Updated with clarification
Defined benefit plan sponsors got more than a year's heads up from the Internal Revenue Service on 2019 changes to the mortality tables that they use to determine plan funding liabilities and other calculations.
Updated mortality improvement rates and tables are used to calculate plan funding targets that determine contributions to pension funds and premiums paid to the Pension Benefit Guaranty Corp. The 2019 notice also modified the unisex version of the mortality tables that are used to determine minimum present value for lump-sum purposes.
The IRS notice 2018-02 published Dec. 15 is in dramatic contrast to the timing for the 2018 tables, which were just released Oct. 4, despite pleas from plan sponsors for more time. "It's great that they updated the tables so people know what to expect," said Lynn Dudley, senior vice president, global retirement and compensation policy for the American Benefits Council, in an interview.
IRS officials said going forward they intend to publish the mortality improvement rates at least 12 months in advance.
The slightly more conservative 2018 mortality tables, based on data from the Society of Actuaries, were estimated to cause funding liabilities to rise as much as 5%.
The 2019 tables reflect an additional year of mortality improvement in the SOA tables, but coupled with the SOA's less optimistic mortality improvement scale (MP-2017), produce slightly shorter life expectancies, which in turn should produce slightly lower liabilities and lump-sum valuations.