IRS approves substitute mortality tables for a pension plan

Plain-English summary

A defined benefit pension plan asked to use plan-specific substitute mortality tables when calculating minimum funding requirements. The IRS approved male and female rates for up to ten years beginning with the plan year starting January 1, 2017, after finding that the rates sufficiently reflected the plan populations' mortality experience. The tables used experience from 2010 through 2014, the Type B Whittaker-Henderson method with Lowrie's Variation, and a 2012 base year. Approval could end early if credible experience requirements were no longer met, controlled-group plans failed applicable rules, the covered population changed significantly, the tables stopped predicting mortality accurately, or published guidance replaced the standard tables.

Ruling snapshot

• Question: Could the pension plan use substitute male and female mortality tables under section 430(h)(3)?
• Outcome: Approved for up to ten plan years, subject to early-termination conditions.
• Key authorities: IRC § 430(h)(3); ERISA § 303(h)(3); Treas. Reg. §§ 1.430(h)(3)-1, 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

JUN 30 2016

Number: 201639024
Release Date: 9/23/2016

Re:
[redacted] (“Plan”)
EIN/PN: [redacted], Plan # [redacted]

Dear [redacted]:

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, 2017.
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 herby granted to use the following male and female substitute mortality
rates shown in the tables below for the Plan.

Substitute Mortality Tables

Male             Female
Age Base         Age Base
1 0.000500       1 0.000448
2 0.000337       2 0.000292
3 0.000280       3 0.000218
4 0.000218       4 0.000163
5 0.000200       5 0.000148
6 0.000191       6 0.000138
7 0.000184       7 0.000129
8 0.000169       8 0.000115
9 0.000164       9 0.000110
10 0.000166      10 0.000111

Substitute Mortality Tables

Male Female

Age Base Age Base
11 0.000172 11 0.000112
12 0.000179 12 0.000116
13 0.000188 13 0.000122
14 0.000202 14 0.000130
15 0.000214 15 0.000140
16 0.000226 16 0.000148
17 0.000239 17 0.000155
18 0.000251 18 0.000159
19 0.000263 19 0.000158
20 0.000274 20 0.000157
21 0.000287 21 0.000156
22 0.000298 22 0.000158
23 0.000311 23 0.000162
24 0.000321 24 0.000168
25 0.000333 25 0.000175
26 0.000352 26 0.000185
27 0.000360 27 0.000193
28 0.000370 28 0.000203
29 0.000388 29 0.000215
30 0.000418 30 0.000234
31 0.000470 31 0.000279
32 0.000529 32 0.000318
33 0.000594 33 0.000353
34 0.000661 34 0.000386
35 0.000728 35 0.000416
36 0.000792 36 0.000445
37 0.000851 37 0.000473
38 0.000897 38 0.000505
39 0.000938 39 0.000541
40 0.000980 40 0.000589
41 0.001025 41 0.000646
42 0.001078 42 0.000711
43 0.001140 43 0.000782
44 0.001216 44 0.000858
45 0.001303 45 0.000926
46 0.001343 46 0.000976
47 0.001421 47 0.001077
48 0.001539 48 0.001228
49 0.001696 49 0.001429
50 0.001892 50 0.001680
51 0.002128 51 0.001982
52 0.002403 52 0.002334
53 0.002717 53 0.002736
54 0.003070 54 0.003189
55 0.003463 55 0.003691
56 0.003723 56 0.003916

Substitute Mortality Tables

Male Female

Age Base Age Base
57 0.004000 57 0.004162
58 0.004298 58 0.004435
59 0.004623 59 0.004741
60 0.004982 60 0.005089
61 0.005384 61 0.005488
62 0.005840 62 0.005949
63 0.006361 63 0.006483
64 0.006962 64 0.007102
65 0.007658 65 0.007819
66 0.008468 66 0.008650
67 0.009412 67 0.009608
68 0.010514 68 0.010712
69 0.011799 69 0.011978
70 0.013295 70 0.013427
71 0.015032 71 0.015079
72 0.017045 72 0.016955
73 0.019373 73 0.019079
74 0.022055 74 0.021476
75 0.025139 75 0.024171
76 0.028674 76 0.027192
77 0.032713 77 0.030567
78 0.037316 78 0.034329
79 0.042548 79 0.038509
80 0.048478 80 0.043142
81 0.055182 81 0.048265
82 0.062743 82 0.053916
83 0.071249 83 0.060136
84 0.080798 84 0.066968
85 0.091495 85 0.074459
86 0.103456 86 0.082661
87 0.116810 87 0.091630
88 0.131698 88 0.101433
89 0.148278 89 0.112143
90 0.166725 90 0.123846
91 0.184097 91 0.134924
92 0.201469 92 0.146003
93 0.218841 93 0.157082
94 0.236213 94 0.168161
95 0.253585 95 0.179239
96 0.270956 96 0.190318
97 0.288328 97 0.201397
98 0.305700 98 0.212476
99 0.323072 99 0.223554
100 0.340444 100 0.234633
101 0.358628 101 0.244834
102 0.371685 102 0.254498

Substitute Mortality Tables
Male Female

Age Base Age Base

103 0.383040 103 0.266044

104 0.392003 104 0.279055

105 0.397886 105 0.293116

106 0.400000 106 0.307811

107 0.400000 107 0.322725

108 0.400000 108 0.337441

109 0.400000 109 0.351544

110 0.400000 110 0.364617

111 0.400000 111 0.376246

112 0.400000 112 0.386015

113 0.400000 113 0.393507

114 0.400000 114 0.398308

115 0.400000 115 0.400000

116 0.400000 116 0.400000

117 0.400000 117 0.400000

118 0.400000 118 0.400000

119 0.400000 119 0.400000

120 1.000000 120 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
January 1, 2010, through December 31, 2014, and were calculated using the Type B
Whittaker-Henderson method with Lowrie’s Variation. The base year for the resulting
tables is 2012. 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
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 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
[redacted].

Sincerely,

David M. Ziegler, Manager
Employee Plans Actuarial Group 2
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