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IRS proposes regulations for pension mortality tables


By Alan Glickstein and Chris Noble | February 2, 2017

The proposal would project greater mortality improvement at most ages, but less improvement at the oldest ages, with the effects varying by plan demographics.

The IRS has proposed regulations that would affect the determination of present values in defined benefit (DB) pension plans. The proposal presents the methodology the IRS would use to update the generally applicable mortality tables under Internal Revenue Code (IRC) section 430 (which defines minimum funding standards for single-employer DB plans). A modified version of these updated tables would be used to determine minimum lump sum values (in traditional or annuity-based DB formulas) under IRC section 417(e). The proposed effective date is for plan years beginning on or after January 1, 2018.

The updated mortality tables would use the 2006 base table that underlies the Society of Actuaries’ (SOA’s) most recent mortality tables, RP-2014. The proposed regulations would project mortality improvement after 2006 using the SOA's most recent mortality improvement scale, MP-2016. The IRS intends to take into account improvement data published annually by the SOA in determining mortality rates for plan years after 2018.

The proposed method for projecting mortality improvement is significantly different than under current law, providing more improvement in mortality rates at most ages, and less improvement at the oldest ages.

The effects of the proposed change in mortality tables will vary greatly depending on the demographics of the pension plan. In general, the change is likely to increase (traditional or annuity-formula based) plan liabilities for funding requirements and Pension Benefit Guaranty Corporation (PBGC) premium calculations by 2% to 5%. The proposed change would also increase most minimum (annuity-formula based) lump sum values 2% to 5% at current interest rates.

The IRS is also proposing new rules for using substitute mortality tables for plan funding calculations (including PBGC premiums). For plan sponsors wishing to use plan-specific tables, the proposal would require the use of mortality ratios (actual deaths to expected deaths during a recent study period) to adjust the generally applicable standard table, eliminating the use under current law of graduation techniques in developing substitute tables. The proposal would also permit use of substitute mortality tables in midsize plans that would be too small under current law.1 Under both current law and the proposed regulations, substitute mortality tables cannot be used for lump sum calculations.

Comments on the proposed regulations are due by March 29, and a public hearing is scheduled for April 13.


1. Plans must meet certain hard-to-attain conditions for their mortality tables to be considered fully credible. A substitute mortality table with a smaller adjustment to the standard table may also be used for a plan with partially credible experience, something not permitted under prior law.

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