Pension plan received substitute mortality tables for annuitants

Plain-English summary

A pension plan requested substitute mortality tables for its participant populations. The IRS approved tables for male and female annuitants, including disabled participants, for ten plan years. Male and female nonannuitants lacked credible mortality experience, so the plan had to use the standard mortality tables for those groups. The substitute tables had to be applied on a generational basis and remained subject to the regulation's early-termination rules.

Ruling snapshot

• Question: Could the plan use substitute mortality tables for its male and female annuitants?
• Outcome: Approved for ten plan years for annuitants; standard tables required for nonannuitants.
• Key authorities: IRC § 430(h)(3); ERISA § 303(h)(3); Treas. Reg. §§ 1.430(h)(3)-1 and 1.430(h)(3)-2; Rev. Proc. 2017-55

Full text (IRS public release)

Scanned document; transcription proofread from IRS OCR against all seven page images. Obvious scan misreads were corrected. Redacted values are marked [redacted], and the wholly redacted mortality-table entries are described in a transcriber note. Wording is otherwise verbatim.

Significant Index No. 0430.00-00

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

NOV 08 2018

201905012

[illegible]:T:EP:RA:A2

Re: Substitute Mortality Table Ruling

Taxpayer = [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 10 plan years beginning with the plan year commencing January 1, [redacted]. 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.

Specifically, this approval applies to the following populations:

• Male annuitants, including disabled participants
• Female annuitants, including disabled participants

Based on the information you provided, the following populations do not have credible
mortality experience, and therefore the standard mortality tables will be used for
calculations under section 430 of the Code:

• Male nonannuitants
• Female nonannuitants

In granting this approval, we have only considered whether the substitute mortality rates
were developed correctly in accordance with section 1.430(h)(3)-2 of the Income Tax
Regulations (the “Regulations”) and Revenue Procedure 2017-55. Accordingly, we are
not expressing any opinion as to the accuracy or acceptability of any calculations or
other material submitted with your request.

2 201905012

Permission is hereby granted to use the substitute mortality rates shown in the tables
below for the Plan:

Substitute Mortality Tables
Approved for use beginning with the plan year commencing January 1, [redacted]
Base year [redacted]

Age
Male Annuitants
Female Annuitants

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Age
Male Annuitants
Female Annuitants

4 201905012

Age
Male Annuitants
Female Annuitants

5 201905012

Age
Male Annuitants
Female Annuitants

[All age and mortality-rate entries in the tables on pages 2 through 5 were redacted in the IRS release. -- transcriber]

The above rates were developed based on an experience study period from
January 1, [redacted], through December 31, [redacted], with a base year of [redacted]. The rates were
calculated by adjusting the applicable standard mortality tables in section 1.430(h)(3)-
1(d) of the Regulations indicated in the table below, using the mortality ratio and
credibility weighting factor determined by aggregating male and female experience, as
shown in the table below.

Male annuitants
Female annuitants

Mortality ratio [redacted] [redacted]
Credibility weighting factor [redacted] [redacted]

The Internal Revenue Service has reviewed the substitute mortality rates and
supporting information, and has determined that based on the information submitted,
the rates were correctly developed in accordance with section 1.430(h)(3)-2 of the
Regulations and Revenue Procedure 2017-55.

The above rates must be applied on a generational basis, as provided in section
1.430(h)(3)-2(c)(3) of the Regulations.

Your attention is called to section 430(h)(3)(C)(ii) of the Code and section 1.430(h)(3)-
2(d)(6) 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) For a plan using a substitute mortality table for only one gender, the first plan
year for which there is full or partial credible mortality information with respect to
the other gender that had lacked credible mortality information (unless an
approved substitute mortality table is used for that gender),

(2) The first plan year in which the plan fails to satisfy the requirements of section
1.430(h)(3)-2(c)(1) of the regulations, regarding the requirement that other plans
and populations in the controlled group must also use substitute mortality tables
unless it can be demonstrated that they do not have credible mortality

6 201905012

information (taking into account the transition period for newly affiliated
companies in section 1.430(h)(3)-2(f)(3) of the Regulations),

(3) The second plan year following the plan year for which there is a significant
change in individuals covered by the plan as described in section
1.430(h)(3)-2(c)(6)(iii) of the Regulations,

(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, or

(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) of the Code and section 1.430(h)(3)-1 of the Regulations, other
than annual updates to the static mortality tables issued pursuant to section
1.430(h)(3)-1(a)(3) of the Regulations or changes to the mortality improvement
rates pursuant to section 1.430(h)(3)-1(a)(2)(i)(C) 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 representatives pursuant to a
power of attorney on file in this office and to the Manager, EP Classification in
Columbus, Ohio and to the Manager, EP Compliance Unit in Chicago, Illinois.

7 201905012

If you require further assistance in this matter, please contact [redacted]
(ID# [redacted]) at [redacted].

Sincerely,

David M. Ziegler, Manager
Employee Plans Actuarial Group 2

cc: