Pension plan may change its actuarial assumptions

Plain-English summary

A pension plan asked the IRS to approve changes to actuarial assumptions used for minimum funding calculations. The requested changes covered retirement, termination, and transfer rates, along with commencement ages, marital assumptions, reciprocity, and future service for certain part-time participants. The IRS approved the changes under section 430(h)(5) for the specified plan year. It limited the ruling to the acceptability of the new assumptions and any transition method, without approving the plan's calculations or its compliance with other Code provisions. The plan was instructed to report the change on Schedule SB when filing Form 5500.

Ruling snapshot

• Question: Could the pension plan use the proposed new actuarial assumptions for its section 430 funding calculations?
• Outcome: approved
• Key authorities: IRC § 430(h)(5); ERISA § 303(h)(5)

Full text (IRS public release)

Significant Index No. 0430.00-00

201710030

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

NOV 30 2016

Re:
(EIN: , Plan No. )

Dear :

This letter constitutes notice that approval has been granted for the change in assumptions as described below. The ruling applies for the plan year beginning January 1, 20 . This ruling is made in accordance with section 430(h)(5) of the Internal Revenue Code (Code) and section 303(h)(5) of the Employee Retirement Income Security Act of 1974. Your authorized representatives reviewed and confirmed each of the rates contained in this ruling on November 28, 2016.

In issuing this ruling, we have considered only the acceptability of the new assumptions and, as necessary, the method by which the transition is to be made between the prior and the new assumptions. Accordingly, we are not expressing any opinion as to the accuracy or acceptability of any calculation or other material submitted with your request. Please note that this letter addresses only specific issues arising under section 430 of the Code and the approval granted herein should not be read to imply that the Plan as it stands satisfies the requirements of other sections of the Code.

This approval applies to the following changes in assumptions:

• Retirement rates
• Termination rates
• Transfer rates
• Commencement age for current and future Vested Terminations
• Spouse Age Difference
• Percent Married and Percent electing a J&S option
• Assumed Reciprocity
• Future Service assumption for Part Time Teamsters

2

201710030

The following retirement rates have been approved.

Part-Time Teamsters and other non-Freight Transfers Age Less than 25 years 25 or more years Less than 30 years 30 or more years
<50
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70

Freight
Age Rates
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70

3

201710030

The following termination rates have been approved.

Teamsters
Service at termination
Age 0 1 2 3 4 5+
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+

4

201710030

Freight
Service at termination
Age 0 1 2 3 4 5+
<=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+

5

201710030

Plan
Service Rate
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25+

6

201710030

The following transfer rates have been approved.

Transfer From Active Status
Age Male Female Age Male Female
21
43
22
44
23
45
24
46
25
47
26
48
27
49
28
50
29
51
30
52
31
53
32
54
33
55
34
56
35
57
36
58
37
59
38
60
39
61
40
62
41
63
42
64

7

201710030

The following commencement ages for current and future Vested Terminations have been approved.

Age
Non-Freight 60
Freight 62

The spousal age difference assumption that wives are 2 years younger than their husbands has been approved.

The following Percent Married assumption has been approved. Eighty percent of all participants are assumed to be married, with the following percentage of such participants assumed to elect a joint and survivor annuity upon commencement.

Percentage
Non-Freight
Freight

The Reciprocity assumption that of transfers are eligible for reciprocity has been approved.

The Future Service Assumption for Part-Time Teamsters that worked less than 750 hours in would earn 0.75 years of benefit service in each future year has been approved.

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 year beginning, please indicate on line 24 of the Schedule SB by checking the “Yes” box that a change in non-prescribed assumptions has been made for the current year. You should also include a copy of this letter as an attachment to the Schedule SB labeled: “Schedule SB, line 24 – Change in Non- Prescribed Actuarial Assumptions.”

8

201710030

We have sent a copy of this letter to your authorized representative pursuant to a power of attorney (Form 2848) on file in this office. If you have any questions regarding this matter, please contact (ID# ) at ( ) - .

Sincerely yours,

David M. Ziegler, Manager
Employee Plans Actuarial Group 2

cc: