Pension plan may use substitute mortality tables for annuitants

Plain-English summary

A controlled group requested substitute mortality tables for several defined benefit plans. The IRS approved Plan TM's tables for male and female annuitants, including disabled participants, beginning with the 2019 plan year for a redacted number of years. Plan TM's male and female nonannuitants, Plan IF's male and female nonannuitants, and all participants in Plans T and P lacked credible mortality experience and must use the standard tables. Separate requests covering Plan IF's annuitants and all participants in Plan IO were reserved for other ruling letters. The IRS found only that the approved rates were developed under Treasury Regulation section 1.430(h)(3)-2 and Revenue Procedure 2017-55, and the approval can terminate early under the listed statutory and regulatory conditions.

Ruling snapshot

• Question: May Plan TM use substitute mortality tables for its male and female annuitants?
• Outcome: Approved beginning with the 2019 plan year for a redacted period; the identified noncredible populations must use standard tables.
• 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 and terms were redacted in the IRS release; wording is otherwise verbatim.

Significant Index No. 0430.00-00

DEPARTMENT OF THE TREASURY                                      201922041

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND

GOVERNMENT ENTITIES                                      MAR 07 2019

DIVISION

T:EP:RA:A2

Re: Substitute Mortality Table Ruling

Taxpayer =
EIN:

Plan for which substitute mortality tables are requested:

Plan TM =
EIN: (Plan No. )

Other Plans in controlled group:

Plan IF =

EIN: (Plan No. )
Plan IO =

EIN: (Plan No. )
Plan T =

EIN: (Plan No. )
Plan P =

EIN: , (Plan No. )

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 Plan TM
has been granted with respect to the populations specified in this letter, effective for a
period of   plan years beginning with the plan year commencing January 1, 2019.
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:

• Plan TM — Male annuitants, including disabled participants
• Plan TM — Female annuitants, including disabled participants

Based on the information provided by the Taxpayer, the following populations do not
have credible mortality experience, and therefore the standard mortality tables will be
used for calculations under section 430 of the Code:

Plan TM — Male nonannuitants
Plan TM — Female nonannuitants
Plan IF — Male nonannuitants
Plan IF — Female nonannuitants
Plan T — All participants

Plan P — All participants

The Taxpayer is also separately requesting approval for substitute mortality tables for
(1) the male annuitants and female annuitants for Plan IF; and (2) all participants for
Plan IO. These requests will be addressed in separate ruling letters.

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 Income Tax
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 tables
below for Plan TM:

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

Base year
Age  Male Annuitant  Female Annuitant

1
2
3
4
5
6
7
8


Age

Male

Annuitant

Female
Annuitant

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


Age

Male
Annuitant

Female
Annuitant

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


Age

Male
Annuitant

Female
Annuitant

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 determined by aggregating male and female experience of Plan TM, as
shown in the table below.

                                                     Mortality     Credibility
Population          Standard base mortality table    ratio         factor
Male Annuitants     Male Annuitant Mortality
Female Annuitants   Female Annuitant Mortality

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    -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.

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 (Form 2848) on file in this office and to the Manager, EP
Classification in Columbus, Ohio and to the Manager, EP Compliance Unit in Chicago,
Illinois.

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

Sincerely,

David M. Ziegler, Manager
Employee Plans Actuarial Group 2

cc.