Actuarial Outpost IRS discount factors
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#1
01-09-2019, 02:59 PM
 CuriousGeorge Member CAS SOA Join Date: Dec 2005 Posts: 1,347
IRS discount factors

Has anyone gone through the IRS determination letter for tax discounting (Rev Proc 2019-06)?

It says that the new interest rate is 3.12%, which I can recreate from official interest rate tables.

But then in the discount factor tables, it has the discount factor for the oldest accident years at 98.4640%, and I don't understand how they get that. Shouldn't it be 1/(1+3.12%)^0.5 = 98.4756%?
#2
01-15-2019, 01:46 PM
 brosin Member CAS AAA Join Date: Sep 2010 Location: Boca Raton, FL Studying for Nothing! College: UCB 2008 Posts: 59

The 3.12% compounded semi-annually. The actual annual rate is (1+3.12%/2)^2-1 = 3.1443%. This will get the values ending in .984640.
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#3
01-15-2019, 02:22 PM
 CuriousGeorge Member CAS SOA Join Date: Dec 2005 Posts: 1,347

I did not know that - thank you!