Definition
Rate of interest on which an account balance is assumed (or projected) to grow. The assumed rate of interest must be within IRS approved standards. For instance, when calculating a SEPP using the annuitization or amortization methods, an assumed rate of interest that is not more than 120 percent of the federal mid-term rate (determined in accordance with IRC § 1274(d) for either of the two months immediately preceding the month in which the distribution begins) can be used
An assumed rate of interest is also used to calculate projected earnings for target benefit plan and defined benefit plan assets .
Referring Cite
ERISA §302(c)(3); IRC §412(c)(3), IRC § 401(a), Revenue Ruling 2002-62
Additional Helpful Information
Assumptions that do not use a reasonable rate of interest may result in the computation being disallowed by the IRS
