An updated mortality improvement scale released Thursday by the Society of Actuaries suggests a slower average rate of improvement that could translate into a slight decrease in pension plan obligations. The scale is used by pension plan officials to project mortality assumptions when valuing pension payment obligations.
The new annual scale also incorporates three additional years of Social Security Administration data on U.S. population mortality from 2012 to 2014.
The slower average rate of improvement may decrease plans' current liabilities by 1.5% to 2%, depending on plan specifics, SOA estimates. The slower rate also indicates a slight decline in life expectancy, with that for a 65-year-old male declining to 85.8 years from 86.2 years under the 2015 scale, and for a 65-year-old female declining to 87.8 years, down from 88.2 years.
“The updated scale provides the latest information to help accurately measure pension obligations. However, it is up to pension plan sponsors, working with their plan actuaries, to determine how to incorporate emerging mortality improvement data into their plan valuations,” Dale Hall, managing director of research at the Society of Actuaries, said in a statement.