which interest rate and mortality table

[M Norton]

When cross-testing a 401(k) plan, we have always used an interest rate of 8.5% and the UP-1984 mortality table.  Are those still the best choices or are others recommended.

Input welcome!

[Tom Poje]

it depends.

if it is a DB/DC combo plan, then those are probably the best assumptions.

if DC alone and you do not impute disparity it is a moot point what table you use for everyone at age 65 will have the same APR. possibly some minor differences for people working past 65 or if plans NRA is 65/5, but the E-Bars on those folks are generally small enough it doesn't matter.

If you impute disparity then 1983 IAF is better. years ago I worked out the following for the Coverage and Nondiscrimination Answer Book (Q 11-10)

without disparity the plan would fail no matter which table was used.

with disparity up84 would still fail but 1983 IAF would pass, because the NHCE would now have a larger E-BAR than the HCE.

 

	Age	Compensation	Contribution	UP84 w/o disp	1983 IAF w/o disp	UP 1984 8.5 % Total = (E-BAR + disparity)	1983 IAF 8.5% Total = (E-BAR + disparity)
HCE	60	235,000	49,000	3.944	3.260	4.158% (3.944 + 0.214)	3.474% (3.260 + 0.214)
NHCE	44	20,000	1,000	3.489	2.884	4.139% (3.489 + 0.650)	3.534% (2.884 + 0.650)

[Tom Poje]

	Age	Compensation	Contribution	UP84 w/o disp	1983 IAF w/o disp	UP 1984 8.5 % Total = (E-BAR + disparity)	1983 IAF 8.5% Total = (E-BAR + disparity)
HCE	60	235,000	49,000	3.944	3.260	4.158% (3.944 + 0.214)	3.474% (3.260 + 0.214)
NHCE	44	20,000	1,000	3.489	2.884	4.139% (3.489 + 0.650)	3.534% (2.884 + 0.650)

[M Norton]

Outstanding response, Tom!

it is DC alone, no imputed disparity, but I am saving this chart.

Thanks!

[Tom Poje]

thanks for the kind compliment.

 

by the way, those are the extremes at age 65

all other tables fall in between those values

the APR for UP 84 is 95.38

and 1983 IAF is 115.39

though I haven't looked recently to see if any new approved table falls on either side of those values.

[jeanh]

Could you give me the rate for up84 at 6.5% and 7% at age 65 or is there a chart you could reference?

 

[Tom Poje]

I get 104.8297 for 7% up84 age 65

and 108.3735 for 6.5%

though you could not use those in a DC situation