<nobr>May 23, 2007</nobr>

Treasury, IRS Release Proposed Mortality Table Regulations

Treasury and the Internal Revenue Service (IRS) May 23 released proposed regulations, mortality tables, and rules governing the use of substitute mortality tables under Section 430 of the Internal Revenue Code, added by the Pension Protection Act. It specifies the minimum funding requirements and defines the minimum required contributions that apply to defined benefit plans. The mortality tables are based upon the RP-2000 Mortality Tables Report and would apply to plan years beginning on or after January 1, 2008.

The proposed rules base the mortality tables on expected mortality as of the year 2000 and would permit plan sponsors to apply projected mortality improvements in annually updated static tables, or by using generational tables. Under the proposed rule, large plans would be required to use separate base tables for annuitants and non-annuitants, while plans with fewer than 500 participants would be permitted to use a blended table. The rule also proposes guidance on the option of using substitute mortality tables with IRS approval. While the general PPA deadline for approval submissions is seven months prior to the beginning of a plan year, submissions prior to October 1, 2007, would be accommodated for plan years beginning in 2008.

To qualify a substitute mortality table, plan sponsors would be required to create a base table -- developed from a study of the mortality experience of the plan -- and identify a base year. The substitute mortality table would need to be based on credible mortality experience for a gender within a plan. This requirement would be satisfied if the mortality experience is based on at least 1,000 deaths within that gender over the period covered by the experience study. A plan sponsor would be permitted to develop separate mortality tables for separate populations within a gender, such as annuitants and non-annuitants, or hourly and salaried employees. In addition, the regulations specify that:

o To use a set of substitute mortality tables for two or more plans, the substitute mortality tables would need to be used for all such plans and based on data collected for all such plans;

o Sponsors using substitute tables would be required to use such tables for all controlled group plans, but plan sponsor would be permitted to exclude other plans for which there is not credible mortality experience for both the male and female populations; and

o Through the end of Section 410(b)(6)(C) coverage test transition period, the use of substitute mortality tables for existing plans would not be prohibited merely because a newly acquired plan does not use substitute mortality tables.

Websites:

Proposed Regulations

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