Substitute mortality tables approved for two pension plans

Plain-English summary

A plan sponsor requested new substitute mortality tables after a group annuity purchase caused its previously approved tables to no longer predict future mortality accurately. The new tables used experience from 2018 through 2022 and excluded participants covered by the annuity purchase. The IRS approved the tables for two Group A pension plans and for male and female annuitants and non-annuitants other than disabled participants, while requiring standard tables for disabled participants. Approval begins with plan years starting January 1, 2025 and is subject to early-termination and annual certification rules, including changes in covered populations. The letter also states that amended regulations require a new substitute mortality table submission for plan years beginning January 1, 2026.

Ruling snapshot

• Question: May the two Group A pension plans use the proposed substitute mortality tables for section 430 computations?
• Outcome: Approved, subject to the stated population, certification, and termination conditions
• Key authorities: IRC § 430(h)(3); ERISA § 303(h)(3); Treas. Reg. § 1.430(h)(3)-2; Rev. Proc. 2017-55

Full text (IRS public release)

Significant Index No. 0430.00-00

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

TAX EXEMPT AND FEB 0 5 2025

GOVERNMENT ENTITIES
DIVISION

Release Number: 202518021
Release Date: 5/2/2025

Re: Substitute Mortality Table Ruling

Taxpayer =
EIN: -

Plans for which substitute mortality tables are requested:

Group A:
Plan 1 =

EIN: - (Plan No.: )
Plan 2 =

EIN: - (Plan No.: )
Group B:
Plan 3 =

EIN: - (Plan No.: )
Plan 4 =

EIN: - (Plan No.: )

Dear Ms.

This letter is to inform you that your request to use substitute mortality tables for making
computations under section 430 of the Code for the above Plan 1 and Plan 2 (hereinafter
referred to as “Group A”) has been granted with respect to the populations specified in this
letter. This ruling is effective for a period of up to 5 plan years beginning with the plan years
commencing January 1, 2025 for each plan of Group A. 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 of Group A:

• Male annuitants other than disabled male annuitants

• Female annuitants other than disabled female annuitants

• Male non-annuitants other than disabled male non-annuitants

• Female non-annuitants other than disabled female non-annuitants

The Taxpayer also requests approval for substitute mortality tables for Plan 3 and Plan 4
(hereinafter referred to as “Group B"), which will be addressed in a separate ruling letter.

The Taxpayer previously received two rulings, both dated January 31, 2024, granting the use
of substitute mortality tables effective for a period up to 5 years beginning with the plan years
commencing January 1, 2024. The approved use of the substitute mortality tables currently
being used will expire on December 31, 2028. The studies used to construct those tables were
based on the experience period from January 1, 2017 through December 31, 2021.

The Taxpayer submitted this request for a ruling to use substitute mortality tables for a period
of up to 5 plan years starting with the plan years beginning January 1, 2025, based on an
experience study period from January 1, 2018 through December 31, 2022. Separate
experience studies were conducted for Group A and Group B, as identified above. The
Taxpayer represented that they no longer believe the substitute mortality tables approved on
January 31, 2024 are accurately predictive of future mortality due to a group annuity purchase
for certain retirees, which occurred in November 2023. Therefore, they have completed a new
experience study with more recent data and have excluded the data for the participants
included in the group annuity purchase.

This request is made in accordance with section 430(h)(3)(C) of the Code, section 303(h)(3) of
the Employee Retirement Income Security Act of 1974, section 1.430(h)(3)-2 of the Treasury
Regulations (“Regulations”), and Revenue Procedure 2017-55.

Section 430(h)(3)(A) of the Code states, in relevant part, that the Secretary shall by regulation
prescribe mortality tables to be used in determining any present value of making any
computation under section 430 of the Code.

Section 430(h)(3)(C) of the Code states, that upon request by the plan sponsor and approval
by the Secretary, a mortality table shall be used in determining any present value or making
any computation under section 430 of the Code during the period of consecutive plan years
(not to exceed 10) specified in the request.

Section 430(h)(3)(C)(ii) of the Code states, in relevant part, a substitute mortality table shall
cease to be in effect as of the earliest of:

(1) the date on which there is a significant change in the participants in the plan by reason
of a plan spinoff or merger or otherwise, or

(2) the date on which the plan actuary determines that such substitute mortality table does
not meet the following requirements of Section 430(h)(3)(C)(iii) of the Code.

Section 430(h)(3)(C)(iii) of the Code states, in relevant part, that a mortality table meets the
requirements of this section if:

(i) there is a sufficient number of plan participants, and the pension plans have been
maintained for a sufficient period of time, to have credible information necessary,

and

(ii) such substitute mortality table reflects the actual experience of the pension plans
maintained by the sponsor and projected trends in general mortality experience.

Section 1.430(h)(3)-2(c)(3) of the Regulations states, in relevant part, that the base year for the
base substitute mortality table is the calendar year that contains the day before the midpoint of
the experience study period. Additionally, a plan's substitute mortality tables must be
generational mortality tables.

Section 1.430(h)(3)-2(c)(4) of the Regulations states, in relevant part, that if separate mortality
tables are used for certain disabled individuals as permitted under section 430(h)(3)(D) of the
Code, then those disabled individuals are disregarded for all purposes under

section 1.430(h)(3)-2 of the Regulations, and mortality experience with respect to those
individuals must be excluded in developing mortality rates for substitute mortality tables.

Section 1.430(h)(3)-2(c)(6)(ii) of the Regulations states, in relevant part, that a plan’s substitute
mortality tables must not be used beginning with the earliest of:

(A) 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),

(B) The first plan year in which the plan fails to satisfy 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),

(C) 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.

(D) 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

(E) 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.

Section 1.430(h)(3)-2(c)(6)(iii) of the Regulations states, in relevant part, a significant change
in the individuals covered by a substitute mortality table for a plan year occurs if the number of
individuals covered by the substitute mortality table for the plan year is less than 80% or more
than 120% of either the average number of individuals in that population over the years
covered by the experience study on which the substitute mortality tables are based, or the
number of individuals covered by the substitute mortality table in a plan year for which a
certification (described below) was made on account of a prior change in coverage. However,
a change in coverage is not treated as significant if 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 that population (taking into account
the effect of the change in the population).

Section 1.430(h)(3)-2(d)(2) of the Regulations states, in relevant part, that the experience
study period must consist of 2, 3, 4, or 5 consecutive 12-month periods, and must be the same
period for all populations. The last day of the experience study period must be less than 3
years before the first day of the first plan year for which the substitute mortality tables are to

apply

Section 1.430(h)(3)-2(d)(4) of the Regulations states, in relevant part, that the base mortality
rates are determined by multiplying the mortality rate from the standard mortality table by the
mortality ratio (modified for ages 96 and older).

Section 1.430(h)(3)-2(e)(1) of the Regulations states, in relevant part, that if the actual number
of deaths is less than the full credibility threshold, then the base mortality rates are determined
using a partial credibility weighting factor.

The substitute mortality tables were developed based on an experience study period from
January 1, 2018 through December 31, 2022, with a base year of 2020. This satisfies the
requirements under sections 1.430(h)(3)-2(c)(3) and (d)(2) of the Regulations.

The substitute mortality tables were developed by adjusting the applicable standard mortality
tables in section 1.430(h)(3)-1(d) of the Regulations with the mortality ratio and credibility
weighting factors shown below.

Mortality Ratio and Credibility Weighting Factor Table

-- —— —

Combined male and Combined maleand .
female annuitants, female non-annuitants, .
excluding disabled excluding disabled |

_annuitants non-annuitants

in

| Mortality Ratio.
_ Credibility Weighting Factor

These were determined by combining male and female annuitant (excluding disabled
annuitants), and male and female non-annuitant (excluding disabled non-annuitants)
experience. These adjustments are required under sections 1.430(h)(3)-2(d)(4) and (e)(1) of
the Regulations.

This approval applies to the following specific populations:

• Male and female annuitants other than disabled annuitants
• Male and female non-annuitants other than disabled non-annuitants

Based on the information provided by the Taxpayer, the standard mortality tables will be used
for the following populations for calculations under section 430 of the Code:

• Male and female disabled annuitants
• Male and female disabled non-annuitants

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 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.

Substitute Mortality Tables
Approved for use beginning with the plan years
commencing January 1, 2025

Base year 2020
Male Female Male Female
Annuitants, Annuitants, | Non-annuitants, | Non-annuitants,
excluding excluding excluding excluding
disabled disabled disabled disabled
Age annuitants annuitants | non-annuitants | non-annuitants
15
16
17
18
19

Age

20

Male
Annuitants,
excluding
disabled
annuitants

Female
Annuitants,
excluding
disabled
annuitants

Male
Non-annuitants,
excluding
disabled
non-annuitants

Female
Non-annuitants,
excluding
disabled
non-annuitants

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

Male
Annuitants,
excluding
disabled
annuitants

Female
Annuitants,
excluding
disabled
annuitants

Male
Non-annuitants,
excluding
disabled
non-annuitants

Female
Non-annuitants,
excluding
disabled
non-annuitants

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

Male Female Male Female
Annuitants, Annuitants, | Non-annuitants, | Non-annuitants,
excluding excluding excluding excluding
disabled disabled disabled disabled
Age_ annuitants annuitants | non-annuitants | non-annuitants
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120

The above mortality rates were developed based on an experience study period from January
1, 2018 through December 31, 2022, with a base year of 2020.

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 for plan years
beginning prior to January 1, 2025, 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(c)(6)
of the Regulations, which describe the circumstances in which the use of the substitute
mortality table will terminate before the end of the 5-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.

We also draw your attention to sections 1.430(h)(3)-2(d)(4)(iii) and 1.430(2)(g) of the
Regulations effective July 31, 2024. The amended sections above describe the circumstances
in which the use of a previously approved substitute mortality table would continue to satisfy
the requirements of section 1.430(h)(3)-2 of the Regulations for plan years beginning on or
after January 1, 2025. Therefore, the new regulation will require a new substitute mortality
table to be submitted for the plan years beginning January 1, 2026.

Section 1.430(h)(3)-2(c)(6)(iii) of the Regulations 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). As noted on page 4 of this
letter, 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)(6Xiii)(A) of the Regulations was made.

10

For reference, the average number of the combined male and femaie annuitants (excluding
disabled annuitants) and combined male and female non-annuitants (excluding disabled non-
annuitants) over the years covered by the experience study, as well as the most recent
number of combined male and female annuitants (exctuding disabled annuitants) and
combined male and female non-annuitants (excluding disabled non-annuitants) in the
submission are as follows:

Combined male and | Combined male and
female annuitants, | female non-annuitants,
excluding disabled excluding disabled
____ annuitants non-annuitants

Average number during
| the experience study period
, Number as of December 31, 2023
| Percentage difference

— — ————-4.~

a

A certification must be provided each year that it is required under the Regulations, as
described above, signed by the enrolled actuary for the plan and stating that the substitute
mortality tables continue to be accurately predictive of the expected future mortality for the
plan. The certification must also contain a statement that:

a. The enrolled actuary is current with educational requirements set forth by the Joint
Board for the Enroliment of Actuaries as well as any other actuarial designations
asserted;

b. The enrolied actuary was personally involved in the detennination that the
substitute mortality table is still accurately predictive and provides the actuary’s best
estimate for the Plans;

c. In determining that the substitute mortality table is still accurately predictive, the
enrolled actuary took into consideration the effect of business combinations, plan
mergers or spinoffs and settlements/other risk transfers, and other events that
would have similar effects on the relevant populations; and,

d. The enrolled actuary has the specific knowledge and experience to make the
judgements set forth above and attests to these representations.

All required certifications must be provided on or before the date Form 5500 is filed for each
plan year for which the certification is required and must be accompanied by the supporting
information relied upon by the enrolled actuary to make that certification. To the extent
possible, please also provide the following supporting information:

(1) The number of actual deaths during the experience study period used to develop the
substitute mortality tables and the beginning and ending dates of the experience study
period.

11

(2) A table showing the number of expected deaths and actual deaths, reported separately
as of December 31, 2023 and for each plan year beginning with deaths during the plan
year ending December 31, 2024 through the plan year immediately preceding the most

recent actuarial valuation, and in total.

(3) A table similar to the stability demonstration required under section 8 of Revenue
Procedure 2017-55, showing the average number of participants in the population
covered by the substitute mortality table during the experience study period and the
number of participants in that population as of the end of each plan year, beginning with
December 31, 2023 through the plan year immediately preceding the most recent
actuarial valuation, expressed both as a headcount and as a percentage of the average

number of participants in the experience study.

(4) A table showing a comparison of (i) the average ages and (ii) percentage of the
population, by the following monthly single life annuity brackets: under $100, between
$100 and $250, between $250 to $500, between $500 to $1,000, between $1,000 and
$1,500, and $1,500 and over, along with the average age and average benefit amount
for the population in total. This information should also be provided for the population in
the experience study and at the end of each plan year, beginning with the valuation date
for the first plan year that the certification is required, through the date immediately
preceding the most recent actuarial valuation at the time the information is reported.

(5) An explanation of any material changes in the population.

This information must be provided to David M. Ziegler, Manager, EP Actuarial Group 2 (or to
another individual designated by the Service) to the following address:

Internal Revenue Service
Attn: Mr. David M. Ziegler
Manager, EP Actuarial Group 2
TE/GE: SE:T:EP:RA:T:A2
IR-6213
1111 Constitution Ave. NW
Washington DC 20224-0002

Failure to provide this information by the due date may result in a requirement that the
standard mortality tables must be used for purposes of section 430 of the Code, beginning with
the earlier of (1) the plan year for which the deadline for providing this information is missed or
(2) the date required for early termination of the use of the substitute mortality tables pursuant

to section 1.430(h)(3)-2(c)(6)(ii) 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.

12

This ruling may be revoked or modified retroactively if there was a misstatement or omission of
controlling facts, the facts at the time of the transaction are materially different from the
controlling facts on which this ruling is based, or the transaction involves a continuing action or
series of actions, and the controlling facts change during the course of the transaction.

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.

Pursuant to a power of attorney on file with this office, a copy of this letter ruling is being sent
to your authorized representative. Additionally, a copy of this letter ruling is being sent to the
Manager, Classification Group 4 in Houston, Texas.

If you require further assistance in this matter, please contact ---------------- (ID Badge
Number ----------------) at (---) --------.

Sincerely,

David M. Ziegler, Manager
Employee Plans Actuarial Group 2

Enclosures
Notice 437, Notice of Intention to Disclose (Rulings)
A deleted copy of the ruling

cc: Manager, Classification Group 4, Houston, TX