PLR 1218038: IRS approves substitute mortality tables for a pension plan

Plain-English summary

The IRS approved a request to use substitute male and female mortality tables for specified populations in a pension plan. The approval applies for up to 10 years beginning with the plan year that starts October 1, 2009. The IRS stated that it reviewed the development of the substitute rates and whether they sufficiently reflected the mortality experience of the applicable populations, but did not express an opinion on the accuracy or acceptability of other calculations or submitted materials. The letter also identifies conditions that can end the approval early, including failures involving credible mortality experience, controlled-group requirements, major population changes, predictive accuracy, or replacement mortality-table guidance.

Ruling snapshot

• Question: May the plan use the specified substitute mortality tables for its covered populations?
• Outcome: approved
• Key authorities: IRC § 430(h)(3); 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
DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

201218038

AUG 21 2009

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, 2009.
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 male and female substitute mortality rates
shown in the tables below:

Age Males Females Age Males Females
1 0.000576 0.000516 8 0.000195 0.000133
2 0.000389 0.000336 9 0.000189 0.000127
3 0.000323 0.000251 10 0.000192 0.000127
4 0.000251 0.000188 11 0.000198 0.000129
5 0.000230 0.000170 12 0.000206 0.000134
6 0.000221 0.000159 13 0.000217 0.000140
7 0.000212 0.000149 14 0.000231 0.000148

Age
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
49
50
51
52
53
54
55
56

Males
0.000244
0.000258
0.000273
0.000287
0.000301
0.000313
0.000326
0.000336
0.000346
0.000352
0.000358
0.000367
0.000373
0.000383
0.000402
0.000433
0.000487
0.000548
0.000603
0.000642
0.000667
0.000681
0.000689
0.000693
0.000696
0.000702
0.000714
0.000735
0.000768
0.000816
0.000882
0.000971
0.001084
0.001226
0.001398
0.001598
0.001829
0.002100
0.002405
0.002737
0.003107
0.003525

Females
0.000157
0.000164
0.000171
0.000175
0.000176
0.000176
0.000176
0.000178
0.000182
0.000186
0.000193
0.000201
0.000210
0.000219
0.000226
0.000233
0.000239
0.000246
0.000253
0.000263
0.000275
0.000290
0.000310
0.000333
0.000362
0.000396
0.000437
0.000485
0.000541
0.000606
0.000679
0.000762
0.000856
0.001006
0.001221
0.001481
0.001768
0.002062
0.002366
0.002695
0.003041
0.003399

Age
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
90
91
92
93
94
95
96
97
98

Males
0.004003
0.004544
0.005138
0.005785
0.006480
0.007221
0.007930
0.008609
0.009375
0.010346
0.011638
0.013277
0.015184
0.017322
0.019656
0.022150
0.024683
0.027280
0.030121
0.033385
0.037250
0.041460
0.045895
0.050941
0.056986
0.064416
0.073132
0.082875
0.093795
0.106043
0.119770
0.135061
0.151816
0.169906
0.189201
0.209571
0.230811
0.253008
0.276469
0.301501
0.328410
0.349910

201218038

Females
0.003765
0.004096
0.004395
0.004726
0.005152
0.005736
0.006464
0.007294
0.008247
0.009346
0.010612
0.012056
0.013664
0.015420
0.017307
0.019311
0.021285
0.023241
0.025395
0.027968
0.031178
0.034872
0.038904
0.043503
0.048899
0.055320
0.062690
0.070857
0.079935
0.090038
0.101282
0.112590
0.123885
0.136783
0.152896
0.173838
0.201632
0.235200
0.264752
0.290543
0.312829
0.331865

201218038

Age Males Females Age Males Females
99 0.366607 0.347908 110 0.400000 0.400000
100 0.379109 0.361213 111 0.400000 0.400000
101 0.388022 0.372037 112 0.400000 0.400000
102 0.393953 0.380635 113 0.400000 0.400000
103 0.397509 0.387264 114 0.400000 0.400000
104 0.399298 0.392178 115 0.400000 0.400000
105 0.399926 0.395634 116 0.400000 0.400000
106 0.400000 0.397888 117 0.400000 0.400000
107 0.400000 0.399196 118 0.400000 0.400000
108 0.400000 0.399813 119 0.400000 0.400000
109 0.400000 0.399996 120 1.000000 1.000000

The above tables will be used for all male and female participants, respectively, in the
Plan. The above rates were developed based on an experience study period from
October 1, 20__, through September 30, 20__, and were calculated using the Karup-
King. The base year for the resulting tables is 20__. 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 populations.

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

201218038

(5) 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

and to the

If you require further assistance in this matter, please contact

Sincerely,

David M. Ziegler, Manager
Employee Plans Actuarial Group 2