IRS determination 201111019: substitute mortality tables approved for a pension plan

Plain-English summary

The IRS approved a pension plan's request to use substitute mortality tables for specified healthy and disabled male and female populations. The approval covers up to 10 years beginning with the plan year commencing October 1, 20[redacted]. The IRS determined that the substitute rates sufficiently reflect the mortality experience of the applicable populations. The approval can terminate early if the plan or its populations no longer satisfy the regulatory requirements.

Ruling snapshot

• Question: Could the pension plan use substitute mortality tables for its specified populations?
• Outcome: Approved.
• Key authorities: IRC §§ 430 and 6110; ERISA § 303(h)(3); Treas. Reg. §§ 1.430(h)(3)-1 and 1.430(h)(3)-2.

Full text (IRS public release)

Significant Index No. 0430.00-00
201111019
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

AUG 21 2009

[illegible]

Re:

Dear

This letter is to inform you that your request to use substitute mortality tables for making computations under section 430 of the Internal Revenue Code (the “Code”) for the Plan has been granted with respect to the populations specified in this letter, effective for a period of up to 10 years beginning with the plan year commencing October 1, 20/

Your request has been granted in accordance with section 430(h)(3) of the 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 populations. 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 hereby granted to use the healthy and disabled male and female substitute mortality rates shown in the tables below:

Healthy Lives
Disabled Lives

Age
1
2
3
4
5
6
7
201111019

2

Healthy Lives
Disabled Lives

Age
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
201111019

3

Healthy Lives
Disabled Lives

Age Males Females Males Females 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89

201111019

Healthy Lives
Disabled Lives

Age Males Females Males Females 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120

The above tables will be used for all healthy and disabled male and female participants, respectively, in the Plan. The above rates were developed based on an experience study period from October 1, 2002, through September 30, 2007, and were calculated using the Karup-King method. The base year for the resulting tables is 2005. The Internal Revenue 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 populations within the Plan.

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 regulations, which describe the 201111019

5

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)

(2)

(3)

(4)

(5)

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

The plan year in which the plan fails to satisfy the requirements of paragraph 1.430(h)(3)-2(d)(1) of the 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,

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 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),

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 Commissioner or as certified by the Plan’s actuary to the satisfaction of the Commissioner, and

The date specified in guidance published in the Internal Revenue Bulletin pursuant to a replacement of 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 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 tables are 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 your Authorized Representative pursuant to a power of attorney on file in this office and to the 201111019

6

If you require further assistance in this matter, please contact

Sincerely,

[signature]

David M. Ziegler, Manager
Employee Plans Actuarial Group 2