January 11, 2017
On December 29, 2016, the Internal Revenue Service (IRS) proposed mortality table regulations that, if made final, would affect the funding of single employer defined benefit (DB) plans and the amount of lump-sum payments. The proposed mortality tables are based on the most recent mortality tables developed by the Society of Actuaries (RP-2014 mortality tables) and the set of mortality improvement projection factors (Scale MP-2016), which also was developed by the Society of Actuaries.
For most plans, the tables, if made final as proposed, will increase funding target liabilities and normal costs by several percentage points. The increase in funding resulting from the new tables will depend on the demographics of the plan population.
In addition, the proposed regulations overhaul the requirements for a single employer plan that wants to use mortality tables based on its own mortality experience. The proposed requirements for such tables are materially different from the current requirements, and include provisions that make it possible for a plan with fewer deaths than are currently required for a plan-specific table to use, at least to some extent, a plan-specific table.
After the IRS issues final mortality table regulations, it will issue separate guidance modifying the tables for plan determinations of the amount of lump sums and other accelerated forms of payment. New mortality tables are likely to result in higher payments under these forms.
The regulations are proposed to be applicable for plan years beginning on or after January 1, 2018. Comments on the proposed regulations are due by March 29, 2017. The IRS will hold a public hearing on April 13, 2017.