Two pension plans may use substitute mortality tables for four populations

Plain-English summary

A controlled group requested substitute mortality tables for two defined benefit plans. The IRS approved combined tables for male and female annuitants and nonannuitants in those plans, excluding disabled participants, for 10 plan years beginning with a redacted effective year. A third controlled-group plan was not subject to section 430, although it was subject to Title IV of ERISA. The IRS determined only that the substitute rates were developed under Treasury Regulation section 1.430(h)(3)-2 and Revenue Procedure 2017-55, and did not validate the submitted calculations. The tables must be applied generationally and can terminate early if the regulatory conditions involving credible data, controlled-group coverage, population changes, predictive accuracy, or replacement mortality guidance occur.

Ruling snapshot

• Question: May the two plans use combined substitute mortality tables for male and female annuitants and nonannuitants, excluding disabled participants?
• Outcome: Approved for 10 plan years beginning with a redacted effective year.
• Key authorities: IRC § 430(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 and certain dates were redacted in the IRS release; wording is otherwise verbatim.

Significant Index No. 0430.00-00

201921020
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE

WASHINGTON, D.C. 20224

TAX EXEMPT AND

GOVERNMENT ENTITIES FEB 28 2019

DIVISION

SE:T:EP:RA:A2

Re: Substitute Mortality Table Ruling

Taxpayer =

Plans for which substitute mortality tables are requested (Included Group):

Plan 1=
Plan 2 =

Other plan in controlled group:

Plan 3 =

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
Included Group 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
(“ERISA”).

This approval applies to the following specific populations:

Plans 1 and 2 combined — Male annuitants, excluding disabled participants

Plans 1 and 2 combined — Female annuitants, excluding disabled participants
Plans 1 and 2 combined — Male nonannuitants, excluding disabled participants
Plans 1 and 2 combined — Female nonannuitants, excluding disabled participants


201921020

Based on the information provided by the Taxpayer, Plan 3 is not subject to section 430
of the Code, but is subject to Title IV of ERISA.

In granting this approval, we have only considered whether the substitute mortality rates
were developed 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 Included Group:

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
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
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
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 population, as shown in the table
below.

                         Male           Female         Male             Female
                         Annuitants      Annuitants     Nonannuitants    Nonannuitants
Mortality ratio
Credibility
Weighting Factor

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 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

201921020

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 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.

In particular, note that under section 1.430(h)(3)-2(c)(6)(iii) a significant change in
coverage occurs if the number of individuals covered by the substitute mortality table for
a plan year is less than 80 percent or more than 120 percent of either (1) the average
number of individuals in that population over the years covered by the experience study
on which the substitute mortality table is based, or (2) the number of individuals covered

by the substitute mortality table in a plan year for which a certification described in
section 1.430(h)(3)-2(c)(6)(iii)(A) of the Regulations was made.

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.


201921020

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

Sincerely,

David M. Ziegler, Manager
Employee Plans Actuarial Group 2

cc: