Rev. Rul. 98-2, 1998-2 I.R.B. 15.

INSURANCE COMPANIES; INTEREST RATE TABLES

Published: January 12, 1998

Section 807. - Rules for Certain Reserves
Insurance companies; interest rate tables. Prevailing state assumed interest rates are provided for the determination of reserves under section 807 of the Code for contracts issued in 1997 and 1998. Rev. Rul. 92-19 supplemented in part.

For purposes of § 807(d)(4) of the Internal Revenue Code, for taxable years beginning after December 31, 1996, 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 1997 and 1998, and a supplement to the table in Part IV of Rev. Rul. 92-19, providing the applicable federal interest rate under § 807(d) for 1997 and 1998. This ruling does not supplement Parts I and II of Rev. Rul. 92-19.

This is the sixth 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), and Rev. Rul. 97-2, 1997-1 C.B. 8 (1996 and 1997).

Part III. Prevailing State Assumed Interest Rates--Products Issued in Years After 1982. [FNa1]

Schedule A

STATUTORY VALUATION INTEREST RATES BASED ON THE 1980 AMENDMENTS TO THE NAIC STANDARD VALUATION LAW

A. Life insurance valuation:

Source: Rates calculated from the monthly averages, ending June 30, 1997, of Moody's Corporate Bond Yield Average--Monthly Average Corporates.
FNa1. 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.
FNaa1. As the applicable federal interest rate for 1998 of 6.31 percent exceeds this prevailing state assumed interest rate, the interest rate to be used for this product under § 807 is 6.31 percent.

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:

Source: Rates calculated from the monthly averages, ending June 30, 1997, of Moody's Corporate Bond Yield Average--Monthly Average Corporates. The terms used in this schedule are those used in the Standard Valuation Law as defined in Rev. Rul. 92-19.
FNa1. As this prevailing state assumed interest rate exceeds the applicable federal interest rate for 1997 of 6.33 percent, the prevailing state assumed interest rate of 6.75 percent is to be used for this product under § 807.

Part III, Schedule C15 - 1997

STATUTORY VALUATION INTEREST RATES BASED ON NAIC STANDARD VALUATION LAW FOR 1997 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:

Source: Rates calculated from the monthly averages, ending June 30, 1997 of Moody's Corporate Bond Yield Average--Monthly Average Corporates.
FNa1. As the applicable federal interest rate for 1997 of 6.33 percent exceeds this prevailing state assumed interest rate, the interest rate to be used for this product under § 807 is 6.33 percent.

Part III, Schedule D15 - 1997

STATUTORY VALUATION INTEREST RATES BASED ON NAIC STANDARD VALUATION LAW FOR 1997 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:

Source: Rates calculated from the monthly averages, ending June 30, 1997, of Moody's Corporate Bond Yield Average--Monthly Average Corporates.
FNa1. As the applicable federal interest rate for 1997 of 6.33 percent exceeds this prevailing state assumed interest rate, the interest rate to be used for this product under § 807 is 6.33 percent.

Part IV. Applicable Federal Interest Rates.

TABLE OF APPLICABLE FEDERAL INTEREST RATES FOR PURPOSES OF § 807

Sources: Rev. Rul. 96-57, 1996-2 C.B. 82 for the 1997 rate and Rev. Rul. 97-50, 1997-49 I.R.B. 5 for the 1998 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 1997 and 1998 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 Ann H. Logan of the Office of Assistant Chief Counsel (Financial Institutions and Products). For further information regarding this revenue ruling contact her on (202) 622-3970 (not a toll-free call).

Rev. Rul. 98-2, 1998-2 I.R.B. 15.