Substitute mortality tables approved for eight plans

Plain-English summary

A controlled group requested permission to use substitute mortality tables for eight aggregated pension plans. The request covered male and female annuitants and nonannuitants, including disabled participants, and no other plan populations in the controlled group were excluded. The IRS found that the submitted rates were developed in accordance with the section 430 regulations and Revenue Procedure 2017-55 and approved their use for five plan years beginning on the redacted date. The approval required generational application and could terminate early after specified changes in credibility, controlled-group coverage, population size, predictive accuracy, or governing mortality-table guidance.

Ruling snapshot

• Question: Could the eight-plan group use its proposed substitute mortality tables for section 430 funding calculations?
• Outcome: Yes; the tables were approved for the specified populations and period, subject to early-termination rules.
• 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)

Transcriber's note: this document is a seven-page scan. All page images were checked. Obvious OCR errors were corrected, repeated page numbers and stamped document numbers were omitted, and redacted identifying text is marked where needed. The mortality-rate, experience-study, mortality-ratio, and credibility-factor cells are blank in the IRS release; the complete age rows are preserved without supplying values. Original grammatical and citation irregularities are preserved. The 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

201924021

MAR 21 2019

[handwritten: SE:T:EP:RA:A2]

Re: Substitute Mortality Table Ruling

Taxpayer = [redacted]
EIN: [redacted]

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

Plan 1 = [redacted]
(EIN: [redacted]; Plan No. [redacted])

Plan 2 = [redacted]
(EIN: [redacted]; Plan No. [redacted])

Plan 3 = [redacted]
(EIN: [redacted]; Plan No. [redacted])

Plan 4 = [redacted]
(EIN: [redacted]; Plan No. [redacted])

Plan 5 = [redacted]
(EIN: [redacted]; Plan No. [redacted])

Plan 6 = [redacted]
(EIN: [redacted]; Plan No. [redacted])

Plan 7 = [redacted]
(EIN: [redacted]; Plan No. [redacted])

Plan 8 = [redacted]
(EIN: [redacted]; Plan No. [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
Included Group has been granted with respect to the populations specified in this letter.
This ruling is effective for a period of 5 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.

This approval applies to the following specific populations:

• Aggregated Plans 1 through 8 – Male annuitants (including disabled participants)
• Aggregated Plans 1 through 8 – Female annuitants (including disabled
  participants)
• Aggregated Plans 1 through 8 – Male nonannuitants (including disabled
  participants)
• Aggregated Plans 1 through 8 – Female nonannuitants (including disabled
  participants)

Based on the information provided by the Taxpayer, there are no plan populations in the
Taxpayer’s controlled group for which substitute mortality tables are not requested.

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, [redacted]
Base year [redacted]

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, [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.

Population | Mortality ratio | Credibility factor
Annuitants |  |
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 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
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, section 1.430(h)(3)-2(c)(6)(iii) provides that the use of substitute mortality
tables must be discontinued after a significant change in coverage unless the plan’s
actuary certifies in writing to the satisfaction of the Commissioner that the substitute
mortality tables used for the population continue to be accurately predictive of future
mortality of the population (taking into account the effect of the change in the
population). For this purpose, 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(6)(c)(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 not sent a copy of this letter to your authorized representative, because he is
not authorized to receive written notices and communications pursuant to the power of
attorney (Form 2848) on file with 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 have any questions concerning this matter, please contact [redacted]
(ID# [redacted]) at ([redacted]) [redacted].

Sincerely,

David M. Ziegler, Manager
Employee Plans Actuarial Group 2

CC: