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IR Notice 2015-53 (2016 Mortality Tables)


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Had an eagle-eyed client bring this to my attention, which was issued today.

http://www.irs.gov/pub/irs-drop/n-15-53.pdf

which IRS issued in IRS GuideWire dated today (inexplicably the 7/31/2015 IRS Employee Plan News doesn't have this in the issue).

Entered 417 rates for 2016 and just ran and looks like fairly trivial impact. From cursory reading of 2015-53, looks like punting the generational tables (and presumably big impact on liabilities) to 2017 (post-election).

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If your software just bumps up the table each year by another year's projection of RP-2000 using Scale AA, there should be no difference between the static tables for 2016 and those shown in the IRS notice. Just another year of more of the same.

The current rules allow use of Scale AA to produce a fully generational table. It is likely that if the IRS decides to go to the SOA RP-2014 basis effective in 2017, whether they will require fully generational application of the new mortality improvement scale or permit the use of static tables reflecting the new scale on a more limited basis, they are likely to use the new scale in some fashion.

Time having gotten so short, it appears that the IRS has deferred any material changes to the mortality status quo to 2017. Whatever they do, material changes will require them to offer a comment period.

Don't know about you, but some accountants are already requiring use of the SOA tables with generational projection, so at the very least, prepare your systems to handle them soon if they cannot already. Just don't have to have them in place for minimum funding or 417(e) purposes just yet.

It would not surprise me at this point if the IRS decides to allow static tables each year and (for minimum funding but not 417(e)) permit but not require the use of fully generational tables. Static tables may be preferable for 417(e) purposes.

Always check with your actuary first!

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Good morning. It's Sunday morning venting time:

It's times like these that I'm pleased I've decided to hank up my spikes. A DB plan terminated 12/31/2014 and distributions will be made this month. The auditor DEMANDED that the FAS35 accrued benefit reporting values in their audit report reflect the RP-2014 mortality table, though they had no idea what that meant. They said the DOL mandated it (did the DOL tell this to anyone but the accounting firm?).

I pointed out:

ASC960 provides, "The primary objective of a plan's financial statements is to provide information that is useful in assessing the plan's present and future ability to pay benefits when they are due." The Plan was terminated as of 12/31/2014 and the termination was adopted long before the plan year end. This is a material event.

The understanding was at that time that the benefits would be distributed in August 2015. Virtually all benefits are being distributed in a lump sum. Such lump sums are by law based upon the 2015 Applicable Mortality Table as published under IRS Notice 2013-49.

Using these tables (which is what FASB calculations did) best represents the Plan's future liabilities and thus, using the RP2014 tables would overstate such liabilities. It would appear this is a valid reason not to use these tables.

The auditor backed off but somewhat patted himself on the back and said they had to go to their national office to obtain an exception.

The Plan had been using the Applicable Mortality Table to determine FAS35 stuff. I have plans that are audited by the same firm (different auditor) who use older standardized tables and nary a peep.

Does anyone know if the FAS35 values are ever used by anyone for any purpose other than they are required?

The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.

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I agree that the use of the SOA tables, however much the accounting profession may prefer their use, makes no sense in your situation.

If the national office comes back with a demand that you use the SOA tables for their 12/31/14 accounting, tell your client that you think that they are mistaken but that you are going to use whatever your client instructs you to use. You have spoken up and (if you are in fact putting yourself out to pasture) have little stomach for battling over such things, so if your client does not want to argue the point, just use what the accountants (with the backing of their national office) specify for the purpose. At worst, when the settlement is reflected in 2015, there will be a gain because the lump sums will be less than the liability measured as of 12/31/14.

I cannot say to what use FAS35 (aka ASC960) values are put besides those for which they are intended, but I can say that if the DOL has issued any guidance concerning the use of the SOA tables, I have not heard about it. Does the DOL have jurisdiction over such things as ASC960, beyond a keen interest that they be done right?

Always check with your actuary first!

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Re: DOL. I believe the auditor was simply shoveling a pile of bovine excrement to support his position without understanding that I was born toilet trained and analyze one-car funerals!

The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.

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We had several auditors requested using the RP 2014 mortality for 1/1/2014 liability measurement based on the following:

http://www.aicpa.org/InterestAreas/FRC/DownloadableDocuments/TQA_Sections/TQA_Section_3700_01.pdf

Reason: by the time the information is presented (i.e. time of the Form 5500 filing), the new mortality should be used for the accounting purposes.

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Then, presumably the auditors would have no reluctance to point you toward the table (tables) that should be used? :)

The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.

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Then, presumably the auditors would have no reluctance to point you toward the table (tables) that should be used? :)

This is easy. Any modifications of the fully generational RP14/MP14 require (per auditors) you to prove that this is the best of the best. Somehow the fully generational RP14/MP14 is the best of the best without any proof needed. :)

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Then, presumably the auditors would have no reluctance to point you toward the table (tables) that should be used? :)

This is easy. Any modifications of the fully generational RP14/MP14 require (per auditors) you to prove that this is the best of the best. Somehow the fully generational RP14/MP14 is the best of the best without any proof needed. :)

If the calculations are for purposes of meeting accounting requirements under either ASC-715 or ASC-960, isn't it the sponsor who has the primary responsibility for selecting the mortality assumption (presumably to be carried out in a way that is acceptable to the accountants)? That selection for such purposes is not the ultimate responsibility of the plan's actuary?

Always check with your actuary first!

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There are two selections. The formal selection is by the plan sponsor who must obtain the blessing of the auditor. The informal selection is by the plan actuary to whom the buck has been passed. I accept the buck but always caveat my transmission so that the buck ain't worth a dime.

The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.

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