Pension plan may use substitute mortality tables for up to 10 years

Plain-English summary

A pension plan asked to use substitute mortality tables for its non-disabled male and female participants when making minimum-funding computations. The IRS found that the submitted rates sufficiently reflected the mortality experience of those populations. It approved the tables for up to 10 years beginning with the plan year starting January 1, 2016. The approval could end earlier if the populations ceased to have credible mortality experience, changed significantly, or met another regulatory termination condition.

Ruling snapshot

• Question: Could the plan use its proposed substitute mortality tables for section 430 funding calculations?
• Outcome: Approved for up to 10 years, subject to regulatory early-termination conditions.
• 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)

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

December 1, 2015

Significant Index Number 0430.00-00

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 January 1, 2016.
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.

The substitute mortality tables will be used for all non-disabled male and non-disabled
female participants, respectively, in the Plan. The substitute mortality rates were
developed based on an experience study period from January 1, 2010, through
December 31, 2013, and were calculated using the Whittaker-Henderson graduation
method. The base year for the resulting tables is 2011. 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.


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Permission is hereby granted to use the non-disabled male and non-disabled female
substitute mortality rates shown in the table below:

Age Males Females  Age Males Females Age Males Females
1   0.000510  0.000457 41  0.001127  0.000655 81 0.064000 0.052250
2  0.000344  0.000298 42  0.001202  0.000722 82 0.071439 0.058939
3   0.000286  0.000223 43  0.001287  0.000794 83 0.079622 0.066377
4  0.000223  0.000167 44  0.001383  0.000875 84 0.088583 0.074601
5  0.000204  0.000151 45  0.001496  0.000967 85 0.098356 0.083650
6  0.000195  0.000141 46  0.001628  0.001073 86 0.108970 0.093561
7  0.000187  0.000132 47  0.001785  0.001196 87 0.120454 0.104371
8  0.000173  0.000118 48  0.001970  0.001339 88 0.132834 0.116116
9  0.000167  0.000112 49  0.002188  0.001506 89 0.146132 0.128826
10  0.000170  0.000113 50  0.002444  0.001699 90 0.160367 0.142528
11  0.000175  0.000115 51  0.002743  0.001922 91 0.175552 0.157245
12  0.000183  0.000119 52  0.003088  0.002179 92 0.192696 0.172199
13  0.000192  0.000124 53  0.003484  0.002473 93 0.212174 0.186644
14  0.000206  0.000133 54  0.003932  0.002806 94 0.233117 0.200648
15  0.000218  0.000142 55  0.004431  0.003181 95 0.254743 0.214267
16  0.000230  0.000150 56  0.004981  0.003602 96 0.276355 0.227547
17  0.000244  0.000158 57  0.005580  0.004069 97 0.297341 0.240524
18  0.000256  0.000161 58  0.006229  0.004586 98 0.317178 0.253223
19  0.000268  0.000161 59  0.006926  0.005152 99 0.335428 0.265659
20  0.000279  0.000160 60  0.007672  0.005770 100 0.351737 0.277836
21  0.000292  0.000159 61  0.008466  0.006439 101 0.365842 0.289747
22  0.000303  0.000161 62  0.009310  0.007158 102 0.377560 0.301376
23  0.000316  0.000165 63  0.010209  0.007927 103 0.386800 0.312695
24  0.000326  0.000170 64  0.011168  0.008747 104 0.393553 0.323666
25  0.000337  0.000177 65  0.012201  0.009624 105 0.397898 0.334241
26  0.000354  0.000187 66  0.013325  0.010562 106 0.400000 0.344360
27  0.000362  0.000195 67  0.014563  0.011572 107 0.400000 0.353955
28  0.000372  0.000206 68  0.015947  0.012669 108 0.400000 0.362945
29  0.000390  0.000217 69  0.017510  0.013875 109 0.400000 0.371239
30  0.000420  0.000236 70  0.019289  0.015218 110 0.400000 0.378736
31  0.000472  0.000281 71  0.021320  0.016734 111 0.400000 0.385326
32  0.000532  0.000320 72  0.023641  0.018464 112 0.400000 0.390885
33  0.000597  0.000357 73  0.026287  0.020457 113 0.400000 0.395280
34  0.000663  0.000389 74  0.029296  0.022765 114 0.400000 0.398370
35  0.000731  0.000421 75  0.032706  0.025446 115 0.400000 0.400000
36  0.000797  0.000450 76  0.036557  0.028553 116 0.400000 0.400000
37  0.000862  0.000480 77  0.040893  0.032140 117 0.400000 0.400000
38  0.000927  0.000512 78  0.045760  0.036258 118 0.400000 0.400000
39  0.000991  0.000549 79  0.051203  0.040953 119 0.400000 0.400000
40  0.001057  0.000598 80  0.057269  0.046269 120 1.000000 1.000000


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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),

(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.

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We have sent a copy of this letter to your authorized representatives pursuant to a
power of attorney (Form 2848) 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 have any questions concerning this matter, please contact                         (ID#
              ) at

Sincerely,

David M. Ziegler, Manager
Employee Plans Actuarial Group 2