Mortality Tables for Determining Present Value Under Defined Benefit Pension Plans

New rules as regards the mortality tables to be used by defined benefit pension plans were recently published in the Federal Register. The rules provide
– an updated methodology for determining mortality tables used to calculate the present value of pension benefits to derive future funding needs and to determine single-sum distributions. This revised methodology includes new base mortality tables and mortality improvements. The base tables thereby include gender-specific mortality tables based on the Pri-2012, the Private Retirement Plans Mortality Tables Report (Pri-2012 Report) of the Retirement Plan Experience Committee (RPEC). They have a base year of 2012 and include non-annuitant and annuitant mortality rates for different age groups. The base mortality tables are subsequently adjusted to reflect expected trends in mortality improvement. They thereby use the MP–2021 Mortality Improvement Scale of the RPEC with modifications, including the elimination of any mortality improvement for specific years and a cap of 0.78 % on annual mortality improvement rates after 2024.
– the corresponding base mortality tables;
– the improvement factors as noted above; and
– static mortality tables which can be used by small pension funds only; larger plans are no longer permitted to use these tables.
It shall be noted that the new rules also provide methods for addressing individuals who identify as nonbinary (gender can not be exclusively assigned to „male“ or „female“) or for whom gender data is not available, allowing actuaries to use reasonable approaches in applying mortality tables, such as using weighted averages or assigning gender randomly based on birthdate.