Pre-Retirement RPA Mortality

[ishi]

For RPA current liability purposes, is a no pre-retirement mortality assumption allowed? Stated differently, if a no pre-retirement mortality assumption is used for all other purposes, can it also be used for RPA current liability purposes?

Thanks,

Ishi

[david rigby]

Gray Book Q&A 95-1

Retirement Protection Act Funding -- Mortality Basis

The RPA requires the Secretary to prescribe a mortality table based on the “prevailing commissioners standard table” in IRC 807(d)(5)(A) (currently the 1983 GAM Table) for purposes of current liability calculations when determining the additional funding charge under IRC 412(l).

(a) Will the prescribed table be limited to the 1983 GAM Table or will some leeway be allowed; for example, will one be allowed to use a mortality table that is at least as conservative as 1983 GAM Table? Will rates be sex distinct or unisex and, in either case, how will they be derived?

(b) For some plans, actuaries have been assuming no mortality prior to retirement. Will they be able to continue to do this for current liability purposes, or must they include the required mortality table and explicitly value pre-retirement death benefits?

© If the actuary’s best estimate of the mortality of participants in the plan is not the 1983 GAM Table, may the 1983 GAM Table be used for regular 412(b) funding if the actuary believes that the added accuracy does not justify the additional valuation fees?

(d) When determining the current liability for an active employee, the actuary assumes rates of disability and values a separate disability benefit. Employees assumed to become disabled and entitled to the disability benefit are thereafter subject to a special disabled life mortality table. Will it be acceptable in 1995 to continue to use such disabled life mortality table? Can the table to be prescribed by the Secretary of Treasury be used after 1995?

RESPONSE:

(a) One specific version of the 1983 GAM Table will be required, without provision for using a more conservative table. When the decision has been made as to what the prescribed table is, including whether or not it is unisex, the IRS will issue detailed guidance.

(b) The mandated version of the 1983 GAM Table must be used whenever mortality is called for in the current liability calculation. If no preretirement mortality is used in the regular 412(b) funding valuation, that approach can be carried over into the current liability calculation.

© The actuary must be willing to certify that the mortality assumption used in the 412(b) funding valuation is “reasonable,” as defined in IRC 412©(3). If the actuary cannot make that certification with respect to the 1983 GAM Table, it cannot be used for 412(b) funding purposes.

(d) The same RPA rules apply to the use of disabled life mortality rates in calculating current liability for those who are already disabled and after assumed disablement for currently active participants.

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[ishi]

Thanks Pax!

The one place I didn't look ...