now worth approximately $450,000. In two years, the lump sum equivalent fell by roughly $190,000. Same pension. Same person. Only the discount rate changed.
This is the single most important thing to understand about pension lump sum math: the present value is a function of interest rates, not just your benefit level. A rising rate environment mechanically shrinks lump sums even when pensions are fully funded and paying normally.
2023 to 2026 stabilization
Rates stayed elevated through 2023 and 2024 as the Fed maintained its tightening position. The November 2025 rates applicable to 2026 plan years came in at 4.07%, 5.15%, and 6.01%. Slightly higher than 2023, reflecting continued corporate bond market conditions and no dramatic Fed reversal.
There was no return to near-zero rates. The extraordinary lump sum values of 2020 to 2021 are unlikely to recur without another financial crisis on the scale of 2008 or 2020.
What this means if you are waiting
If you have been waiting for rates to fall before electing a lump sum, consider whether that expectation is realistic. Rates would need to fall several hundred basis points across all three segments to approach 2021 lump sum levels. That is a severe recession scenario, not a base case. Meanwhile, the annuity continues to provide its guaranteed monthly income regardless of rate movements.
Finding historical rates
The IRS publishes segment rates monthly in Revenue Rulings, archived at IRS.gov. Your plan's Summary Plan Description specifies whether your plan uses the November, October, or August lookback month. Use the calculator on this site with the specific rates from your plan documents for the most accurate present value. The current 2026 rates are pre-populated, and you can enter any historical rate set to see what your pension would have been worth at a different point in time.
Historical segment rate table: 2018 through 2026
These are the IRS 417(e) segment rates published each November, the most common lookback month used by private-sector defined benefit plans. November rates determine lump sum calculations in the following plan 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% | 5.15% | 5.57% |
| Nov 2025 (2026) | 4.07% | 5.15% | 6.01% |
Source: IRS monthly Revenue Rulings under IRC Section 417(e)(3), as amended by the Pension Protection Act of 2006. Plans using August or October lookback months will show slightly different applicable rates.
What each segment covers
Segment 1 discounts payments expected within five years of your retirement date. Segment 2 covers payments between 5 and 20 years out. Segment 3 discounts payments beyond 20 years. Your age at retirement determines which segments carry the most weight.
A 65-year-old has the majority of projected payments in segments 1 and 2. A 57-year-old has more payments in segment 3, so that rate has greater influence on the calculation. This is why two retirees with identical monthly benefits but different ages produce different lump sums in the same rate environment. The IRS specifies the applicable mortality tables in Revenue Procedure 2017-55 and updates them periodically for plan compliance.
The lookback month locks your rates for the full plan year
Your plan's Summary Plan Description states the lookback month explicitly. A November-lookback plan uses November rates for all lump sum calculations during the entire following calendar year. Retiring in February 2026 versus November 2026 uses identical rates if your plan uses November lookback. You cannot improve your lump sum within a plan year by delaying your retirement date.
The only way to benefit from a future rate change is to delay past the next lookback month. If rates fall meaningfully between November 2025 and November 2026, retirees who wait for the 2027 plan year would see higher lump sums. The question is whether that gain exceeds the annuity payments collected while waiting, which at $3,000 to $5,000 per month adds up quickly.
Why employers time pension offers around rate cycles
Pension risk transfer volume correlates inversely with segment rates. LIMRA Secure Retirement Institute reported approximately $52 billion in group annuity pension risk transfer premiums in 2022, a record at the time, partly because elevated rates reduced the cost to employers of transferring pension liabilities. Voluntary lump sum windows to employees follow the same logic: offering a window when rates are high means paying out smaller lump sums for the same pension obligation.
A company offering a buyout window at 2024 rates is settling pension obligations at roughly 25% less cost than it would have at 2021 rates, for the same underlying monthly benefit. That does not mean the offer is wrong for you individually, but it is context worth having when you compare the offer against the actuarial value of your annuity.
The break-even on waiting for lower rates
To recover 2021 lump sum values, segment rates would need to fall roughly 300 to 400 basis points across the curve. That requires a severe recession and emergency Fed rate cuts comparable to 2008 or 2020. Absent that, rates at current levels are likely to persist or move modestly.
Run the break-even directly. At $3,500/month in annuity payments, you collect $42,000 per year while waiting. A 100-basis-point decline across all three segments adds roughly $35,000 to $55,000 to a typical mid-size pension lump sum, depending on age. Rates would need to fall more than 100 basis points within 12 months for the waiting strategy to break even against the annuity stream. Over any rolling 12-month window since 2023, that has not happened. For most retirees in average health, the annuity payments collected while waiting exceed any realistic rate-driven lump sum improvement at current levels.
Blended rates and the pre-PPA methodology
Before the Pension Protection Act of 2006 took full effect, plans could use a blended rate that included a portion of the long-term corporate bond rate rather than the current three-segment structure. The PPA phased in the three-segment methodology over 2008 to 2012 for most plans. Plans that were not grandfathered under transition rules now use the standard three-segment rates exclusively.
The three-segment structure generally produces lower lump sums than the prior blended rate method in low-rate environments, because it applies shorter-duration rates to near-term payments rather than a single long-term rate. In the 2020 to 2021 window, even the three-segment method hit historic highs. But in any given year from 2015 through 2019, lump sums under three-segment rates were lower than they would have been under the pre-PPA methodology. This explains why some retirees who were offered windows in 2016 and 2017 saw offers that felt low relative to expectations rooted in older rate structures. The calculation method changed in a way that was not widely communicated to affected employees at the time.
How a rate change translates to real dollars
Most people understand that higher rates mean lower lump sums but few work out the dollar impact for their specific benefit. Here is how to do it. Present value is a convex function of the discount rate, meaning the dollar impact of a 1% rate change is larger at lower rates than at higher ones. Going from 1.5% to 2.5% reduces a lump sum more in dollar terms than going from 5.0% to 6.0% for the same monthly benefit, even though both moves are exactly 100 basis points.
For a $3,000/month pension with a 20-year expected retirement duration, a 1 percentage point increase in Segment 2 reduces the lump sum by approximately 10 to 12%, or $50,000 to $70,000 depending on the exact payment stream profile. The 2022 spike from November 2021 rates (1.02%, 2.72%, 3.08%) to November 2022 rates (5.09%, 5.60%, 5.41%) was roughly 290 basis points in Segment 2. A 300 basis point increase translates to a 30 to 35% reduction in the lump sum for most mid-size pensions. That is $150,000 to $200,000 gone from the same pension in a single year, with no change to the underlying monthly benefit.
Your age at retirement determines which segments carry the most weight. A 65-year-old has the majority of projected payments falling in Segment 2 (years 5 through 20). A 57-year-old has more payments in Segment 3 (beyond year 20), making the third segment rate more influential. This is why two retirees with identical $3,000/month benefits but different ages produce different lump sums at the same published rates. The IRS specifies the applicable mortality tables for this calculation in Revenue Procedure 2017-55 and updates them periodically.
To see your specific sensitivity: use the calculator on this site at current rates, then manually change Segment 2 by 50 basis points and recalculate. The difference is your lump sum exposure to a half-point rate move. Most people are surprised by how much their lump sum changes per rate point.
The IRS publication schedule and how to track rates monthly
The IRS publishes 417(e) segment rates monthly in a Revenue Procedure or Notice, typically released in the first week of the following month. November rates (the most common lookback month) are released in early December. Publications are archived at IRS.gov under Revenue Procedures, and the annual IRS Notice on minimum required distributions consolidates the full year's rates.
Segment rates are derived from corporate bond yields using a 24-month averaging methodology under Treasury Regulation section 1.430(h)(2). Because of this smoothing, rates move more slowly than spot corporate bond yields. The Fed funds rate and IRS segment rates are not the same input. When the Fed raised the funds rate aggressively in 2022, segment rates followed but with a lag of several months. When the Fed begins cutting rates, segment rates will also lag. A 50-basis-point Fed cut in one month does not mean segment rates fall 50 basis points that same month.
If your plan uses a November lookback month, track the monthly IRS segment rate publications from January through October each year. If rates are trending downward through mid-year, the November publication has a reasonable probability of coming in below the prior year. If rates have moved up or sideways, expect the following year's lump sums to stay flat or decline. Monthly tracking takes five minutes and gives you a practical early read on the next plan year months before the official November publication locks your rates.
Which plan years produced the best and worst timing for retirees
Looking at the rate history table, three plan years stand out. The 2021 plan year (November 2020 rates) was the best year on record for anyone taking a lump sum: Segment 2 at 2.31% produced lump sums roughly 40 to 45% higher than the 2024 plan year for the same pension. A $3,000/month pension was worth approximately $640,000 in 2021 versus $455,000 in 2026. Retirees who took lump sums in 2021 received the maximum possible present value from their pension under the modern three-segment methodology.
The 2023 plan year (November 2022 rates) was the worst in the history of the current rate regime: Segment 2 hit 5.60%. The same pension that was worth $640,000 in 2021 was worth approximately $435,000 in 2023. Retirees or deferred vested participants who happened to hit a plan-defined window in 2023 received the lowest present value lump sum available in the post-PPA rate structure.
This variability explains why timing matters so much, and why employers time buyout windows carefully. A company that offered a lump sum window to 1,000 retirees in 2021 paid out roughly $185,000,000 more in aggregate than if it had offered the same window in 2023 to the same group. From the company's perspective, rate timing is a cost-reduction strategy. From the retiree's perspective, the lump sum available in any given year is largely determined by external rate conditions they cannot control, which strengthens the case for comparing the lump sum offer to the actuarial value of the annuity rather than treating any particular lump sum amount as the inherent value of your pension.
When to request a lump sum calculation from your plan
If you are a deferred vested participant or approaching a voluntary retirement window, the timing of your calculation request relative to your plan's lookback month matters. Request a formal lump sum calculation from your plan administrator at least 60 days before your planned election date. Most plan administrators take 2 to 4 weeks to produce a formal calculation, and you want time to review it against independent calculations and ask questions.
When you receive the calculation, verify these items: the segment rates used match the rates for your plan's lookback month (the plan's SPD specifies which month), the benefit amount used matches your plan's stated monthly benefit, the mortality table applied is current (plans must use IRS-specified tables and update them when required), and the payment start date in the calculation matches your intended retirement date. An error in any of these inputs produces a wrong lump sum figure. Catching it before the election deadline is straightforward. Disputing it after the deadline is significantly harder. Plans have formal claims and appeals procedures under ERISA, but correction timelines can span months.
Why the same rate change that lowers your lump sum improves plan funding
One counterintuitive aspect of segment rate math: the same rate increase that reduces your lump sum also reduces the accounting liability of the pension plan. When segment rates rise, the present value of all future pension obligations falls, which makes the plan look better funded on paper. This is why 2022 and 2023, which were terrible years for lump sum values, were good years for pension plan funded status. Many plans that were 70 to 80% funded in 2021 reached 100% or above funded status by 2023 using the elevated segment rates in their actuarial calculations.
This has practical implications. A well-funded plan is more likely to offer voluntary lump sum windows, because the cost to the company of a window is lower when rates are high (each $1 in monthly benefit converts to less in lump sum). A well-funded plan is also less likely to face benefit restrictions under ERISA's at-risk funding rules, which prohibit certain benefit improvements and accelerated distributions when plan funding falls below specified thresholds. In 2021, when lump sums were at their peak for participants, plan funding was at its lowest, which sometimes meant plans were legally restricted from offering voluntary windows at all.
The irony is that the rate environment which produces the highest lump sums for participants tends to produce the lowest funded status for plans, which can trigger restrictions on offering those lump sums. The 2021 rate environment was an exception where rates were so low that even plans with average funded status could potentially qualify for windows, and many employers chose that moment to shed pension liabilities at maximum cost. Since 2022, the elevated rate environment has improved funded status broadly, potentially opening the door for more voluntary windows in the coming years, but at lower lump sum values than 2021.
For participants watching the rate environment: a plan at 100% funded status with current rates above 5% on Segment 2 has both the financial capability and the cost incentive to offer a voluntary window. A plan that announces a window when rates are elevated is offering participants a lump sum that is lower in present value than it would have been in 2021, but the underlying pension income is the same. The segment rates set the present value of the exchange; they do not change the monthly benefit you are giving up by taking the lump sum. That monthly benefit, and the years you could collect it, is the anchor for evaluating any offer regardless of the rate environment in which it is made.
Segment rates and the pension breakeven calculator
The IRS segment rate history is the most precise input to any pension lump sum breakeven calculation. The breakeven question is: at what age does the cumulative value of monthly pension payments (the annuity) exceed the lump sum invested at a reasonable return? The answer changes materially based on which rate environment you are calculating in.
At 2021 rates (Segment 2 at 2.31%), a $3,000/month pension produced a lump sum of roughly $640,000. Invested at 5%, that lump sum generates $32,000/year, or $2,667/month, with the principal intact. The annuity ($3,000/month) exceeds the investment income ($2,667/month) from day one. The breakeven on the principal drawdown is approximately 22 years, or to age 87 for a 65-year-old. Average life expectancy for a 65-year-old male is approximately 84 years. At 2021 rates, the annuity was a close call against the lump sum.
At 2026 rates (Segment 2 at 5.15%), the same pension produces a lump sum of approximately $455,000. Invested at 5%, that generates $22,750/year, or $1,896/month. The annuity ($3,000/month) exceeds the investment income by $1,104/month from the start. The principal drawdown breakeven is approximately 15 years, or to age 80, well within average life expectancy. At 2026 rates, the annuity is a much stronger choice for anyone in average or better health, because the lump sum's investment case is weaker relative to the guaranteed monthly income than it was in 2021.
This is why the rate environment in which an offer is made fundamentally changes the decision calculus, not just the dollar amounts involved. The calculator on this site uses current segment rates by default and allows you to input any rate set to see the breakeven analysis at historical rates as well. Use it with your actual monthly benefit and planned retirement age. The most useful comparison: run the calculator at the current 2026 rates, then re-run it with Segment 2 set to 3.0% to see what your lump sum would be if rates fell 235 basis points to the midpoint between 2021 lows and current levels. That gap in dollar terms is the upside you are waiting for if you choose to delay. Then calculate how many monthly annuity payments you would collect while waiting one or two plan years for that rate improvement to materialize. In most scenarios for retirees in average health, the annuity income collected while waiting exceeds the potential lump sum improvement, which is the most concrete reason the current elevated rate environment strengthens the case for the annuity over the lump sum for most participants. The IRS publishes each month's segment rates at irs.gov within the first two weeks of the following month. Bookmarking that page and checking it monthly from January through October of any year you are approaching a retirement decision costs almost nothing in time and ensures you are working from current data rather than rates that may be months out of date. Segment rates move. Lump sum values move with them. A participant who tracks rates through the critical months and times the retirement election accordingly can capture meaningfully more than one who ignores them entirely. The math is knowable. Use it. Segment rates are public, free, and updated monthly. There is no reason to make a lump sum retirement decision without them.
Use the present value calculator to quantify your pension's annuity value at current discount rates -- the result frames the lump sum vs. annuity comparison as a dollar-amount decision rather than a percentage guess. Use the lump sum vs. annuity calculator to model the break-even age based on your specific lump sum offer and monthly annuity amount. And use the pension buyout calculator to evaluate lump sum windows against the alternative of continuing to accrue benefits -- segment rate changes affect the lump sum value, but they do not affect the actuarial value of waiting for a larger annuity. Run all three analyses before the election window closes.