Substitute pension mortality tables approved for up to 10 years

Plain-English summary

A single-employer defined benefit plan requested permission to use substitute male and female mortality tables for funding computations under IRC § 430. The proposed rates were based on the plan population's experience from 2008 through 2012, used a 2010 base year, and were calculated with the Whittaker-Henderson graduation method. The IRS found that the tables sufficiently reflected the applicable populations' mortality experience and approved them for up to 10 years beginning with the plan year starting January 1, 2015. Earlier termination could occur if the population ceased to have credible experience, controlled-group requirements were not met, the covered population changed significantly, the tables stopped predicting mortality accurately, or replacement guidance took effect. The IRS did not express an opinion on other calculations or materials submitted with the request.

Ruling snapshot

• Question: Could the pension plan use its proposed substitute mortality tables for section 430 funding calculations?
• Outcome: Approved for up to 10 years beginning January 1, 2015, subject to early-termination rules
• 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)

TAX EXEMPT AND
GOVERNMENT ENTITIES

Significant Index No. 0430.00-00

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

NOV 13 2014

201506018

DIVISION

SE:T:EP:RA:A2

Re:
(the “Plan”)

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 January 1, 2015.
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:

Nondisabled Nondisabled Nondisabled Nondisabled

Age Males Females Age Males Females
1 0.000520 0.000467 8 0.000176 0.000120
2 0.000351 0.000304 9 0.000171 0.000114
3 0.000292 0.000227 10 0.000173 0.000115
4 0.000227 0.000170 11 0.000179 0.000117
5 0.000208 0.000154 12 0.000186 0.000121
6 0.000199 0.000144 13 0.000196 0.000127
7 0.000191 0.000135 14 0.000210 0.000135

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

Males
0.000222
0.000234
0.000248
0.000261
0.000273
0.000285
0.000297
0.000309
0.000321
0.000333
0.000346
0.000359
0.000374
0.000391
0.000412
0.000436
0.000465
0.000501
0.000543
0.000593
0.000653
0.000724
0.000806
0.000901
0.001011
0.001135
0.001276
0.001435
0.001612
0.001809
0.002027
0.002266
0.002527
0.002811
0.003119
0.003450
0.003806
0.004186
0.004589

Nondisabled Nondisabled

Females
0.000145
0.000152
0.000160
0.000163
0.000163
0.000163
0.000162
0.000163

0.000168

0.000173
0.000180
0.000189
0.000201
0.000215
0.000233
0.000256
0.000287
0.000327
0.000377
0.000441
0.000520
0.000616
0.000732
0.000868
0.001028
0.001213
0.001424
0.001662
0.001927
0.002220
0.002541
0.002889
0.003262
0.003659
0.004078
0.004514
0.004965
0.005429
0.005907

Age
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
90
91
92

Males
0.005018
0.005474
0.005958
0.006476
0.007032
0.007632
0.008285
0.008999
0.009787
0.010663
0.011642
0.012743
0.013988
0.015398
0.016998
0.018815
0.020878
0.023216
0.025864
0.028852
0.032216
0.035986
0.040196
0.044872
0.050041
0.055729
0.061958
0.068748
0.076117
0.084082
0.092658
0.101855
0.111682
0.122146
0.133250
0.144997
0.157387
0.170420
0.184094

201506018

Nondisabled Nondisabled

Females
0.006399
0.006906
0.007428
0.007969
0.008532
0.009122
0.009746
0.010411
0.011125
0.011894
0.012728
0.013633
0.014618
0.015691
0.016864
0.018150
0.019565
0.021131
0.022874
0.024826
0.027026
0.029516
0.032341
0.035546
0.039178
0.043281
0.047899
0.053073
0.058842
0.065242
0.072305
0.080057
0.088522
0.097717
0.107654
0.118339
0.129778
0.141970
0.154916

3
Nondisabled Nondisabled Nondisabled Nondisabled
Age Males Females Age Males Females
93 0.198409 0.168615 107 0.400000 0.322725
94 0.213363 0.183065 108 0.400000 0.337441
95 0.228956 0.198266 109 0.400000 0.351544
96 0.247094 0.211215 110 0.400000 0.364617
97 0.268391 0.220214 111 0.400000 0.376246
98 0.291103 0.226988 112 0.400000 0.386015
99 0.313746 0.232961 113 0.400000 0.393507
100 0.335097 0.239247 114 0.400000 0.398308
101 0.354193 0.246659 115 0.400000 0.400000
102 0.370331 0.255702 116 0.400000 0.400000
103 0.383070 0.266579 117 0.400000 0.400000
104 0.392229 0.279187 118 0.400000 0.400000
105 0.397886 0.293116 119 0.400000 0.400000
106 0.400000 0.307811 120 1.000000 1.000000

201506018

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
January 1, 2008, through December 31, 2012, and were calculated using the Whittaker-
Henderson graduation method. The base year for the resulting tables is 2010. 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 are 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),

201506018

(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.

4

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 Manager, EP Classification in
Baltimore, Maryland and to the Manager, EP Compliance Unit in Chicago, Illinois.

If you require further assistance in this matter, please contact
(ID# ) at ( ) -

Sincerely,

David M. Ziegler, Manager
Employee Plans Actuarial Group 2