By Pension and Benefits Editorial Staff
The IRS has provided the updated mortality improvement rates and static mortality tables to be used under Code Sec. 430(h)(3)(A). These rates are used to calculate the funding target and other items for valuation dates occurring during calendar year 2020. Also included are modified “unisex” mortality tables for use in determining minimum present value under Code Sec. 417(e)(3) for distributions with annuity starting dates that occur during stability periods beginning in calendar year 2020.
Mortality improvement rates. The IRS explains that IRS Reg. §1.430(h)(3)-1 provides the rules for mortality tables used under Code Sec. 430(h)(3)(A) for plan years beginning on or after January 1, 2018. The mortality tables used under Code Sec. 430(h)(3)(A) are based on the tables in the RP-2014 Mortality Tables Report, adjusted for mortality improvement.
The mortality improvement rates for valuation dates occurring during 2020 are the mortality improvement rates in the Mortality Improvement Scale MP-2018 Report (issued by the Retirement Plans Experience Committee (RPEC) of the Society of Actuaries and available at https://www.soa.org/Files/resources/experience-studies/2018/mortality-improvement-scale-mp-2018.pdf).
Multiemployer plans. The same mortality assumptions that apply for purposes of Code Sec. 430(h)(3)(A) and IRS Reg. §1.430(h)(3)-1(a)(2) are used to determine a multiemployer plan’s current liability for purposes of applying the full-funding rules of Code Sec. 431(c)(6). For this purpose, a multiemployer plan is permitted to apply either the annually adjusted static mortality tables or generational mortality tables.
Cooperative and small employer charity plans. The IRS notes that, under Code Sec. 433(h)(3)(B)(i), regulations may be issued to prescribe mortality tables for cooperative and small employer charity (CSEC) plans to be used in determining current liability for purposes of Code Sec. 433(c)(7)(C). IRS Reg. Sec. 1.433(h)(3)-1(a) provides that the mortality tables described in Code Sec. 430(h)(3)(A) are to be used to determine current liability under Code Sec. 433(c)(7)(C).
Comments requested. The IRS is requesting comments on a couple of issues pertaining to mortality rates. In the Mortality Improvement Scale MP-2018 Report, RPEC discusses an alternative model for developing mortality improvement rates from historical U.S. population mortality rates. The alternative model is identical to the current model except that a different approach is used to graduate (that is, smooth) the historical mortality rates, according to the IRS. The IRS requests comments about whether or not to use this alternative model to determine the mortality improvement rates that apply under Code Sec. 430(h)(3)(A) for future years.
In addition, the IRS stated in the preamble to IRS Reg. §1.430(h)(3)-1 that the mortality improvement rates used under IRS Reg. §1.430(h)(3)-1 may not be updated for a year if changes to the mortality improvement rates for the year would be minimal. Comments are requested about whether future updates to the mortality improvement rates used under IRS Reg. §1.430(h)(3)-1 should be delayed until the cumulative changes to expected mortality improvement rates reach a particular magnitude.
SOURCE IRS Notice 2019-26.
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