IRS releases new mortality tables for plan sponsors

The IRS issued updated mortality tables on Wednesday that plan sponsors will have to study quickly before they go into effect for plan years starting Jan. 1, 2018.

The guidance, expected to be published in the Federal Register on Thursday, also updates mortality tables used to determine minimum lump sums, which could become more expensive for plan sponsors.

Officials from the Committee on Investment of Employee Benefit Assets and the American Benefits Council had urged the Office of Management and Budget to delay the rules and do more analysis of the economic impact of the updates, which they warned could lead to significant increases in both plan liabilities and volatility.

The ERISA Industry Committee did appreciate several IRS changes the group had suggested, including allowing a potential one-year delay for plan sponsors for purposes of satisfying minimum funding standards. Will Hansen, ERIC's senior vice president of retirement and compensation policy, said his group with continue to advocate for ways to lessen the burden and cost of compliance.

A Society of Actuaries report released in April projected that updated mortality tables will increase pension liabilities and reduce plans' funded status in the short term. Minimum required contributions will increase 11%, it said. For estimated aggregate funding targets in 2018, liabilities would increase 2.9%, or $65 billion, and the aggregate funded status would drop 1 percentage point to 96%, as calculated by the SOA. Premiums paid to the Pension Benefit Guaranty Corp., which are based on plan funding levels, would increase 12% to $9.6 billion, the SOA projects.

"The biggest issue is, it's going to increase PBGC premiums," noted Greg Reardon, Cheiron principal consulting actuary, who said that further guidance is needed on how plan sponsors can qualify for the one-year delay.