What are IRS 417(e) segment rates?

IRS 417(e) segment rates are three interest rates published monthly by the IRS that pension plans use to calculate the present value of lump sum payments. Higher rates produce lower lump sums; lower rates produce higher lump sums. They are derived from investment-grade corporate bond yields segmented by duration.

What does each segment rate cover?

Segment 1 discounts payments due within 5 years of the annuity starting date. Segment 2 covers years 6 through 20. Segment 3 covers payments expected beyond year 20. Each segment uses corporate bond yields of the corresponding maturity duration, so longer-duration payments are discounted at longer-duration rates.

How much do segment rates affect the pension lump sum amount?

The effect is large. For a $3,000 per month pension starting at 62, the minimum lump sum was about $629,000 on the rates used for 2021 (Segment 2 at 2.31%) and about $470,000 on the rates used for 2026 (Segment 2 at 5.15%), a drop of roughly $159,000. Raising Segment 2 alone by 1 percentage point cuts a lump sum at 62 or 65 by about 5.5%; if all three rates rise a point, the cut is about 8%.

Why do higher segment rates mean a lower pension lump sum?

A lump sum is the present value of all future monthly payments discounted at the segment rates. Higher discount rates reduce present value because future payments are worth less in today's dollars when a higher rate is applied. The underlying monthly pension benefit does not change -- only the present value calculation changes. This is the same mathematical relationship that makes bond prices fall when interest rates rise.

When does a rate change take effect for my lump sum election?

It depends on the plan's stability period. A calendar-year plan with an annual stability period and a November lookback uses the November 2025 rates for every lump sum paid in 2026. Plans with a monthly or quarterly stability period update their rates during the year. Your plan document says which applies.

Reference Data

IRS 417(e) Segment Rates

Q: Which lookback month does my pension plan use for segment rates?

Whatever your plan document says. Treasury rules let a plan use a lookback month of one to five months before its stability period begins, so a calendar-year plan with an annual stability period can use any month from August through December of the prior year. November is a common choice. Your Summary Plan Description or plan administrator will confirm which month applies.

The three interest rates published monthly by the IRS that determine how pension plans calculate lump sum present values under Section 417(e). Higher rates mean lower lump sums.

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2026 vs. 2025: lump sums at 62 are about the same

Against the 2025 rates, the same pension's minimum lump sum changes -0.1% for a payout starting at 62, +0.2% at 65 and -6.2% for a 50-year-old whose pension starts at 65. Lump sums depend on all three rates, so check your own figure in the calculator.

Latest Published Month: August 2026

The newest monthly rates the IRS has posted. These are not the 2026 plan-year rates below; they matter if your plan's lookback month is August 2026, and they show where the November 2026 rates for 2027 may land.

Segment 1 (Yrs 1-5)

4.65%

Segment 2 (Yrs 6-20)

5.75%

Segment 3 (Yr 21+)

6.73%

2026 Monthly Rates

Every 2026 month the IRS has published so far, newest first. Use the row for your plan's lookback month.

Month	Segment 1	Segment 2	Segment 3
August 2026Latest	4.65%	5.75%	6.73%
July 2026	4.62%	5.62%	6.51%
June 2026	4.49%	5.43%	6.18%
May 2026	4.42%	5.47%	6.31%
April 2026	4.27%	5.34%	6.22%
March 2026	4.24%	5.35%	6.25%
February 2026	3.96%	5.15%	6.11%
January 2026	4.03%	5.20%	6.12%

Source: IRS, Minimum present value segment rates.

November Rates by Plan Year

Many calendar-year plans use the November rate set for the following year. These are the rates pension actuaries use to calculate the minimum lump sum under IRS Section 417(e). Source: IRS Notices (irs.gov minimum present value segment rates).

Plan Year	Rate Set (November)	Segment 1 (Yrs 1-5)	Segment 2 (Yrs 6-20)	Segment 3 (Yr 21+)	Lump Sum at 62 vs. Prior Year
2026Current	November 2025	4.07%	5.15%	6.01%	About the same
2025	November 2024	4.66%	5.25%	5.57%	Higher than prior year
2024	November 2023	5.50%	5.76%	5.83%	Lower than prior year
2023	November 2022	5.09%	5.60%	5.41%	Lower than prior year
2022	November 2021	1.02%	2.72%	3.08%	Lower than prior year
2021	November 2020	0.53%	2.31%	3.09%	Higher than prior year
2020	November 2019	2.04%	3.09%	3.68%	Higher than prior year
2019	November 2018	3.43%	4.46%	4.88%	Lower than prior year
2018	November 2017	2.20%	3.57%	4.24%	Higher than prior year
2017	November 2016	1.79%	3.80%	4.71%	Higher than prior year
2016	November 2015	1.76%	4.15%	5.13%	Lower than prior year
2015	November 2014	1.40%	3.88%	4.96%	Higher than prior year
2014	November 2013	1.19%	4.53%	5.66%	Lower than prior year
2013	November 2012	0.97%	3.50%	4.60%	Higher than prior year
2012	November 2011	1.99%	4.47%	5.26%	Baseline

Source: IRS Notices (irs.gov minimum present value segment rates). November rates shown because November is a common lookback month. Plans using another month will have different applicable rates. Impact compares the 417(e) minimum for a pension starting at 62 (IRS 2026 mortality table); changes under 0.5% show as about the same.

What Each Segment Covers

1Segment 1

Years 1 through 5

Derived from corporate bond yields with maturities under 5 years. The shortest-duration segment, so it responds quickly to short-term Fed policy changes.

4.07%, 2026

2Segment 2

Years 6 through 20

Derived from intermediate-term corporate bond yields. The most influential segment for most retirees because the bulk of expected payments fall in this window.

5.15%, 2026

3Segment 3

Year 21 and beyond

Derived from long-duration corporate bond yields. Applies to retirees with very long expected payment streams. Tends to move less than Segments 1 and 2.

6.01%, 2026

Which Lookback Month Does Your Plan Use?

The IRS publishes new segment rates every month, but pension plans lock in a specific month for the calendar year. The choice of lookback month is specified in your Summary Plan Description.

November is a common lookback month for calendar-year plans. Plans using the November rates apply them to lump sum calculations for the entire following calendar year.

A calendar-year plan with an annual stability period can use any month from August through December of the prior year (Treas. Reg. 1.417(e)-1(d)(4)). Governmental plans aren't subject to Section 417(e) at all. If your plan uses October 2025 rates rather than November 2025 rates, your lump sum will be slightly different from what this calculator shows. Request your plan document or ask your HR benefits administrator which month your plan uses.

Lookback Month	Typical Plan Types	Applies to Plan Year
NovemberCommon	Common among calendar-year corporate plans (check your SPD)	Following calendar year
August, September, October or December	Any month the plan document names, for calendar-year plans with an annual stability period	Following calendar year
Monthly or quarterly	Plans with a shorter stability period; rates update during the year	The month or quarter after the lookback

How Much Do Rates Change the Lump Sum?

The difference between a low-rate environment and a high-rate environment is substantial. A $3,000 per month pension starting at 62, valued with each year's November rates and the IRS 2026 mortality table (Notice 2025-40), illustrates the impact:

Plan Year	Segment 2 Rate	Approx. Lump Sum Value	vs. 2021
2021	2.31%	$629,000	Baseline (historic high)
2022	2.72%	$611,000	-$18,000
2023	5.60%	$462,000	-$167,000
2024	5.76%	$451,000	-$178,000
2025	5.25%	$470,000	-$159,000
2026Current	5.15%	$470,000	-$159,000

Example: $3,000/month pension starting at 62, IRS 2026 unisex mortality table, rounded to the nearest $1,000. Use the calculator for your own figures.

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