david rigby Posted October 3, 2017 Share Posted October 3, 2017 https://www.irs.gov/pub/irs-drop/n-17-60.pdf I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice. Link to comment Share on other sites More sharing options...
tuni88 Posted October 3, 2017 Share Posted October 3, 2017 Other than the actual rates of mortality, is there anything different about 2018 compared to 2017? Link to comment Share on other sites More sharing options...
My 2 cents Posted October 3, 2017 Share Posted October 3, 2017 5 minutes ago, tuni88 said: Other than the actual rates of mortality, is there anything different about 2018 compared to 2017? Pretty much no - even though based on a totally different mortality study (and projection scale) than the tables underlying the mandated rates during the past few years, static tables (provided by the IRS in their regulations) are still allowed for funding and required for lump sum calculations under 417(e). And adding static tables to one's software/spreadsheets is not hard. Those who do their own programming may well be glad that there is no requirement (except from the accountants!) for dynamically projected tables (the way of the future, which are supported by most reasonably sophisticated vendor systems anyway). Always check with your actuary first! Link to comment Share on other sites More sharing options...
Grant Posted October 5, 2017 Share Posted October 5, 2017 Do the new rates apply to 2018 funding or not? confused Link to comment Share on other sites More sharing options...
My 2 cents Posted October 5, 2017 Share Posted October 5, 2017 The IRS earlier provided a proposal for new rates to be used beginning in 2018 (based on the Society of Actuaries RP-2014 base table, with mortality improvements for the period 2006-2014 backed out and with projected improvements using MP-2016 applied from 2006 forward). I suspect that those are being treated as final (to the extent that this latest pronouncement identifies itself as final regs). The earlier release permitted the use of a static table for Section 430 purposes. I am a bit unclear when one would be concerned with using 2018 mortality for a plan year beginning in 2017 (part of this release), but then we don't use valuation dates other than the first day of the plan year. Plan year changes for plans under 100 participants? They haven't granted automatic approval for that yet, have they? Calculation of Section 436 contributions to allow amendments to become effective? Other situations? Always check with your actuary first! Link to comment Share on other sites More sharing options...
Grant Posted October 5, 2017 Share Posted October 5, 2017 This was in Plan Sponsor article today: (I don't see where the Notice or Regs say there is an option for a one year delay?) In a statement, the ERISA Industry Committee (ERIC) said it is pleased the Treasury Department took into account a number of the requested changes listed in its comment letters, including flexibility for DB plan sponsors to potentially delay, for one year, using the new mortality tables to satisfy minimum funding standards. Link to comment Share on other sites More sharing options...
My 2 cents Posted October 5, 2017 Share Posted October 5, 2017 I checked the link to ERIC and did not notice anything about a one-year delay. With the possible exception of plans not using first-day-of-the-plan-year valuation dates, I did not notice anything in the new IRS regs allowing a one-year delay in going to the revised mortality rates for minimum funding. I think that all plans permitting lump sums must go to the new mortality rates for any stability periods beginning on or after 1/1/18. Am I missing something here? As I said above, it is not a technical challenge to update one's systems to be able to apply the new static tables. Always check with your actuary first! Link to comment Share on other sites More sharing options...
Calavera Posted October 5, 2017 Share Posted October 5, 2017 1.430(h)(3)-1(f)(2) (2) Option to apply prior regulations in certain circumstances. For a plan for which substitute mortality tables are not used pursuant to § 1.430(h)(3)-2 for a plan year beginning during 2018, mortality tables determined in accordance with § 1.430(h)(3)-1 as in effect on December 31, 2017 (as contained in 26 CFR part 1 revised April 1, 2017) may be used for purposes of applying the rules of section 430 for a valuation date occurring during 2018 if the plan sponsor— (i) Concludes that the use of mortality tables determined in accordance with this section for the plan year would be administratively impracticable or would result in an adverse business impact that is greater than de minimis; and (ii) Informs the actuary of the intent to apply the option under this paragraph (f)(2). Grant 1 Link to comment Share on other sites More sharing options...
SoCalActuary Posted October 5, 2017 Share Posted October 5, 2017 I would guess that "de minimus" means that the old tables do not trigger aftap boundaries at 60 or 80 percent, but the new tables would. Just speculation..... Link to comment Share on other sites More sharing options...
Grant Posted October 5, 2017 Share Posted October 5, 2017 Thanks, i would prefer not to have an option! Link to comment Share on other sites More sharing options...
My 2 cents Posted October 5, 2017 Share Posted October 5, 2017 Really? Really? And it's being left to the plan sponsor, who merely has to notify the enrolled actuary, with the determination of "de minimis" being made by the plan sponsor? For those plans permitting lump sum distributions, does this option also allow one to estimate the expected amount payable as lump sums at future dates using the 2017 Section 417(e) mortality or would one estimate the potential lump sums using the new 2018 417(e) mortality but discount those potential lump sums using the 2017 sex-distinct Section 430 mortality rates? Previously, the only difference between assumed payouts as annuities and as lump sums (thanks to the annuity substitution rule) was to substitute unisex mortality to value the potential lump sum instead of the sex-distinct Section 430 mortality rates. Does one need to recognize the extra value (relative to the value of an annuity) resulting from the new 417(e) table versus the old? And will that put pressure on enrolled actuaries to reflect that in their choice of utilization percentage (and, hint, a higher lump sum value is not going to reduce the percentage of people expected to elect lump sums)? Always check with your actuary first! Link to comment Share on other sites More sharing options...
david rigby Posted October 17, 2017 Author Share Posted October 17, 2017 Has anyone given more thought to this possible one-year delay? What do you think of the de minimis concept? (It looks a bit too easy, so perhaps I'm missing something.) I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice. Link to comment Share on other sites More sharing options...
My 2 cents Posted October 17, 2017 Share Posted October 17, 2017 27 minutes ago, david rigby said: Has anyone given more thought to this possible one-year delay? What do you think of the de minimis concept? (It looks a bit too easy, so perhaps I'm missing something.) Just some speculation and thoughts here: 1. No guidance has been offered on what de minimis is to mean in this context. So if you were a sponsor, and had the choice between contributing $40,000 this year but could choose to defer the use of the new tables to next year and could then pay only $39,000, wouldn't you want to be able to say that the difference is not de minimis? 2. Don't forget that all actual lump sums must be based on the new tables whatever is to be used for minimum funding. 3. Speaking of which, if you are assuming that 80% of the participants are electing lump sums, do you apply the annuity substitution rule using the 2018 extension of the 2017 417(e) mortality rates or the actual 2018 417(e) mortality rates? Previously, the only difference was unisex versus sex distinct. 4. If the sponsor does make the election, the actuary must use the 2017 table projected forwards another year as in the past, not the very same rates as were used in 2017, right? 5. And there is still the PBGC to be heard from, right? I would be surprised if they would let sponsors use anything but the actual 2018 mortality tables for premium calculation purposes, whether the filing method was the standard or the alternative method (i.e., base the premium on non-relief liability calculations based on the 2018 tables, not on 2017 tables extended into 2018). Always check with your actuary first! Link to comment Share on other sites More sharing options...
drakecohen Posted November 15, 2017 Share Posted November 15, 2017 Has anyone used the 2018 factors yet to get an AMT18 table. No AMT18 table yet on this website that I use for cross-checking: https://www.pensionbenefits.com/calculators/cal_main.jsp?sub_item=ppa06_lumpsum_cal When I go to input the Qx factors the 2018 ones now start at age 0 instead of age 1 (2017 and 2018 factors attached). Are the ages 0 and 1 in the 2018 listing supposed to be added together? qx-2018.pdf qx-2017.pdf Link to comment Share on other sites More sharing options...
david rigby Posted November 15, 2017 Author Share Posted November 15, 2017 The SOA recently created this website. https://afc.soa.org/ (Sorry, I haven't used it yet.) I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice. Link to comment Share on other sites More sharing options...
Mike Preston Posted November 15, 2017 Share Posted November 15, 2017 soa site doesn't do segment rates so is of little value. JB, do you really have a need for q0 or q1? Link to comment Share on other sites More sharing options...
drakecohen Posted November 20, 2017 Share Posted November 20, 2017 The PPA 2006 Lump Sum Calculator website just added AMT18 and I got their annuity value when ignoring the IRS q0 number. In the past I developed the lx factors from the qx starting with q1. I wonder what the q0 is and how it would apply. Comparing AMT18 to AMT17 based on the 10/17 segment rates it came out to a 3.9% hike. Link to comment Share on other sites More sharing options...
Effen Posted November 20, 2017 Share Posted November 20, 2017 The impact of the new mortality varies by age. Less at older ages, more at younger ages. I was seeing about 3.7% @65 and 4.7% at 25. (using 2.05, 3.61, 4.27) 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. Link to comment Share on other sites More sharing options...
dmb Posted January 19, 2018 Share Posted January 19, 2018 Quote On 10/5/2017 at 3:08 PM, My 2 cents said: For those plans permitting lump sum distributions, does this option also allow one to estimate the expected amount payable as lump sums at future dates using the 2017 Section 417(e) mortality or would one estimate the potential lump sums using the new 2018 417(e) mortality but discount those potential lump sums using the 2017 sex-distinct Section 430 mortality rates? Previously, the only difference between assumed payouts as annuities and as lump sums (thanks to the annuity substitution rule) was to substitute unisex mortality to value the potential lump sum instead of the sex-distinct Section 430 mortality rates. Does one need to recognize the extra value (relative to the value of an annuity) resulting from the new 417(e) table versus the old? And will that put pressure on enrolled actuaries to reflect that in their choice of utilization percentage (and, hint, a higher lump sum value is not going to reduce the percentage of people expected to elect lump sums)? On 10/17/2017 at 3:33 PM, My 2 cents said: Speaking of which, if you are assuming that 80% of the participants are electing lump sums, do you apply the annuity substitution rule using the 2018 extension of the 2017 417(e) mortality rates or the actual 2018 417(e) mortality rates? Previously, the only difference was unisex versus sex distinct. Has anyone heard or read anything further on above questions regarding mortality table assumption for funding for a plan with lump sum option if employer delays use of new mortality tables? Thanks. Link to comment Share on other sites More sharing options...
John314 Posted March 2, 2018 Share Posted March 2, 2018 From Rev Notice 2017-60 The mortality table that applies under § 417(e)(3) for distributions with annuity starting dates occurring during stability periods beginning in 2018 is set forth in Appendix B of this Notice. The mortality rates in this table are derived from the mortality tables specified under § 430(h)(3)(A) for the 2018 plan year (which are set forth in § 1.430(h)(3)-1(e)) by following the procedures set forth in Rev. Rul. 2007-67. This mortality table applies to a plan for 2018 (including for purposes of § 1.430(d)-1(f)(4)(iii)(B)) regardless of whether the option under § 1.430(h)(3)-1(f)(2) is used for the plan. Link to comment Share on other sites More sharing options...
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