Actuarial/Mortality Table and cross testing.

[Chippy]

I have always used the Up-84 mortality table when doing cross testing on a New Comp Plan.  My plan is failing the average benefits test slightly (69.89%)  I noticed in the administrative system that I use, there is a table called 2017 417 (e) (3).    If I use that table the Average Benefits test will pass at 70.20%.    The plan document does not state which table to use, so, Is it ok to use this table when running the test?   

[Mike Preston]

Yes, for a 2017 test.  Some may argue that it could be used for any year.  I haven't looked at that issue in a long time so maybe somebody else has the time to look that up.

[Tom Poje]

 

the boring Math details

consider the following. the first uses UP 1984, fails

the second uses 1983 IAF passes (NHCE e bar is greater than the HCE E BAR)I always recommend using 1983 IAF if cross testing DC plan only. certainly one of the tables that is 'acceptable' if that makes you feel more comfortable.

notes: accumulation factor = 1.085 ^ 5 or 1.085^ 21 depending which person

equiv amt = total allocation * accum factor

annual benefit = equiv amt / APR *12

E Bar = annual benefit / comp

these are the extreme ends of the mortality tables - APR = 95.38 vs 115.39

it helps to impute disparity

might make a difference whether you used age definition nearest or age definition last

[Draper55]

If you do not impute permitted disparity changing tables will not do anything for you..

[Bri]

I don't think that's true, because if you have employees past NRA, the actual table affects how much the succeeding APRs decrease after that age.  It's not like a 66 year old's APR would be always, say, 97% of the age 65 APR.  Which, if we're splitting hairs on EBARs out to five decimal places (thousandths of a percent), can make a difference.

[shERPA]

Yes, the table won't affect the results unless imputing PD or with participants past NRA (otherwise you are just dividing the projected contribution by a constant [test age APR] for all participants).

IME depending on demographics it helps to use either the shortest or the longest table.  In practice I've used 71 GAM, 83 IAF,  or the applicable table.  I can't recall where anything in between ever helped, but it's been a long time since I experimented with this.