We don't know the exact formula that is actually used when the IRS releases the 120% Mid-Term Rate, but over the last several years our estimates have been very close. The 120% Mid-Term Rate is usually released by the IRS between about the 18th and 23rd of each month. We normally post the published as it is released.
The formula used to calculate the estimated rate was last updated on 12/07/2010. Past results / variances of our estimate using the current formula can be viewed at HERE.
Published 120% Mid-Term Rate: 1.57% for Month Beginning 05/01/2012
Estimated 120% Mid-Term Rate: 1.33% for Month Beginning 06/01/2012
Interest Rate Change: -0.24%
The chart above illustrates our estimate of the next 120% Mid-Term AFR. Calculations for the
estimated rate start on the 15th of each month. The calculation cycle is completed on the
14th of the following month.
The estimated rate and chart remain unchanged from the 15th of the month until the end of
the month when the calculations start again. The closer to the 15th of the month, the more
accurate the estimate should be.
Rates are published monthly by the Treasury. The maximum interest rate that
may be used for a SEPP plan is any interest rate that is not more than 120 percent of the
federal mid-term rate for either of the two months immediately preceding the month in which
the distribution begins.