IRS Unveils Mortality Tables for 2016 Pension Funding

Stewart Lawrence, national retirement practice leader for Sibson Consulting, notes sponsors of private pension plans in the U.S. “now have clarity that the IRS will not change the mortality basis used to calculate the 2016 funding requirement, nor [the assumptions] for minimum lump sum amounts that may be paid to participants in lieu of an annual annuity.”

This clarity comes after the Internal Revenue Service (IRS) published Notice 2015-53, which contains in full the updated static mortality tables for use in important defined benefit (DB) pension plan calculations for 2016.

The IRS notice provides mortality assumptions “to be used for defined benefit pension plans under Section 430(h)(3)(A) of the Internal Revenue Code [IRC] and Section 303(h)(3)(A) of the Employee Retirement Income Security Act of 1974, Pub. L. No. 93-406, as amended (ERISA). These updated tables, which are being issued using the methodology in the existing final regulations under Section 430(h)(3)(A), apply for purposes of calculating the funding target and other items for valuation dates occurring during calendar year 2016.”

This notice also includes a modified unisex version of the mortality tables for use in determining minimum present value under Section 417(e)(3) of the IRC and Section 205(g)(3) of ERISA for distributions with annuity starting dates that occur during stability periods beginning in the 2016 calendar year.

“This allows plan sponsors to move ahead in crystallizing their funding and de-risking strategies on a basis similar to the current environment,” Lawrence adds.

Analysis of the impact of updated mortality numbers on DB plan sponsors and providers is here.