IRS approves substitute mortality tables for specified pension plans

Plain-English summary

The IRS approved a request to use substitute mortality tables for the pension plans in a specified permissive group. The approval applies to the listed bargaining-unit and non-bargaining-unit male and female populations, for up to 10 years beginning with the designated plan years. The IRS stated that the rates sufficiently reflect the mortality experience of the applicable populations, based on an experience study from 2005 through 2009. The approval can end early if the plans no longer meet the regulatory conditions, including requirements concerning credible mortality experience and significant population changes.

Ruling snapshot

• Question: May the plans use the requested substitute mortality tables under IRC § 430(h)(3)?
• Outcome: Approved
• Key authorities: IRC §§ 430(h)(3) and 6110(k)(3); ERISA § 303(h)(3); Treas. Reg. § 1.430(h)(3)-2

Full text (IRS public release)

Significant Index No. 0430.00-00

201228056

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

AUG 16 2011

TEP: RAC: A2

Re: Request for the use of plan-specific substitute mortality tables for the plans
comprising the following Permissive Group:

Plan Name Plan Number EIN

201228056

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 plans
in the Permissive Group 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 years
commencing January 1, [illegible]. 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 for plans in the Permissive Group to use the male and
female substitute mortality rates shown in the tables below:

Bargaining Unit Non-Bargaining Unit

Age Males Females Males Females
1 0.000553 0.000496 0.000553 0.000496
2 0.000373 0.000323 0.000373 0.000323
3 0.000310 0.000241 0.000310 0.000241
4 0.000241 0.000181 0.000241 0.000181
5 0.000221 0.000163 0.000221 0.000163
6 0.000212 0.000153 0.000212 0.000153
7 0.000203 0.000143 0.000203 0.000143
8 0.000188 0.000128 0.000188 0.000128
9 0.000181 0.000122 0.000181 0.000122
10 0.000184 0.000122 0.000184 0.000122
11 0.000190 0.000124 0.000190 0.000124
12 0.000198 0.000128 0.000198 0.000128
13 0.000208 0.000135 0.000208 0.000135
14 0.000222 0.000143 0.000222 0.000143
15 0.000235 0.000152 0.000235 0.000152
16 0.000248 0.000159 0.000248 0.000159
17 0.000263 0.000167 0.000263 0.000167
18 0.000276 0.000170 0.000276 0.000170
19 0.000289 0.000171 0.000289 0.000171
20 0.000302 0.000171 0.000302 0.000171
21 0.000314 0.000170 0.000314 0.000170
22 0.000325 0.000172 0.000325 0.000172

Age
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
57
58
59
60
61
62
63

Bargaining Unit

Males
0.000336
0.000343
0.000350
0.000362
0.000369
0.000406
0.000493
0.000622
0.000782
0.000965
0.001162
0.001362
0.001556
0.001736
0.001892
0.002014
0.002093
0.002121
0.002137
0.002214

• 0.002359

0.002559
0.002798
0.003064
0.003342
0.003642
0.003974
0.004322
0.004670
0.005004
0.005279
0.005503
0.005746
0.006075
0.006558
0.007160
0.007838
0.008640
0.009619
0.010824
0.012327

Females

0.000176
0.000181
0.000188
0.000197
0.000205
0.000216
0.000228
0.000246
0.000290
0.000331
0.000384
0.000464
0.000573
0.000711
0.000879
0.001078
0.001309
0.001574
0.001858
0.002079
0.002176
0.002193
0.002224
0.002361
0.002699
0.003321
0.004164
0.005104
0.006015
0.006772
0.007339
0.007801
0.008209
0.008619
0.009085
0.009575
0.010054
0.010568
0.011164
0.011879
0.012751

Non-Bargaining Unit

Males
0.000336
0.000343
0.000350
0.000362
0.000369
0.000379
0.000398
0.000429
0.000482
0.000543
0.000609
0.000678
0.000746
0.000812
0.000873
0.000928
0.000981
0.001032
0.001083
0.001133
0.001183
0.001234
0.001286
0.001340
0.001396
0.001531
0.001788
0.002103
0.002416
0.002664
0.002802
0.002871
0.002940
0.003077
0.003352
0.003767
0.004278
0.004878
0.005562
0.006324
0.007066

Females

0.000176
0.000181
0.000188
0.000197
0.000205
0.000216
0.000228
0.000246
0.000290
0.000331
0.000370
0.000405
0.000440
0.000472
0.000506
0.000558
0.000643
0.000760
0.000906
0.001079
0.001277
0.001498
0.001740
0.002000
0.002277
0.002568
0.002872
0.003185
0.003507
0.003835
0.004166
0.004499
0.004832
0.005162
0.005488
0.006039
0.006871
0.007860
0.008881
0.009813
0.010658

201228056

Bargaining Unit

Age Males
64 0.014092
65 0.016015
66 0.017990
67 0.019911
68 0.021574
69 0.023048
70 0.024641
71 0.026662
72 0.029419
73 0.033034
74 0.037301
75 0.042038
76 0.047059
77 0.052181
78 0.057110
79 0.061966
80 0.067194
81 0.073236
82 0.080533
83 0.089156
84 0.098810
85 0.109389
86 0.120791
87 0.132910
88 0.145741
89 0.159353
90 0.173755
91 0.188955
92 0.204961
93 0.221364
94 0.238158
95 0.255957
96 0.275375
97 0.297026
98 0.317035
99 0.335253

100 0.351530

101 0.365714

102 0.377657

103 0.387207

104 0.394214

Females

0.013749
0.014825
0.015935
0.017032
0.017951
0.018722
0.019594
0.020816
0.022636
0.025134
0.028143
0.031546
0.035224
0.039059
0.042940
0.046946
0.051244
0.055997
0.061373
0.067254
0.073530
0.080376
0.087967
0.096475
0.105344
0.114457
0.124651
0.136764
0.151632
0.169412
0.189519
0.211371
0.234384
0.257974
0.281558
0.304553
0.326375
0.346440
0.364166
0.378968
0.390263

201228056

Non-Bargaining Unit

Males
0.007791
0.008648
0.009782
0.011343
0.013514
0.016197
0.019116
0.021991
0.024545
0.026335
0.027547
0.028844
0.030892
0.034354
0.039200
0.044986
0.051760
0.059568
0.068455
0.078640
0.090091
0.102483
0.115489
0.128785
0.143818
0.160805
0.177574
0.191953
0.201769
0.214419
0.229383
0.246140
0.264170
0.282952
0.301967
0.320694
0.338612
0.355201
0.369941
0.382311
0.391791

Females

0.011499
0.012330
0.013145
0.013936
0.014494
0.014824
0.015240
0.016055
0.017584
0.019980
0.023034
0.026515
0.030194
0.033840
0.037143
0.040256
0.043645
0.047777
0.053120
0.059566
0.066804
0.074995
0.084300
0.094881
0.106583
0.119299
0.133260
0.148699
0.165848
0.182798
0.199497
0.215892
0.231931
0.247562
0.262732
0.277389
0.291479
0.304952
0.317755
0.329834
0.341138

201228056

5
Bargaining Unit Non-Bargaining Unit
Age . Males Females Males Females
105 0.398529 0.397468 0.397861 0.351614
106 0.400000 0.400000 0.400000 0.361210
107 0.400000 0.400000 0.400000 0.369873
108 0.400000 0.400000 0.400000 0.377551
109 0.400000 0.400000 0.400000 0.384192
110 0.400000 0.400000 0.400000 0.389743
111 0.400000 0.400000 0.400000 0.394152
112 0.400000 0.400000 0.400000 0.397366
113 0.400000 0.400000 0.400000 0.399332
114 0.400000 0.400000 0.400000 0.400000
115 0.400000 0.400000 0.400000 0.400000
116 0.400000 0.400000 0.400000 0.400000
117 0.400000 0.400000 0.400000 0.400000
118 0.400000 0.400000 0.400000 0.400000
119 0.400000 0.400000 0.400000 0.400000

120 1.000000 1.000000 1.000000 1.000000

The above tables will be used for all bargaining and non-bargaining unit male and
female participants, respectively, in the plans comprising the Permissive Group. The
above rates were developed based on an experience study period from January 1,
2005, through December 31, 2009, and were calculated using the Karup-King method.
The base year for the resulting tables is 2007. 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
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

201228056

6

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

(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 [illegible]
and to the [illegible]

If you require further assistance in this matter, please contact

Sincerely,

David M. Ziegler, Manager
Employee Plans Actuarial Group 2