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Actuarial Tables for Same-Sex Spouses


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We need to calculate survivor benefits for a spouse, but we only have male/female, female/male mortality tables.  Do male/male and female/female tables exist that we can use?  Or is it okay to use the opposite-sex tables even for same-sex couples?  If we do the later, are there any special considerations (i.e. do we need to notify the parties or obtain consent)?

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3 minutes ago, HCE said:

We need to calculate survivor benefits for a spouse, but we only have male/female, female/male mortality tables.  Do male/male and female/female tables exist that we can use?  Or is it okay to use the opposite-sex tables even for same-sex couples?  If we do the later, are there any special considerations (i.e. do we need to notify the parties or obtain consent)?

ERISA plan?

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59 minutes ago, Mike Preston said:

ERISA plan?

In this case it's only sort of ERISA -- it's a top-hat, nonqual plan.  But we are anticipating a similar issue with the ERISA plan in the future, so if you have any thoughts on that, it would be helpful as well.  We're also more than willing to apply any ERISA rules to the top-hat plan as a best practice.

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Do male/male and female/female tables exist that we can use?  Yes - the actuary should be able to produce those for you.

Or is it okay to use the opposite-sex tables even for same-sex couples?  Non-ERISA - you can do what you want.  ERISA - Yes, as long as the table you use is not based on the gender of the participant.  IOW, you can treat all participants as "male" and all beneficiaries as "female".  Or you can treat them all as male, or all as female, or treat them all as 75% male and 25% female, but you can't specifically use male mortality for males and female mortality for females when determining the amount of their benefit.

If we do the later, are there any special considerations (i.e. do we need to notify the parties or obtain consent)?  I don't know of any special notices that are required, however an ERISA plan is required to provide the relative value of each of the optional forms of payment and disclose the assumptions used for that purpose.  

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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Curious as to what happens if you have participants who choose not to identify a gender - referring to themselves as "they" rather than he/she/whatever. We've seen a few of these in DC plans where the payouts have been lump-sum, so it hasn't mattered. These are ERISA plans. Can you just use a unisex table, etc.? What considerations are involved for the Plan Administrator to choose one table over another in such situations? I've never really thought about this issue until reading the above post. Thanks.

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The regulations under IRC 430 do provide sex-distinct mortality tables for funding purposes. However there is no guidance on how to apply them - how do you determine whether a participant is male or female? It's one of those questions that's easy to answer until it isn't. A reasonable approach (not supported by any authority that I know of, just my own speculation) might be to assume a 50% chance that the male table applies and a 50% chance that the female table applies. It just so happens that the unisex table, aka the 417(e) table, is just that - a 50/50 weighting of the male and female combined funding tables. So if you use the unisex table for funding, you are essentially saying that you don't know which table should apply to the participants and you have to assume equal probability that they might be male or female.

As mentioned, you always have to use unisex tables for benefits.

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  • 2 weeks later...

 

On 8/17/2021 at 8:58 PM, Effen said:

Non-ERISA - you can do what you want. 

Um, no.  The Norris decision applied to a non-ERISA plan.  It was made under Title VII and only tangentially refers to ERISA for support.

A nonqualified plan must use unisex tables for benefits purposes.  Note that this also carries over to determining the PV upon which to base FICA taxes.  Many actuaries/plan sponsors will say to use the FAS assumptions for this, but you need to change to mortality basis to unisex.  Otherwise, females will pay more in taxes on their NQ benefits than males, which would be a no-no.

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Thank you for the correction.

 

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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