IRS Issues Proposed Rule on Plan-Specific Substitute Mortality Tables for Determining Present Value; Comments Due December 19

The Department of the Treasury and the Internal Revenue Service (IRS) issued a proposed rule that would update the requirements that a plan sponsor of a single-employer defined benefit plan must meet to obtain IRS approval to use mortality tables specific to the plan in calculating present value for minimum funding purposes (as a substitute for the generally applicable mortality tables).

These regulations would affect participants in, beneficiaries of, employers maintaining, and administrators of certain retirement plans.

These proposed regulations would:

• generally retain the methodology for development of substitute mortality tables included in the 2017 substitute mortality table regulations but provide additional rules regarding the use of mortality experience data for the COVID-19 pandemic period.
• In order to develop a mortality ratio that is more accurately predictive of future mortality experience for a plan population, these proposed regulations would provide that the expected deaths for the plan population used in determining the denominator in the mortality ratio are calculated by adjusting the mortality rates in the generally applicable mortality tables.
• Specifically, the proposed regulations would provide that, for each 12-month period that is included in the experience study period and that begins after 2019 and before 2024, the expected mortality rate for an individual is determined by multiplying the expected mortality rate for that individual from the standard mortality tables by an adjustment factor. The adjustment factor for each of these years would approximate the ratio (as reported by the National Center for Health Statistics) of (1) the actual number of deaths for the general population for the year to (2) the expected number of deaths for the general population for that year.

The proposed regulations would apply for plan years beginning on or after January 1, 2025.

Comments are requested by December 19, 2023.