October 10, 2017

Treasury’s Final Pension Mortality Regulations Are Effective for 2018 Lump-Sum Payments

On October 3, 2017, the Department of the Treasury and the Internal Revenue Service issued final regulations, and a related Notice (Notice 2017-60), adopting new mortality tables, generally effective for 2018 plan years. Multiemployer defined benefit plans must use these tables for purposes of determining the amount of lump-sum payments and also for current liability disclosure and the full-funding limit. The final mortality tables and improvement scales are identical to the tables in the proposed regulations issued December 29, 2016 (see Segal’s January 11, 2017 hot topic). As discussed in more detail below, while the new mortality tables are generally applicable for plan years beginning on or after January 1, 2018, some plans with off-calendar years will have to apply the new tables as of January 1, 2018, with regard to lump-sum calculations.

Lump Sums

Pursuant to Notice 2017-60, for purposes of present value calculations under Section 417(e) of the Internal Revenue Code (IRC), the new mortality tables apply for annuity starting dates occurring in “stability periods” beginning in calendar year 2018. The stability period is the period for which the IRC §417(e) “lookback” interest rate applies, and can be one calendar month, one plan or calendar quarter, or one plan or calendar year. Under the lump-sum effective date rule, for a plan with a July 1–June 30 plan year and a calendar-year stability period, the new mortality tables are effective with the January 1, 2018 stability period.

Current Liability Disclosure and Full-Funding Limit

Multiemployer plans must use the new tables for plan years beginning on or after January 1, 2018 to determine the plan’s currently liability for disclosure purposes and its full-funding limit.

Technical Note

The new tables are the RP-2014 mortality tables. They are derived based on no collar distinction using base rates as of 2006, projected forward using the MP-2016 improvement scale.

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Stuart Sirkin

Stuart Sirkin

VP, National Retirement Compliance Deputy Practice Leader

Eli Greenblum

Eli Greenblum

SVP, Chief Actuary