Permission Granted to Use Substitute Mortality Tables

Significant Index No.: 0430.00-00

Date: October 30, 2019

Refer Reply To: T:EP:RA:A2

Re: Substitute Mortality Table Ruling

LEGEND:

Taxpayer = * * *
Plan 1 = * * *
Plan 2 = * * *

Dear * * *:

This letter is to inform you that your request to use substitute mortality tables for making computations under section 430 of the Internal Revenue Code (the “Code”) for Plan 1 and Plan 2 has been granted with respect to the populations specified in this letter. This ruling is effective for a period of * * * plan years beginning with the plan year commencing January 1, 20* * *. Your request has been granted in accordance with section 430(h)(3) of the Code and section 303(h)(3) of the Employee Retirement Income Security Act of 1974.

This approval applies to the following specific populations:

• Aggregated Plan 1 and Plan 2 male annuitants, excluding disabled participants

• Aggregated Plan 1 and Plan 2 female annuitants, excluding disabled participants

In granting this approval, we have only considered whether the substitute mortality rates were developed in accordance with section 1.430(h)(3)-2 of the Income Tax Regulations (“Regulations”) and Revenue Procedure 2017-55. Accordingly, we are not expressing any opinion as to the accuracy or acceptability of any calculations or other material submitted with your request.

Permission is hereby granted to use the substitute mortality rates shown in the table below for Plan 1 and Plan 2:

Substitute Mortality Tables
Approved for use beginning with the plan year commencing January 1, * * *
Base year * * *

The above rates were developed based on an experience study period from January 1, * * * through December 31, * * * with a base year of * * *. The rates were calculated by adjusting the applicable standard mortality tables in section 1.430(h)(3)-1(d) of the Regulations, using the mortality ratio and credibility weighting factor determined by aggregating Plan 1 and Plan 2 experience, but separate male and female experience, as shown in the table on the next page.

The Internal Revenue Service has reviewed the substitute mortality rates and supporting information, and has determined that based on the information submitted, the rates were developed in accordance with section 1.430(h)(3)-2 of the Regulations and Revenue Procedure 2017-55.

The above rates must be applied on a generational basis, as provided in section 1.430(h)(3)-2(c)(3) of the Regulations.

Your attention is called to section 430(h)(3)(C)(ii) of the Code and section 1.430(h)(3)-2(c)(6) of the Regulations, which describe the circumstances in which the use of the substitute mortality table will terminate before the end of the 10-year period described above. In general, the substitute mortality tables can no longer be used as of the earliest of:

We draw your attention to the fact that the male nonannuitants experienced. * * * deaths during the experience study period (using the simplified rule described in section 1.430(h)(3)-2(c)(2)(ii)(B) of the Regulations). Note that this population will have credible mortality experience if it experiences at least * * * deaths during a * * * year period (corresponding to the length of the experience study used to construct the substitute mortality tables for the other populations). It is important to monitor this population to ensure that appropriate action is taken should this occur, to avoid violating paragraph (2) above.

Also note that section 1.430(h)(3)-2(c)(6)(iii) provides that the use of substitute mortality tables must be discontinued after a significant change in coverage unless the plan's actuary certifies in writing to the satisfaction of the Commissioner that the substitute mortality tables used for the population continue to be accurately predictive of future mortality of the population (taking into account the effect of the change in the population). For this purpose, a significant change in coverage occurs if the number of individuals covered by the substitute mortality table for a plan year is less than percent or more than * * * percent of either (1) the average number of individuals in that population over the years covered by the experience study on which the substitute mortality table is based, or (2) the number of individuals covered by the substitute mortality table in a plan year for which a certification described in section 1.430(h)(3)-2(6)(c)(iii)(A) of the Regulations was made.

This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited by others as precedent.

When filing Form 5500 for the plan years for which the substitute mortality tables are used, please note the information that is required to be attached to Schedule SB (Actuarial Information) in accordance with the instructions to that form.

We have sent a copy of this letter to your authorized representatives pursuant to a power of attorney on file in this office and to the Manager, EP Classification in Columbus, Ohio and to the Manager, EP Compliance Unit in Chicago, Illinois.

If you require further assistance in this matter, please contact * * * (ID # * * *) at * * *.

Sincerely,

David M. Ziegler, Manager
Employee Plans Actuarial Group 2

cc:
* * *