Q. What exactly is the “federal mid-term rate” Can you tell me where this interest rate comes from? 

A. Prior to 2002, an IRA owner could use any “reasonable” interest rate in his/her SEPP calculation, but in 2002 the IRS limited the interest rate assumption to the 120% Federal Mid-Term rate, which is used for all long term calculations, not just SEPP calculations. Around the middle of each month, the IRS posts a table of Applicable Federal Rates for the next month. While the method for calculating these rates seems to be known only to the IRS, you can get a general feeling of where the mid-term rates are going by watch the 5-Year Treasury Note.