PBGC Mortality Assumptions - Definition of

[AndyH]

Non-ERISA DB plan pays lump sums which are based upon the "PBGC Interest Rate" and the "PBGC Mortality Assumptions"

The Plan document defines the latter as:

“PBGC Mortality Assumptions” means the mortality assumptions used by the PBGC in valuing immediate annuities of a terminating single employer plan.

This is interpreted as UP84+1. Is this correct in 2007? Opinions please. Thanks.

[Mike Preston]

Non-ERISA DB plan pays lump sums which are based upon the "PBGC Interest Rate" and the "PBGC Mortality Assumptions"

The Plan document defines the latter as:

"PBGC Mortality Assumptions" means the mortality assumptions used by the PBGC in valuing immediate annuities of a terminating single employer plan.

This is interpreted as UP84+1. Is this correct in 2007? Opinions please. Thanks.

Not even close. Yes.

No doubt you are talking about a plan that hasn't been amended for a while. Or two whiles.

No way would I interpret the plan as providing for a mutating mortality definition in the absence of clear proof that they were intended to have it morph. And, since I'm a betting man, that means I'm willing to bet dollars to donuts (not nearly as big a spread as when I was in college, but I digress) you won't find any.

Now, fact is, you got yourself a real live am-bye-gue-it-eee. That means it is time for somebody, and by somebody I mean the plan administrator, to make a decision as to what was intended.

But I would be shocked. SHOCKED< I tell you! <smile> if the plan administrator intended a change.

[AndyH]

Thanks. Had to re-read that a few times. You say no "indexing" of the mortality table based upon the whims of the "mother ship" without clear client assent. So UP84+1 still rules. Right?

[Mike Preston]

It is more than just indexing, isn't it? It is a whole new table. If you go down the route of saying that the plan is not ambiguous, and therefore strip the decision from the plan administrator, then there should be some consistency of approach, yes? So, what is the interest rate of which you speak? Is it the same interest rates in use for lo these many years and currently hovering between 3% and 4%? In which case, my answer would be a resounding yes. Or is it the rates which are intended to be combined with an entirely different mortality table? In which case, I will be forced to admit that you should not use UP-84+1. But since I find it hard to believe that you would have asked this question if the interest rate was something other than the tiered rates, I'll wager (but not too much) as to the result. Will I lose?

[AndyH]

You win. The series of tiered rates are still used, so your argument is persuasively logical.

Oddly enough, reading through some the the PBGC proposed regulation "background", there would seem to be many plans that still use the old PBGC rates.

Thanks for your help.