Mortality table for calculations. Which one?

[BG5150]

We've been using the 1984 UP life table in our calculations. (Well, in Relius)

Given that many times most of the people I'm testing weren't even born by 1984, should we be using a more recent table?

What you you guys use?

[Tom Poje]

well that all depends.
if it is a db-dc combo I think that table works out best.
if it is only dc, then in the process of calculating an e-bar, you divide each person by the APR, so if no one is past retirement (or is an oldie due to 65/5) then it doesn't really matter because at that point it is a constant.
if you impute disparity then 1983 IAF works best

years ago at some talk I did I ran the following as an example


Using UP 1984 Mortality table
was adds w/ disparity
HCE 3.214 .17 3.391
NHCE 2.732 .65 3.382
NHCE is not in the rate group


Using 1983 IAF mortality table
was adds w/ disparity
HCE 2.657 .17 2.834
NHCE 2.258 .65 2.908
In the rate group with room to spare!
of course, you could probably get by grouping accrual rates for UP 1984 but why bother.
.............................................................
Dang, this was the talk Otis Redding showed up and sang
"Sittin' in a 401(k)"

(I can't attach a 'mid' file, but if you download the file and delete the '.xls' extension the sound file should work and you can karaoke if you are so inclined)

Sittin’ in a lifestyle fund
I’ll be sittin’ when retirement comes
Automatic enrollment kicked in
The default investment’s a sin
I’m sittin in a 4-0-1 K
Watchin’ the funds roll away
Sittin’ in a 4-0-1 K
Wastin’ dimes

The fees they seem to gorge-ya
Nothin’ changed under P-P-A
The returns are really poor
Looks like nothin’ gonna come my way
I’m just sittin in a 4-0-1 K
Watchin’ the funds roll away
Sittin’ in a 4-0-1 K
Wastin’ dimes

Looks like nothin’s gonna change
Everything still remains the same
I don’t know just what the fund will do
The amount always remains the same

I’m sittin’ here resting my bones
There ain’t enough to take a loan
Two thousand lies on the phone
Just to make this investment my home
I’m just sittin in a 4-0-1 K
Watchin’ the funds roll away
Sittin’ in a 4-0-1 K
Wastin’ dimes

SITTING ON THE DOCK OF THE BAY.mid.xls

[John Feldt ERPA CPC QPA]

1.401(a)(4)-12 defines your options for testing under "Standard interest rate" and "Standard mortality table".

Sometimes A) 8.5% with GAM71 Male gets you the results you want in a CB/DC combo, other times B) you're better off using 7.5% post IAM83 Female.

If you are trying to get the largest offset value off of the cash balance plan accounts, then (B) above will give you larger PVABs for that offset. Using 7.5% for the pre-retirement testing assumption may even lower this further, but it could cause the rate groups to fail, so watch out for that.

However, if your HCEs are a lot younger than your HCEs or your HCE benefit targets are not huge, you may be able to lower your minimum gateway from the 7.5% to 7% or 6% or even 5% by using the 8.5% GAM71 Male as your testing assumption.

If you are designing a new cash balance plan, the choice of the interest rate and the actuarial equivalence definition will also have an impact.

[Tom Poje]

the reason this works:

the APRs are at the extreme end of things.

for example UP 84 at 8.5% age 65 APR is 95.38

1983 IAF at 7.5% age 65 APR is 122.64

again, part of the formula to determine an E-Bar is to divide by the APR, and if everyone has the same retirement age it is a constant so unless you impute disparity it really shouldn't matter which mortality you use.