PLR 200824026: Pension plan may use substitute mortality rates for male annuitants

Plain-English summary

A pension plan asked to use its own mortality table when calculating funding under § 430. The IRS approved substitute rates for non-disabled male annuitants, starting with the 2008 plan year for up to five years. The rates reflected the plan population's mortality experience from 2003 through 2006. The plan must use standard IRS tables for its other populations and for plans in the excluded group. The IRS listed circumstances that could end permission early, including insufficient mortality data, a major change in the covered population, or rates that no longer predict future mortality accurately.

Ruling snapshot

• Question: Could the plan use a substitute mortality table for non-disabled male annuitants?
• Outcome: Yes, for up to five years beginning with the 2008 plan year, subject to the stated limits.
• Key authorities: IRC § 430(h)(3); ERISA § 303(h)(3).

Full text (IRS public release)

Significant Index No. 0430.00-00
200824026

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND

GOVERNMENT ENTITIES
DIVISION

MAR 21 2008

[illegible]

In re: Request to use substitute mortality table
Plan for which a substitute mortality table is requested (“Permissive Plan”) =

Plan(s) for which substitute mortality tables are not requested (“Excluded Group”)=

Dear

This letter is to inform you that your request to use a substitute mortality table for making computations under section 430 of the Code for the above Permissive Plan has been granted with respect to the population specified in this letter, effective for a period of up to 5 years beginning with the 2008 plan year. Your request has been granted in accordance with section 430(h)(3) of the Internal Revenue Code and section 303(h)(3) of the Employee Retirement Income Security Act of 1974 (“ERISA”).

In granting this approval, we have considered only the development of the substitute mortality rates and whether they sufficiently reflect the mortality experience of the applicable plan population. Accordingly, we are not expressing any opinion as to the accuracy or acceptability of any calculations or other material submitted with your request.

Permission is herby granted to use the substitute mortality rates shown in the table below.

Non-disabled Male Annuitant Mortality Rates

Age qₓ Age qₓ Age qₓ
1 0.000588 41 0.001116 81 0.082003
2 0.000397 42 0.001260 82 0.090053
3 0.000329 43 0.001478 83 0.098476
4 0.000256 44 0.001768 84 0.107304
5 0.000235 45 0.002129 85 0.121344
6 0.000225 46 0.002560 86 0.135383
7 0.000216 47 0.003061 87 0.149423
8 0.000199 48 0.003922 88 0.163462
9 0.000193 49 0.004783 89 0.177501
10 0.000196 50 0.005645 90 0.191541
11 0.000202 51 0.006506 91 0.205580
12 0.000210 52 0.007367 92 0.219619
13 0.000221 53 0.008228 93 0.233659
14 0.000235 54 0.009089 94 0.247698
15 0.000249 55 0.009951 95 0.265357
16 0.000263 56 0.010812 96 0.281641
17 0.000279 57 0.011673 97 0.297460
18 0.000293 58 0.011881 98 0.314037
19 0.000307 59 0.012268 99 0.328888
20 0.000320 60 0.012753 100 0.343180
21 0.000332 61 0.013229 101 0.358628
22 0.000342 62 0.013626 102 0.371685
23 0.000351 63 0.013935 103 0.383040
24 0.000357 64 0.014233 104 0.392003
25 0.000361 65 0.014673 105 0.397886
26 0.000369 66 0.015401 106 0.400000
27 0.000374 67 0.016498 107 0.400000
28 0.000385 68 0.018008 108 0.400000
29 0.000404 69 0.019941 109 0.400000
30 0.000435 70 0.022298 110 0.400000
31 0.000489 71 0.025092 111 0.400000

Age qₓ Age qₓ Age qₓ
32 0.000551 72 0.028345 112 0.400000
33 0.000618 73 0.032126 113 0.400000
34 0.000688 74 0.036490 114 0.400000
35 0.000758 75 0.041449 115 0.400000
36 0.000824 76 0.047006 116 0.400000
37 0.000886 77 0.053152 117 0.400000
38 0.000941 78 0.059816 118 0.400000
39 0.000993 79 0.066887 119 0.400000
40 0.001045 80 0.074291 120 1.000000

The above table will be used for the non-disabled male annuitant population in the Permissive Plan. The populations of the Permissive Plan for which the substitute mortality table will not be used (excluded populations) are non-annuitant male participants, all female participants and all disabled participants. Standard mortality tables issued by the IRS will be used for all populations of the Excluded Group and all excluded populations of the Permissive Plan.

The rates were developed based on an experience study period from January 1, 2003, through December 31, 2006, and were graduated using the Whittaker-Henderson Type B graduation method. The Service has reviewed the substitute mortality rates and supporting information, and has determined that based on the information submitted, the rates sufficiently reflect the mortality experience of the applicable plan population.

Your attention is called to section 430(h)(3)(C)(ii) of the Code, section 303(h)(3)(C)(ii) of ERISA, and section 1.430(h)(3)-2(d)(4) of the proposed regulations, which describe the circumstances in which the use of the substitute mortality table will terminate before the end of the 10-year period described above. In general, the substitute mortality tables can no longer be used as of the earliest of:

(1) The plan year in which the plan fails to satisfy the requirements of paragraph 1.430(h)(3)-2(c)(1) of the proposed regulations, requiring that the groups for which substitute mortality tables is used must have credible mortality experience,

(2) The plan year in which the plan fails to satisfy the requirements of paragraph 1.430(h)(3)-2(d)(1) of the proposed regulations, regarding the requirement that other plans and populations in the controlled group must use substitute mortality tables unless it can be demonstrated that they do not have credible mortality experience,

(3) The second plan year following the plan year in which there is a significant change in individuals covered by the plan as described in paragraph 1.430(h)(3)-2(d)(4)(ii) of the proposed regulations (generally applicable when there is a change of 20% or more in the number of individuals in the population for which the substitute mortality table is used),

(4) The plan year following the plan year in which a substitute mortality table used for a plan population is no longer accurately predictive of future mortality of that population, as determined by the Service or as certified by the enrolled actuary to the satisfaction of the Service, and

(5) The date specified in guidance published in the Internal Revenue Bulletin regarding any replacement mortality tables specified under section 430(h)(3)(A) and 1.430(h)(3)-1, other than annual updates to the static mortality tables issued pursuant to 1.430(h)(3)-1(a)(3) of the proposed regulations.

This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited by others as precedent.

When filing Form 5500 for the plan years for which the substitute mortality table is used, please note the information that is required to be attached to Schedule SB (Actuarial Information) in accordance with the instructions to that form.

We have sent a copy of this letter to the
to the and to your
authorized representatives pursuant to a power of attorney on file in this office.

If you require further assistance in this matter, please contact at

Sincerely,

David M. Ziegler, Acting Manager
Employee Plans Actuarial Group 2