Some corporate defined benefit plans would be better served by adopting industry-specific mortality assumptions rather than the new Society of Actuaries mortality tables, said a recent webcast from Mercer.
The new tables recently released by the SOA reflect an increase in life expectancy that could increase DB plan liabilities for corporate DB plans by as much as 5% to 10%, the webcast said.
The new tables “showed a significant improvement in longevity,” said Bruce Cadenhead, Mercer’s chief actuary for the U.S. retirement business, in a telephone interview. “People are living longer, their pensions are going be more expensive. The big jump in costs inspired us to take a careful look before simply accepting that it was all justified. Based on our client base, as well as prospects, we found there is quite a bit of variation (in longevity) in industries.”
“So we’ve done analysis based on the data of different industry groups, and so if it’s a good match for a particular plan, you could use one of the tables we’ve developed to calculate longevity rather than accepting the SOA table,” Mr. Cadenhead said.
The Mercer Industry Longevity Experience Study showed, for example, that the consumer goods and food and drink industries mortality rates are 9.5% higher than in the generic SOA tables, and therefore 2% less in liabilities than the generic SOA study. Auto, transportation and industrial goods showed a 7% higher mortality rate and thus 1.5% less in liabilities.
However, other industries create higher liabilities than the SOA’s generic tables. For example, health care and hospitals have 4.75% fewer deaths, and thus 1% higher liabilities than the generic SOA tables, and banking, finance and insurance have 3.25% fewer deaths with 0.75% higher liabilities.
The webcast presentation is available on Mercer’s website.
