Pension plan may use substitute mortality tables for all participant populations

Plain-English summary

A defined benefit pension plan asked to use substitute mortality tables for its male and female annuitants and nonannuitants, including disabled participants. The IRS approved the tables for 10 plan years beginning with the redacted effective year. It determined only that the rates were developed correctly under Treas. Reg. § 1.430(h)(3)-2 and Revenue Procedure 2017-55, not that every submitted calculation was accurate. The rates must be applied on a generational basis. The approval can end early if one of the statutory or regulatory termination events occurs.

Ruling snapshot

• Question: Could the plan use its substitute mortality tables for all four participant populations?
• Outcome: Approved for 10 plan years, 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; Rev. Proc. 2017-55

Full text (IRS public release)

Scanned document; transcription proofread from IRS OCR. Obvious scan misreads were corrected. Numeric mortality rates were redacted in the IRS release; wording is otherwise verbatim.

Significant Index No. 0430.00-00

DEPARTMENT OF THE TREASURY                                      201907016
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND

GOVERNMENT ENTITIES                                      NOV 20 2018

DIVISION

SE:T:EP:RA:A2

Re: Substitute Mortality Table Ruling

Taxpayer =                                      (EIN:          )

Plan =
          (EIN:          ; Plan No.          )

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 10 plan years beginning with the plan year commencing January 1,

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
• Female annuitants
• Male nonannuitants
• Female nonannuitants

The above tables also apply to disabled participants.

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 Treasury
Regulations (“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.

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

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

Age  Male Annuitants  Female Annuitants  Male Nonannuitants  Female Nonannuitants

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

26

27

28

29

30

31

Age  Male Annuitants  Female Annuitants  Male Nonannuitants  Female Nonannuitants

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50

51

52

53

54

55

56

57

58

59

60

61

62

63

64

65

66

67

68

69

70

71

72

Age  Male Annuitants  Female Annuitants  Male Nonannuitants  Female Nonannuitants

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

100

101

102

103

104

105

106

107

108

109

110

111

112

113

Age  Male Annuitants  Female Annuitants  Male Nonannuitants  Female Nonannuitants

114

115

116

117

118

119

120

The above rates were developed based on an experience study period from January 1,

, through December 31,          , with a base year of          . 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 individually determined for each separate population, as shown in the
table below:

Population              Mortality Ratio     Credibility Factor

Male
Annuitants

Female
Annuitants

Male
Nonannuitants

Female
Nonannuitants

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
paragraph 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 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 1.430(h)(3)-1 of the Regulations, other than
annual updates to the static mortality tables issued pursuant to 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 not sent a copy of this letter to your authorized representatives pursuant to a
power of attorney (Form 2848) on file in this office. We have sent a copy of this letter to
the Manager, EP Classification in Columbus, Ohio 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

CC: