Updated July 30, 2026. Quick answer: Your monthly benefit did not change. The lump sum did, because a lump sum is a present value and IRC §417(e)(3)(A) requires that it “shall not be less than the present value calculated by using the applicable mortality table and the applicable interest rate.” Discounting a fixed stream of future payments at a higher rate produces a smaller number today. Rates up, lump sum down, for the identical pension.
What the statute actually specifies
IRC §417(e)(3)(C): the term “applicable interest rate” means “the adjusted first, second, and third segment rates applied under rules similar to the rules of section 430(h)(2)(C) … for the month before the date of the distribution or such other time as the Secretary may by regulations prescribe.” And §417(e)(3)(B): the “applicable mortality table” is “a mortality table, modified as appropriate by the Secretary, based on the mortality table specified for the plan year under subparagraph (A) of section 430(h)(3).”
Three things in that text change how you read an offer. It is three segment rates, not one. It is tied to a stated month, not to the day you decide. And §417(e)(3)(A) sets a floor — “shall not be less than” — so a plan may pay more than the statutory present value, and some plan documents do.
The direction, which is the part you can actually use
| If rates… | The present value of a fixed monthly stream… | So the lump-sum offer… |
|---|---|---|
| Rise | Falls | Shrinks, for the same monthly benefit |
| Fall | Rises | Grows, for the same monthly benefit |
| Are unchanged, but you are a year older | Fewer expected payments remain | Moves for a different reason entirely |
This is why two colleagues with identical service and identical monthly benefits can be quoted materially different lump sums months apart, and why neither quote is an error. It is also why a buyout window has a rate embedded in it. The offer is a function of when it was struck, and the statute pins that to a month.
This page states no rate, and that is deliberate. The segment rates change monthly, and your plan document names which month and which stability period it uses. A number quoted here would be stale before you read it and would sit next to a decision worth six figures. Ask your plan administrator, in writing, two things: which month’s rates were used for your quote, and what the plan’s stability period is. Those two answers let you tell a genuinely time-limited offer from one that merely looks urgent.
What this does and does not tell you about timing
It tells you the mechanism. It does not tell you to wait, because waiting trades a known quote for an unknown one and simultaneously reduces the number of payments left in your expected lifetime. Anyone who tells you rates are about to move in your favour is forecasting, and §417(e)(3) does not help them do it. What the provision does give you is the right question: what month is my quote built on, and when does it reset?
One consequence worth carrying to the other side of the decision: because the lump sum is a present value and the monthly benefit is not, a rate move changes only one side of the comparison. That is exactly what the break-even arithmetic measures.
Sources
IRC §417(e)(3), subparagraphs (A)-(D), quoted verbatim; IRC §417(e)(1) and §417(e)(2) for the consent boundary. Retrieved from the United States Code, July 2026.
This states what the cited authority says. It is not tax, legal or investment advice. A pension election turns on your own plan document, your own health and marital situation, and figures your plan must give you in writing — and this site states no interest rate, no conversion factor and no break-even age, because every one of those is specific to your plan and a borrowed number is worse than none.