[Federal Register Volume 82, Number 192 (Thursday, October 5, 2017)]
[Rules and Regulations]
[Pages 46388-46411]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-21485]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD9826]
RIN 1545-BM71


Mortality Tables for Determining Present Value Under Defined 
Benefit Pension Plans

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations prescribing mortality 
tables to be used by most defined benefit pension plans. The tables 
specify the probability of survival year-by-year for an individual 
based on age, gender, and other factors. This information is used 
(together with other actuarial assumptions) to calculate the present 
value of a stream of expected future benefit payments for purposes of 
determining the minimum funding requirements for a defined benefit 
plan. These mortality tables are also relevant in determining the 
minimum required amount of a lump-sum distribution from such a plan. In 
addition, this document contains final regulations updating the 
requirements that a plan sponsor must meet to obtain IRS approval to 
use mortality tables specific to the plan for minimum funding purposes 
(instead of using the generally applicable mortality tables). These 
regulations affect participants in, beneficiaries of, employers 
maintaining, and administrators of certain retirement plans.

DATES: 
    Effective date: These regulations are effective on October 5, 2017.
    Applicability date: These regulations apply to plan years beginning 
on or after January 1, 2018.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Arslan 
Malik at (202) 317-6700; concerning the construction of the base 
mortality tables and the static mortality tables for 2018, Michael 
Spaid at (206) 946-3480.

SUPPLEMENTARY INFORMATION: 

Background

A. Generally Applicable Mortality Tables

    Section 412 of the Internal Revenue Code (Code) prescribes minimum 
funding requirements for defined benefit pension plans. Section 430 
specifies the minimum funding requirements that apply generally to 
defined benefit plans that are not multiemployer plans.\1\ Section 
430(a) defines the minimum required contribution for a plan year by 
reference to the plan's funding target for the plan year. Under section 
430(d)(1), a plan's funding target for a plan year generally is the 
present value of all benefits accrued or earned under the plan as of 
the first day of that plan year.
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    \1\ Section 302 of the Employee Retirement Income Security Act 
of 1974, Public Law 93-406, as amended (ERISA), sets forth funding 
rules that are parallel to those in section 412 of the Code, and 
section 303 of ERISA sets forth additional funding rules for defined 
benefit plans (other than multiemployer plans) that are parallel to 
those in section 430 of the Code. Under section 101 of 
Reorganization Plan No. 4 of 1978 (43 FR 47713) and section 302 of 
ERISA, the Secretary of the Treasury has interpretive jurisdiction 
over the subject matter addressed in these regulations for purposes 
of ERISA, as well as the Code. Thus, these Treasury regulations 
issued under section 430 of the Code also apply for purposes of 
section 303 of ERISA.
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    Section 430(h)(3) contains rules regarding the mortality tables to 
be used under section 430. Under section 430(h)(3)(A), except as 
provided in section 430(h)(3)(C) or (D), the Secretary is to prescribe 
by regulation mortality tables to be used in determining any present 
value or making any computation under section 430. Those mortality 
tables must be based on the actual mortality experience of pension plan 
participants and projected trends in that experience. In prescribing 
those mortality tables, the Secretary is required to take into account 
results of available independent studies of mortality of individuals 
covered by pension plans.\2\ Under section

[[Page 46389]]

430(h)(3)(B), the Secretary is required to make revisions to any table 
in effect under section 430(h)(3)(A) at least every 10 years to reflect 
actual mortality experience of pension plan participants and projected 
trends in that experience.
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    \2\ The standards prescribed for developing these mortality 
tables are the same as the standards that are prescribed for 
developing mortality tables for multiemployer plans under section 
431(c)(6)(D)(iv)(II) (which are used to determine current liability 
as part of the calculation of the minimum full funding limitation 
under section 431(c)(6)(B)). These standards also apply for purposes 
of determining current liability as part of the calculation of the 
minimum full funding limitation under section 433(c)(7)(C) for a 
CSEC plan (as defined in section 414(y)).
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    Section 430(h)(3)(C) prescribes rules for a plan sponsor's use of 
substitute mortality tables reflecting the specific mortality 
experience of a plan's population instead of using the generally 
applicable mortality tables. Under section 430(h)(3)(C), the plan 
sponsor may request the Secretary's approval to use plan-specific 
substitute mortality tables that meet requirements specified in the 
statute.
    Section 430(h)(3)(D) provides for the use of separate mortality 
tables with respect to certain individuals who are entitled to benefits 
on account of disability. These separate mortality tables are permitted 
to be used with respect to disabled individuals in lieu of the 
generally applicable mortality tables provided pursuant to section 
430(h)(3)(A) or the substitute mortality tables under section 
430(h)(3)(C). The Secretary is to establish separate tables for 
individuals with disabilities occurring in plan years beginning before 
January 1, 1995, and in later plan years, with the mortality tables for 
individuals with disabilities occurring in those later plan years 
applying only to individuals who are disabled within the meaning of 
Title II of the Social Security Act.
    Final regulations (TD 9419) under section 430(h)(3) were published 
in the Federal Register for July 31, 2008 (73 FR 44632). The final 
regulations issued in 2008 include rules regarding generally applicable 
mortality tables, which are set forth in Sec.  1.430(h)(3)-1 (the 2008 
general mortality table regulations), as well as rules regarding 
substitute mortality tables, which are set forth in Sec.  1.430(h)(3)-2 
(the 2008 substitute mortality table regulations).
    The 2008 general mortality table regulations prescribe a base 
mortality table and a set of mortality improvement rates that are used 
to project mortality rates for years after the year 2000. The mortality 
tables included in those regulations are based on the mortality tables 
included in the RP-2000 Mortality Tables Report (based on an experience 
study for the period 1990-1994 and referred to in this preamble as the 
RP-2000 mortality tables) released by the Society of Actuaries in July 
2000 (updated in May 2001). The mortality improvement rates included in 
those regulations are the Scale AA Projection Factors (which are based 
on mortality improvement for the period 1977 through 1993), which were 
included in the RP-2000 Mortality Tables Report for use in conjunction 
with the RP-2000 mortality tables.\3\
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    \3\ The RP-2000 Mortality Tables Report is available at https://www.soa.org/experience-studies/2000-2004/research-rp-2000-mortality-tables/.
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    The 2008 general mortality table regulations prescribe the use of 
generational mortality tables,\4\ but include an option for plans to 
use static mortality tables. The static mortality tables (which are 
updated annually) use a single mortality table for all years of birth 
to approximate the present value that would be determined using the 
generational mortality tables. The 2008 general mortality table 
regulations set forth static mortality tables for valuation dates 
occurring in 2008 and provide that static mortality tables for 
valuation dates occurring in later years will be published in the 
Internal Revenue Bulletin. Static mortality tables for valuation dates 
occurring during 2009-2013 were published in Notice 2008-85 (2008-1 
C.B. 747 (March 28, 2008)). Updated static mortality tables for 
valuation dates occurring during 2014 and 2015 were published in Notice 
2013-49 (2013-32 I.R.B. 127 (July 10, 2013)). Updated static mortality 
tables for valuation dates occurring in 2016 and 2017 were published in 
Notice 2015-53 (2015-33 I.R.B. 190 (July 31, 2015)) and Notice 2016-50 
(2016-38 I.R.B. 371 (September 2, 2016)), respectively.
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    \4\ Generational mortality tables are a series of mortality 
tables, one for each year of birth, each of which fully reflects 
projected trends in mortality for individuals who are born in a 
particular year.
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    Notice 2013-49 also requested comments on whether a separate 
disability mortality table is still warranted with respect to 
participants who became disabled before 1995. In addition, Notice 2013-
49 noted that the Treasury Department (Treasury) and the IRS were aware 
that the Society of Actuaries was conducting a mortality study of 
pension plan participants and specifically requested comments on 
whether other studies of actual mortality experience of pension plan 
participants and projected trends of that experience were available 
that should be considered for use in developing mortality tables for 
future use under section 430(h)(3).
    In October 2014, the Retirement Plans Experience Committee (RPEC) 
of the Society of Actuaries issued a new mortality study of 
participants in private pension plans. The study, which is based on 
mortality experience for the years 2004 to 2008, is referred to as the 
RP-2014 Mortality Tables Report (and sets forth mortality tables that 
are referred to as the RP-2014 mortality tables). The RP-2014 Mortality 
Tables Report, as revised November 2014, is available at www.soa.org/Research/Experience-Study/pension/research-2014-rp.aspx. At the same 
time, RPEC issued a companion study of mortality improvement, referred 
to as the Mortality Improvement Scale MP-2014 Report (which sets forth 
mortality improvement rates that are referred to as the Scale MP-2014 
rates). As described in the Mortality Improvement Scale MP-2014 Report 
(available at www.soa.org/Research/Experience-Study/pension/research-2014-mp.aspx), the Scale MP-2014 rates were based on mortality 
improvement experience for the general population through 2009.
    In October 2015, RPEC released an update to the Scale MP-2014 
rates. The updated rates, referred to as the Scale MP-2015 rates, were 
released as part of the Mortality Improvement Scale MP-2015 Report 
(available at https://www.soa.org/Research/Experience-Study/Pension/research-2015-mp.aspx). The Scale MP-2015 rates were created using 
historical data for mortality improvement for the general population 
through 2011 and the same model and parameters that were used to 
produce the Scale MP-2014 rates. In conjunction with the release of the 
updated rates, RPEC indicated the intent to reflect the latest data 
available by providing future annual updates to the model as soon as 
practicable following the public release of updated data upon which the 
model is constructed.
    In October 2016, RPEC released a further update to the Scale MP-
2014 rates, which are referred to as the Scale MP-2016 rates. The Scale 
MP-2016 rates take into account data for mortality improvement for the 
general population for 2012 and 2013, along with an estimate of 
mortality rates for 2014. As described in the Mortality Improvement 
Scale MP-2016 Report (available at www.soa.org/Research/Experience-Study/Pension/research-2016-mp.aspx), in developing the Scale MP-2016 
rates, RPEC changed some of the parameters from those that were used in 
developing the Scale MP-2014 rates.

B. Plan-Specific Substitute Mortality Tables

    Section 430(h)(3)(C) permits a plan sponsor to request approval by 
the Secretary to use plan-specific substitute mortality tables in lieu 
of the generally applicable mortality tables. If the Secretary 
determines that the proposed

[[Page 46390]]

tables meet the statutory standards and approves the request, the 
substitute mortality tables are used to determine present values and 
make computations under section 430 during the period of consecutive 
plan years (not to exceed 10) specified in the request. Under the 
statute, a substitute mortality table may be used for a plan, only if: 
(1) The plan has a sufficient number of plan participants and has been 
maintained for a sufficient period of time to have credible mortality 
information necessary to create a substitute mortality table; and (2) 
the table reflects the actual mortality experience of the plan's 
participants and projected trends in general mortality experience. 
Except as provided by the Secretary, a plan sponsor may not use 
substitute mortality tables for any plan unless substitute mortality 
tables are established and used for each plan maintained by the plan 
sponsor or a member of its controlled group.
    The 2008 substitute mortality table regulations provide for review 
by the Commissioner of a plan sponsor's request for approval to use 
substitute mortality tables. Under those regulations, to use substitute 
mortality tables with respect to a plan, a plan sponsor must submit a 
written request to the Commissioner that demonstrates that those 
substitute mortality tables comply with applicable requirements. A 
request for approval to use substitute mortality tables must specify 
the first plan year and the term of years for which the tables are 
requested to be used.
    Substitute mortality tables may not be used for a plan year unless 
the plan sponsor submits the request at least 7 months before the first 
day of the first plan year for which the substitute mortality tables 
are to apply. The Commissioner has 180 days to review a request for 
approval to use substitute mortality tables. If the Commissioner does 
not deny the request within this 180-day period, the request is deemed 
to have been approved unless the Commissioner and the plan sponsor have 
agreed to extend that period.
    Under the 2008 substitute mortality table regulations, substitute 
mortality tables for a plan must be established separately for each 
gender, and a substitute mortality table may be established for a 
gender only if there is credible mortality experience with respect to 
that gender. If the mortality experience for one gender is credible but 
the mortality experience for the other gender is not credible, the 
substitute mortality tables are used for the gender that has credible 
mortality experience, and the generally applicable mortality tables are 
used for the gender that does not have credible mortality experience.
    Under the 2008 substitute mortality table regulations, there is 
credible mortality experience with respect to a gender if and only if, 
over the period covered by the experience study, there are at least 
1,000 deaths of individuals of that gender.\5\ For this purpose, the 
minimum length of the experience study period is 2 years and the 
maximum length of the experience study period generally is 5 years. 
Furthermore, the last day of the final year reflected in the experience 
data must be less than three years before the first day of the first 
plan year for which the substitute mortality tables are to apply.
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    \5\ The 1,000-death threshold for credible mortality experience 
under the regulations was intended to provide a high degree of 
confidence that the plan's past mortality experience will be 
predictive of its future mortality, and is consistent with relevant 
actuarial literature (see, for example, Thomas N. Herzog, 
Introduction to Credibility Theory (1999); Stuart A. Klugman, et. 
al., Loss Models: From Data to Decisions (2004)).
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    Under the 2008 substitute mortality table regulations, development 
of substitute mortality tables for a plan requires creation of a base 
table and identification of a base year, which are then used to 
determine the substitute mortality tables. The base table must be 
developed from a study of the mortality experience of the plan using 
amounts-weighted data. Under those regulations, a plan's substitute 
mortality tables must be generational mortality tables that are 
determined using the base mortality tables developed from the 
experience study and the Scale AA Projection Factors (that is, using 
the same basis for mortality improvement that is used under 2008 
general mortality table regulations).
    Under the 2008 substitute mortality table regulations, the use of 
substitute mortality tables is terminated early in certain 
circumstances, including pursuant to a replacement of the generally 
applicable mortality tables. The early termination pursuant to such a 
replacement must be effective as of a date specified in guidance 
published in the Internal Revenue Bulletin.
    Rev. Proc. 2008-62 (2008-2 C.B. I.R.B. 935) sets forth the 
procedure by which a plan sponsor of a defined benefit plan may request 
and obtain approval to use plan-specific substitute mortality tables in 
accordance with section 430(h)(3)(C). The revenue procedure specifies 
the information that must be provided in a request for approval to use 
substitute mortality tables and specifies two alternative acceptable 
methods of construction for base substitute mortality tables. Under 
section 11 of Rev. Proc. 2008-62, a base table for a population may be 
created from the unadjusted base table for the population through the 
application of a graduation method generally used by the actuarial 
profession in the United States.\6\ Section 12 of Rev. Proc. 2008-62 
provides for an alternative method of constructing a base table through 
the application of a fixed percentage to the mortality rates of a 
standard mortality table, projected to the base year.
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    \6\ The revenue procedure identifies the Whittaker-Henderson 
Type B graduation method or the Karup-King graduation method as 
acceptable methods.
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    Section 503 of the Bipartisan Budget Act of 2015, Public Law 114-74 
(129 Stat. 584 (2015)), which was enacted November 2, 2015, provides 
for changes to the rules on the use of substitute mortality tables. 
Under that section, ``the determination of whether plans have credible 
information shall be made in accordance with established actuarial 
credibility theory, which (1) is materially different from the rules 
under [section 430(h)(3)(C)], including Revenue Procedure 2007-37,\7\ 
that are in effect on [November 2, 2015]; and (2) permits the use of 
tables that reflect adjustments to the tables described in [section 
430(h)(3)(A) and (B)]'' if those adjustments are based on the actual 
experience of the pension plan maintained by the plan sponsor.
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    \7\ Rev. Proc. 2007-37, 2007-1 CB 1433, was not in effect on 
November 2, 2015. It was issued in 2007 in conjunction with proposed 
regulations regarding substitute mortality tables (REG-143601-06, 72 
FR 29456) and was replaced by Rev. Proc. 2008-62 when those 
regulations were finalized in 2008.
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    Proposed regulations regarding revisions to mortality tables under 
section 430(h)(3) (REG-112324-15) were published in the Federal 
Register on December 29, 2016 (81 FR 95911). The proposed regulations 
contain revisions to the generally applicable mortality tables (based 
on the RP-2014 Mortality Tables Report), as well as new rules regarding 
substitute mortality tables that reflect section 503 of the Bipartisan 
Budget Act of 2015. Comments were received on the proposed regulations, 
and a public hearing was held on April 13, 2017. After consideration of 
the comments, the proposed regulations are adopted by this Treasury 
decision subject to certain changes, the most significant of which are 
described in this preamble under the heading Explanation of Provisions.

Explanation of Provisions

I. Overview

    These final regulations revise the methodology for developing the

[[Page 46391]]

generally applicable mortality tables that are used to determine 
present value or make any computation under section 430. Pursuant to 
section 417(e)(3)(B), a modified version of these tables will be used 
for purposes of determining the amount of a single-sum distribution (or 
another accelerated form of distribution). This revised methodology for 
developing tables under section 430(h)(3)(A) is being issued pursuant 
to the requirement under section 430(h)(3)(B) to revise the mortality 
tables used under section 430 at least every 10 years to reflect the 
actual mortality experience of pension plan participants and projected 
trends in that experience. As under the 2008 general mortality table 
regulations, the methodology involves the separate determination of 
base tables and the projection of mortality improvement.
    These regulations also revise the rules regarding substitute 
mortality tables. This revision is being made pursuant to section 503 
of the Bipartisan Budget Act of 2015, which requires that the 
determination of whether a plan has credible information be made in 
accordance with established actuarial credibility theory. Following 
enactment of that requirement, Treasury and the IRS undertook a review 
of actuarial literature regarding credibility theory and consulted with 
experts on that topic from the Society of Actuaries. Based on that 
review and analysis, these regulations set forth a method for 
developing substitute mortality tables that is materially different 
from the method that is required under the 2008 substitute mortality 
table regulations and the associated revenue procedure. The method for 
developing substitute mortality tables that is set forth in the final 
regulations is simpler than the graduation method that applies under 
the 2008 substitute mortality table regulations and also accommodates 
the use of substitute mortality tables for plans with smaller 
populations that have only partially credible mortality experience.

II. Generally Applicable Mortality Tables

A. Base Mortality Tables

    Under these regulations, the generally applicable base mortality 
tables are derived from the tables contained in the RP-2014 Mortality 
Tables Report. In response to Notice 2013-49, commenters generally 
recommended that the RP-2014 mortality tables form the basis for the 
mortality tables used under section 430. After reviewing the RP-2014 
mortality tables, the accompanying report published by the Society of 
Actuaries, and related public comments, Treasury and the IRS determined 
that the experience study used to develop the RP-2014 mortality tables 
is the best available study of the actual mortality experience of 
pension plan participants (other than disabled individuals). As a 
result, Treasury and the IRS issued proposed regulations that use the 
RP-2014 mortality tables as the foundation for the base mortality 
tables used to project the mortality rates of pension plan participants 
(other than disabled individuals).\8\
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    \8\ Mortality tables that may be used as an alternative to the 
tables provided in these regulations with respect to certain 
disabled individuals are provided in Rev. Rul. 96-7 (1996-1 CB 59).
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    Most commenters supported the selection of the base mortality 
tables in the proposed regulations. One commenter opposed this 
selection but did not suggest any alternative. Accordingly, the base 
mortality tables under these final regulations are the same as in the 
proposed regulations. Like the mortality tables provided in the 2008 
general mortality table regulations, the mortality tables under these 
final regulations are gender-distinct because of significant 
differences between expected male mortality and expected female 
mortality. In addition, as under the 2008 general mortality table 
regulations, these regulations set forth separate mortality rates for 
annuitants and nonannuitants.
    The base tables that are set forth in these final regulations are 
used to develop the mortality tables for future years. These base 
tables have a base year of 2006 (the central year of the experience 
study used to develop the mortality tables in the RP-2014 Mortality 
Tables Report). These base tables generally have the same mortality 
rates as the RP-2014 mortality tables after factoring out the mortality 
improvements from 2007 to 2014 (calculated using the Scale MP-2014 
rates). However, these base tables also include nonannuitant mortality 
rates for ages below age 18 and above age 80 and annuitant mortality 
rates for ages below age 50. This generally is the same approach that 
was used to develop the base tables included in the 2008 general 
mortality table regulations.

B. Mortality Improvement and Static Mortality Tables

    The proposed regulations, like the 2008 general mortality table 
regulations, provided that expected trends in mortality experience must 
be taken into account through the use of either generational or 
annually updated static mortality tables. In accordance with section 
430(h)(3)(B), the proposed regulations updated the mortality 
improvement rates used under the 2008 general mortality table 
regulations. To select up-to-date mortality improvement rates, Treasury 
and the IRS reviewed the Mortality Improvement Scale MP-2014 Report, 
related public comments, the data sources cited in those comments, the 
Mortality Improvement Scale MP-2015 Report, the Mortality Improvement 
Scale MP-2016 Report, and other published data sources.\9\ After that 
review, Treasury and the IRS issued proposed regulations that applied 
the MP-2016 rates to develop mortality tables for use in 2018.
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    \9\ See the August 2013 Literature Review and Assessment of 
Mortality Improvement Rates in the U.S. Population: Past Experience 
and Future Long-Term Trends, available at www.soa.org/Files/Research/Exp-Study/research-2013-lit-review.pdf.
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    Some commenters supported the selection of the mortality 
improvement rates in the proposed regulations, while other commenters 
expressed concerns about the selection of those rates. Those commenters 
who expressed concern about the mortality improvement rates noted that 
the selection of a long-term mortality improvement rate assumption is 
inherently speculative and cautioned against using the assumptions 
regarding the rate of long-term mortality improvement that were used by 
RPEC (which are a long-term rate of 1.0 percent per year for ages 85 
and younger, grading down to 0.85 percent at age 95, and further 
grading down to 0 at age 115). Instead of the RPEC assumptions, these 
commenters suggested that Treasury and the IRS use assumptions 
regarding the rate of long-term mortality improvement that are closer 
to the rates that are used by the Office of the Actuary within the 
Social Security Administration. Those rates also vary by age group, and 
the documentation accompanying the 2017 report of the Board of Trustees 
of the Federal Old-Age, Survivors Insurance and Disability Insurance 
Trust Funds indicates that, under the intermediate assumptions (which 
reflect the Trustees' best estimates of future experience), the 
weighted average over all ages of those assumed long-term mortality 
improvement rates is 0.72 percent per year.\10\
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    \10\ See ``The Long-Range Demographic Assumptions for the 2017 
Trustees Report,'' Office of the Chief Actuary, Social Security 
Administration (July 13, 2017), at Mortality, page 17 (available at 
https://www.ssa.gov/OACT/TR/2017/2017_Long-Range_Demographic_Assumptions.pdf).
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    Treasury and the IRS carefully considered the assumptions used by 
Office of the Actuary within the Social Security Administration and 
compared it with the long-term assumptions

[[Page 46392]]

currently recommended by RPEC. In evaluating the merits of each, 
Treasury and the IRS took into consideration the views of the Technical 
Panel of the Social Security Advisory Board. The Social Security 
Advisory Board is an independent federal government agency, and the 
Technical Panel, which is comprised of actuaries, economists and 
demographers, is charged by the Advisory Board with reviewing the 
assumptions and methods used in the annual report of the Board of 
Trustees of the Federal Old-Age, Survivors Insurance and Disability 
Insurance Trust Funds. The Technical Panel, which issues a report every 
4 years, has consistently recommended that the mortality improvement 
assumption used by the Office of the Actuary be increased.\11\ In 
addition, the Congressional Budget Office uses a faster rate of 
mortality improvement in evaluating Social Security solvency than the 
Office of the Actuary.\12\
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    \11\ See ``2015 Technical Panel on Assumptions and Methods 
Report to the Social Security Advisory Board,'' available at 
www.ssab.gov/Details-Page/ArticleID/656/2015-Technical-Panel-on-Assumptions-and-Methods-A-Report-to-the-Board-September-2015.
    \12\ See Comparing CBO's Long-Term Projections with Those of the 
Social Security Trustees: Hearing before the Subcommittee on Social 
Security, Committee on Ways and Means, U.S. House of 
Representatives, 114th Cong. September 21, 2016 (Testimony of Keith 
Hall), available at https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/51988-socialsecuritytestimony.pdf.
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    After review and consideration of the comments, the documentation 
accompanying the Trustees' Report, and the views of the Technical Panel 
of the Social Security Advisory Board, Treasury and the IRS have 
concluded that the procedures that RPEC used to develop the Scale MP-
2016 rates generate mortality improvement rates that currently are the 
appropriate rates for use in developing mortality tables to be used for 
purposes of pension funding. Accordingly, these regulations provide 
that the mortality improvement rates for valuation dates in 2018 are 
the Scale MP-2016 rates.
    Treasury and the IRS understand that RPEC expects to issue updated 
mortality improvement rates that reflect new data for mortality 
improvement trends for the general population on an annual basis. As 
noted by the commenters, while the rate of mortality improvement has 
fluctuated significantly on a year-to-year basis, there has been a 
significant reduction in the rate of improvement over the past few 
years compared to the rate of improvement for the past 25 years. RPEC 
has indicated the intent to continually review the methodology used in 
its mortality improvement model in an effort to improve the overall 
effectiveness of the model, especially with respect to year-over-year 
stability and forecast accuracy, and it has identified the assumed 
long-term rate of mortality improvement and graduation techniques as 
two of the items included in this review. In establishing the mortality 
improvement rates to be used under section 430(h)(3) for valuation 
dates in years after 2018, Treasury and the IRS will continue to take 
into account RPEC's updates (including any modifications to RPEC's 
methodology), as well as other sources of data or analyses regarding 
mortality improvement. These regulations provide that the mortality 
improvement rates applicable for those future valuation dates will be 
specified in guidance to be published in the Internal Revenue Bulletin. 
See Sec.  601.601(d)(2)(ii)(b) of this chapter. If Treasury and the IRS 
determine that significant revisions to the mortality improvement rates 
are appropriate, the revisions may first be proposed in a new 
rulemaking in order to allow for public comment before the rule is 
finalized.
    Some commenters asked that Treasury and the IRS commit to providing 
the mortality improvement rates for a calendar year at least 12 months 
before the start of that year. Treasury and the IRS understand that a 
significant motivation for this request is to avoid the issuance of new 
mortality improvement rates in the early part of a calendar year 
(because issuance of new mortality improvement rates at that time could 
result in the need to revise calculations that have already been made 
in the course of preparing a plan sponsor's financial statement as of 
the previous December 31). While Treasury and the IRS intend that the 
mortality improvement rates for a calendar year generally will be 
issued more than 12 months in advance of that year, the final 
regulations do not include a provision requiring that the mortality 
improvement rates for a calendar year be issued within this timeframe. 
Retaining the flexibility to issue mortality improvement rates closer 
to the date they would become effective will allow additional time for 
the possibility that certain revisions to the mortality improvement 
rates will first be published in proposed form.
    Other commenters requested that Treasury and the IRS consider 
updating the mortality tables on a less frequent basis than annually. 
Although the RPEC indicated its intent to issue updated mortality 
improvement rates on an annual basis, the final regulations do not 
require the mortality improvement rates under section 430(h)(3) to be 
updated annually. However, to minimize the discontinuities in mortality 
rates that could arise from infrequent updates, Treasury and the IRS 
contemplate that generally the rates will be updated annually. If the 
changes from one year to the next are minimal, Treasury and the IRS may 
choose not to update the rates for that year.
    As under the 2008 general mortality table regulations, the proposed 
regulations take into account the limitations of some current actuarial 
software that is not designed to use generational mortality tables and 
continue to permit the use of static mortality tables. These static 
mortality tables, when used to determine the present value of an 
annuity, approximate the present value that would be determined using 
the generational mortality tables. All but one commenter supported the 
option to use static mortality tables, and these final regulations 
provide for this option. These static tables consist of separate 
gender-specific tables, which are updated annually. The static 
mortality tables that will be used for 2018 are included in these 
regulations. For later years, updated static mortality tables will be 
set forth in guidance published in the Internal Revenue Bulletin. See 
Sec.  601.601(d)(2)(ii)(b) of this chapter.

C. Use of Section 430 Mortality Tables for Other Provisions

    Section 417(e)(3) generally provides that the present value of 
certain benefits under a qualified pension plan (including single-sum 
distributions) must not be less than the present value of the accrued 
benefit using applicable interest rates and the applicable mortality 
table. Section 417(e)(3)(B) defines the term ``applicable mortality 
table'' as the mortality table specified for the plan year for minimum 
funding purposes under section 430(h)(3)(A) (without regard to the 
rules for substitute mortality tables under section 430(h)(3)(C) or 
mortality tables for disabled individuals under section 430(h)(3)(D)), 
modified as appropriate by the Secretary. The modifications to the 
section 430(h)(3)(A) mortality table used to determine the section 
417(e)(3)(B) applicable mortality table are not addressed in these 
regulations and are currently provided in Revenue Ruling 2007-67 (2007-
2 C.B. 1047).
    As under the proposed regulations, the final regulations provide 
that the same mortality assumptions that apply for purposes of section 
430(h)(3)(A) and Sec.  1.430(h)(3)-1(a)(2) are used to determine a 
plan's current liability for purposes of applying the full-funding

[[Page 46393]]

rules of section 431(c)(6) (in the case of a multiemployer plan) and 
section 433(c)(7)(C) (in the case of a CSEC plan). For this purpose, a 
multiemployer plan or CSEC plan is permitted to apply either the 
annually-adjusted static mortality tables or the generational mortality 
tables.

D. Effective Date

    The proposed regulations provide that the regulations will be 
effective beginning in 2018. Some commenters expressed concern that 
this effective date would not allow adequate time for compliance. One 
commenter requested that the effective date of the regulations be no 
sooner than 18 months after the regulations are finalized in order to 
give plan sponsors adequate time to plan for the higher level of 
contributions that will be required under the new mortality 
assumptions. Treasury and the IRS understand that most employers have 
been planning for the issuance of updated mortality tables for the 
purposes of section 430 since the RP-2014 Mortality Tables Report was 
issued in 2014 and many of those employers are already using updated 
mortality tables for financial reporting purposes. Furthermore, any 
additional required contributions for a plan resulting from the 
adoption of the new tables will not be due before September 15, 2019. 
For a plan with a calendar plan year, this date is 8\1/2\ months after 
the end of the first plan year for which the regulations apply.\13\
---------------------------------------------------------------------------

    \13\ However, new mortality tables may affect plan operations 
relating to the requirements of section 436 during the 2018 plan 
year.
---------------------------------------------------------------------------

    Moreover, as described in section II.C of this Explanation of 
Provisions, the amount of a single-sum distribution computed as the 
present value of an annuity is determined using a mortality table that 
is based on the generally applicable mortality tables used for minimum 
funding purposes. Thus, retaining the mortality tables under existing 
regulations for the 2018 plan year, as requested by some commenters, 
would result in inappropriately depressing the amount of single-sum 
distributions payable to affected participants during the 2018 plan 
year (resulting in a permanent loss of retirement assets for those 
participants). A 2013 study indicates that approximately 56 percent of 
retiring participants in a traditional defined benefit plan with an 
unlimited single-sum option choose that option.\14\ In addition, the 
Government Accountability Office recently issued a study examining the 
increase in ``lump-sum window'' offers--typically, limited time offers 
to participants who are no longer employed by the sponsor but still 
waiting for their pension benefit to begin in the future, or retirees 
already receiving their pension annuity payments.\15\ Similarly, Willis 
Towers Watson reported significant risk transferring activity in recent 
years through lump sum windows and other means.\16\
---------------------------------------------------------------------------

    \14\ Sudipto Banerjee, Ph.D., Employee Benefits Research 
Institute, Issue Brief: Annuity and Lump-Sum Decisions in Defined 
Benefit Plans: The Role of Plan Rules, January 2013, available at 
https://www.ebri.org/pdf/briefspdf/EBRI_IB_01-13.No381.LSDs2.pdf.
    \15\ U.S. Government Accountability Office, GAO 15-74, 
Participants Need Better Information When Offered Lump Sums That 
Replace Their Lifetime Benefits (January 2015). This report also 
notes the substantial financial advantages that exist for plan 
sponsors implementing lump sum windows and attributes the recent 
increase in lump-sum window offers, in part, to the outdated 
mortality tables in the current regulations, which result in reduced 
payments to plan participants. Id. at pp. 16-17.
    \16\ Brendan McFarland, After a few ups and downs, corporate 
pension funding levels showed little change in 2016: Late-year rise 
in interest rates and stock market performance mitigate earlier 
downturn in funded status, Willis Towers Watson Insider, Vol. 27, 
No. 2 (February 2017) at p. 3, available at https://www.towerswatson.com/en-US/Insights/Newsletters/Americas/insider.
---------------------------------------------------------------------------

    Because these rules were proposed in December of 2016 to be 
applicable as final regulations for plan years beginning on and after 
January 1, 2018, the Treasury Department and the IRS believe that many 
plan sponsors have had adequate time to set aside funds needed for 
additional pension contributions for the 2018 plan year. Furthermore, 
because the steps that plan sponsors will need to take to update their 
administrative systems in response to these final regulations are not 
significantly different from the steps they would need to take in 
response to the annual update of mortality tables that has previously 
occurred at this time of the year, the Treasury Department and the IRS 
believe that plan sponsors generally will have sufficient time to make 
any needed changes to these administrative systems.\17\
---------------------------------------------------------------------------

    \17\ See section 4. of the Regulatory Impact Assessment provided 
under the heading Special Analyses, Regulatory Planning and Review 
(Executive Orders 12866 and 13563) in this preamble for a discussion 
of needed changes in administrative systems.
---------------------------------------------------------------------------

    The final regulations generally retain the effective date that was 
proposed, and apply to plan years beginning on or after January 1, 
2018. In response to comments indicating that this effective date may 
create certain administrative or financial difficulties, the final 
regulations provide an option that may be used in certain circumstances 
for the 2018 plan year to apply the regulations that were formerly in 
effect. Specifically, for a plan for which substitute mortality tables 
are not used for the 2018 plan year, mortality tables determined in 
accordance with regulations previously in effect may be used for 
purposes of applying the rules of section 430 for a valuation date 
occurring during 2018 if the plan sponsor (1) concludes that the use of 
mortality tables determined in accordance with the final regulations 
for the plan year would be administratively impracticable or would 
result in an adverse business impact that is greater than de minimis, 
and (2) informs the actuary of the intent to apply this option. While 
this option provides significant flexibility to plan sponsors, the use 
of the option will not affect the mortality table used to determine 
minimum present value for distributions with annuity starting dates in 
stability periods that begin during 2018 (which is based on the 
generally applicable mortality tables under section 430(h)(3)(A) that 
apply if this option is not used). Therefore, the lump-sum 
distributions received by participants retiring in 2018 will 
appropriately reflect their expected longevity.

III. Plan-Specific Substitute Mortality Tables

A. Application of Established Actuarial Credibility Theory

    These final regulations contain a comprehensive revision of the 
rules regarding plan-specific substitute mortality tables for plans 
that are subject to the rules of section 430.\18\ These regulations 
carry over many of the rules regarding substitute mortality tables from 
the 2008 substitute mortality table regulations. However, after 
analyzing the actuarial literature regarding credibility theory, 
Treasury and the IRS made a number of changes to the rules relating to 
the development of substitute mortality tables. Specifically, these 
final regulations, like the proposed regulations, generally require 
that a substitute mortality table be constructed by multiplying the 
mortality rates from a projected version of the generally applicable 
base mortality table by a mortality ratio (that

[[Page 46394]]

is, a ratio of the actual deaths for the population to the expected 
deaths determined using the standard mortality tables for that 
population).
---------------------------------------------------------------------------

    \18\ There is no provision for defined benefit plans that are 
not subject to the requirements of section 430 (such as 
multiemployer plans) to request approval to use of substitute 
mortality tables. However, the mortality tables under section 
430(h)(3) are required to be used for those plans only for very 
limited purposes (and the mortality tables used for those plans for 
most purposes, while subject to the requirements of section 
431(c)(3) or 433(c)(3), are not tables specified by statute or 
regulations).
---------------------------------------------------------------------------

    Use of mortality ratios (rather than providing for the graduation 
of raw mortality rates as under the 2008 substitute mortality table 
regulations) will make it easier for plan sponsors to develop 
substitute mortality tables because it eliminates the need to apply a 
complex graduation technique. It also facilitates efficient IRS review 
of applications for approval to use substitute mortality tables, which 
is particularly important in light of the other major change made in 
the regulations (permitting the use of substitute mortality tables for 
a plan that has mortality experience that is only partially credible). 
As a result of the changes made in these regulations, Treasury and the 
IRS expect that significantly more plan sponsors will request approval 
to use substitute mortality tables.

B. Development of Substitute Mortality Tables for Plans With Full 
Credibility

    The substitute mortality table for a population with full 
credibility must be determined by applying projected mortality 
improvement to a base substitute mortality table developed using an 
experience study of the population. Like the proposed regulations, the 
final regulations use the same general requirements for an experience 
study as under the 2008 substitute mortality table regulations but 
reflect certain changes from the proposed regulations in response to 
comments. Specifically, the experience study generally must cover a 
period of at least 2 (and no more than 5) consecutive 12-month periods 
that ends less than 3 years before the first day of the first plan year 
for which the substitute mortality tables are to apply, and must cover 
the same period for all populations within a plan.\19\ However the 
final regulations include an exception that permits the use of an 
earlier study period if the submission is made more than 1 year (and 
less than 2 years) before the first day of the first plan year for 
which the substitute mortality tables are proposed to apply. Under this 
exception, the last day of the experience study period is permitted to 
be 3 years or more before the first day of the first plan year for 
which the substitute mortality tables are proposed to apply, provided 
that the last day of the experience study period is less than 2 years 
before the application is submitted.
---------------------------------------------------------------------------

    \19\ As under the 2008 regulations and the proposed regulations, 
the final regulations provide for permissive aggregation of plans of 
a plan sponsor for purposes of developing and using substitute 
mortality tables. The final regulations clarify that if two or more 
plans with different plan years are aggregated, the experience study 
may consist of data that is collected over different periods for 
plans with different plan years, subject to certain conditions.
---------------------------------------------------------------------------

    A base substitute mortality table generally is determined by 
multiplying the mortality rates from the corresponding standard 
mortality table (that is, the generally applicable base mortality table 
for the population, projected with mortality improvement to the base 
year for the base substitute mortality table) by the mortality ratio 
for the population. For this purpose, the mortality improvement rates 
that apply for the calendar year during which the plan sponsor submits 
the request for approval to use substitute mortality tables are used to 
project the generally applicable base mortality table to the base year 
for the base substitute mortality table.\20\ The mortality ratio is 
determined as a fraction, the numerator of which is the number of 
actual deaths during the experience study period (with each death 
weighted by the benefit amount) and the denominator of which is the 
number of expected deaths during that period (determined using the 
standard mortality table) weighted by the benefit amount. An 
individual's benefit amount (which is used to determine amounts-
weighted mortality rates and for other purposes in the construction of 
base substitute mortality tables) is the individual's accrued benefit 
expressed in the form of an annual benefit commencing at normal 
retirement age (or at the current age, if later) if the individual has 
not commenced benefits, and the individual's annual payment if the 
individual has commenced benefits. Consistent with section 503 of the 
Bipartisan Budget Act of 2015 (and unlike Sec.  1.430(h)(3)-
2(c)(2)(ii)(D) of the 2008 substitute mortality table regulations, 
which provides that the Commissioner may permit the use of other 
recognized mortality tables to construct the base substitute mortality 
table), the regulations provide that the standard mortality table that 
must be used for this purpose is the generally applicable base 
mortality table projected with mortality improvement to the base year 
for the base substitute mortality table.
---------------------------------------------------------------------------

    \20\ If the plan sponsor submits such a request during 2017, 
then mortality improvement is reflected using the mortality 
improvement rates that generally apply for use for 2018, which are 
the Scale MP-2016 rates.
---------------------------------------------------------------------------

    Some commenters pointed out that multiplying mortality ratios for a 
population by the mortality rates in the applicable standard mortality 
table could yield inappropriate results at extremely old ages. In 
response to those comments, the final regulations provide that 
mortality rates under the base substitute mortality tables must be the 
same as the mortality rates under the standard mortality table for ages 
above 109 and that a modified mortality ratio is used for ages from 96 
through 109 (to accomplish a gradual transition to the standard 
mortality table while avoiding inappropriate results). If the mortality 
ratio for the population is greater than 1.0, the modified mortality 
ratio for an age within this range is equal to the mortality ratio for 
the population reduced by 1/15th of the excess of the mortality ratio 
over 1.0 for each year by which the age exceeds 95. If the mortality 
ratio for the population is less than 1.0, the modified mortality ratio 
for an age within this range is equal to the mortality ratio for the 
population increased by 1/15th of the excess of 1.0 over the mortality 
ratio for each year by which the age exceeds 95.

C. Standards for Full Credibility

    The proposed regulations revised the standard for full credibility 
of a population under the 2008 substitute mortality table regulations 
(which is 1,000 actual deaths for the relevant population during the 
experience study period) to better reflect established actuarial 
credibility theory. Under established actuarial credibility theory, the 
1,000-death threshold (which is a rounding down of the 1,082 actual 
deaths that would be needed for a 90% confidence level that the 
measured rate is within 5% of the underlying mortality rate) should 
apply to the credibility for a single mortality rate and not an entire 
mortality table.\21\ Moreover, the 1,000 death threshold did not take 
into account the well-established actuarial principle that mortality 
experience within a population will vary predictably based on the 
amount of the annuity (or life insurance, as applicable). The base 
tables for the generally applicable mortality tables were constructed 
on an amounts-weighted basis (under which the individuals with higher 
benefit amounts have a greater weight in the computation of the 
mortality rate for a

[[Page 46395]]

particular age); accordingly, substitute mortality tables should be 
constructed using the same principle.
---------------------------------------------------------------------------

    \21\ Although the use of a graduation technique under Rev. Proc. 
2008-62 enables a plan with fewer than 1,000 deaths at each age to 
have credible mortality experience that may be used to establish a 
substitute mortality table, the statutory instruction providing that 
the determination of whether a plan has credible mortality 
information be made in accordance with established actuarial 
credibility theory which is materially different than the rules in 
effect on November 2, 2015, led to the elimination of that 
technique.
---------------------------------------------------------------------------

    Using established actuarial credibility theory to evaluate whether 
a population has fully credible mortality experience entails the use of 
a threshold that takes into account the dispersion of benefits within 
the population. Accordingly, under the proposed regulations, the number 
of deaths that are needed for a population within a plan to have fully 
credible mortality experience is determined as the product of 1,082 and 
the benefit dispersion factor for the population.\22\ The benefit 
dispersion factor for a population is equal to the number of expected 
deaths for the population during the experience study period, 
multiplied by the sum of the mortality-weighted squares of the 
benefits, divided by the square of the sum of the mortality-weighted 
benefits.\23\
---------------------------------------------------------------------------

    \22\ This formula for the number of deaths needed for full 
credibility is based on the assumption that the distribution of 
releases from liability due to deaths follows a compound Poisson 
model. See www.actuaries.ca/members/publications/2002/202037e.pdf.
    \23\ See Gavin Benjamin, Selecting Mortality Tables: A 
Credibility Approach, available at www.soa.org/Files/Research/Projects/research-2008-benjamin.pdf.
---------------------------------------------------------------------------

    Commenters supported the actuarial soundness of the standard for 
fully credible mortality information under the proposed regulations, 
and the final regulations adopt the provisions of the proposed 
regulations regarding full credibility. At the request of commenters, 
the regulations include expressions of various formulas in mathematical 
notation to assist actuaries in making computations under the 
regulations.\24\
---------------------------------------------------------------------------

    \24\ In the proposed regulations, these formulas were stated as 
amounts to be computed separately for each age and then summed for 
the population. The final regulations instead state these formulas 
more concisely as amounts to be computed for the entire population. 
These two approaches yield mathematically identical results.
---------------------------------------------------------------------------

    One commenter noted that the increase of the threshold for full 
credibility (together with the inability to reflect the pattern of the 
plan's mortality experience at different ages) may produce substitute 
mortality tables that are substantially different than those that are 
currently in use. To address this concern, in part, the final 
regulations include an option to increase the credibility of a plan's 
mortality experience by basing it on the combined mortality experience 
of both genders.\25\
---------------------------------------------------------------------------

    \25\ This option is described in section III.F.2 of this 
Explanation of Provisions (Option to use combined male and female 
mortality experience).
---------------------------------------------------------------------------

D. Partial Credibility

    As under the proposed regulations, the final regulations permit 
substitute mortality tables to be used for a plan that does not have 
sufficient deaths to have fully credible mortality information. In 
accordance with established actuarial credibility theory, the 
substitute mortality table used for such a plan is the weighted average 
of the standard mortality table and the substitute mortality table that 
would be developed for the plan if it were to have fully credible 
mortality information. The weight for the substitute mortality table 
that would be developed for the plan if the plan were to have fully 
credible mortality information is the square root of a fraction, the 
numerator of which is the actual number of deaths for the population 
within the experience study period and the denominator of which is the 
number of deaths needed for the plan to have fully credible mortality 
information.

E. Controlled Group Consistency Requirement

    Under section 430(h)(3)(iv) there is a general consistency 
requirement for the use of substitute mortality tables with respect to 
all plans within a controlled group. Thus, use of substitute mortality 
tables for a plan is generally permitted only if substitute mortality 
tables are used for all plans subject to section 430 that are 
maintained within the controlled group of the plan sponsor.
    The 2008 substitute mortality table regulations set forth an 
exception from this consistency requirement for plans that did not have 
credible mortality experience. As a result of the change permitting the 
use of substitute mortality tables for plans that have only partially 
credible mortality information, Treasury and the IRS concluded that the 
exception should be modified so that it only applies to plans with a 
relatively small population. Accordingly, the regulations provide that 
a population does not have credible mortality information (and so a 
substitute mortality table is neither permitted nor required to be used 
for that population) if the actual number of deaths for that population 
during the experience study period is less than 100. For this purpose, 
the length of the experience study period must be the same length as 
the longest experience study period for any plan in the controlled 
group \26\ and must end less than 3 years before the first day of the 
first plan year for which the substitute mortality tables are to apply. 
Treasury and the IRS proposed the use of a threshold of 100 deaths to 
balance the benefit of the use of substitute mortality tables for a 
plan with a relatively small population (which would be small, given 
the relatively low weight assigned to that plan's partially credible 
mortality experience) against the burden of developing substitute 
mortality tables for that plan (which would be required to comply with 
the controlled group consistency requirement). No comments were 
received objecting to this threshold or recommending a different 
threshold. As a result, the final regulations adopt the proposed 100-
death threshold.
---------------------------------------------------------------------------

    \26\ If a plan has credible mortality information for one gender 
but not for the other gender, the length of the period of this 
demonstration is the length of the experience study for that plan.
---------------------------------------------------------------------------

F. Other Rules Relating to the Use of Substitute Mortality Tables

1. Multiple-Employer Plans
    In response to comments, the final regulations provide rules 
regarding the use of substitute mortality tables in connection with 
multiple-employer plans. Under the final regulations, the application 
for use of substitute mortality tables in the case of a multiple-
employer plan must be made by the plan administrator, and the 
substitute mortality tables must apply on a plan-wide basis (even if 
the plan is subject to the rules of section 413(c)(4)(A)).
    In addition, the final regulations provide special rules for the 
application of the controlled group consistency rule in the case of a 
multiple-employer plan. Under this special rule, an employer 
participating in a multiple-employer plan is treated as maintaining 
that plan if and only if the proportion of the plan's funding target 
attributable to the employees and former employees of the employer and 
members of the employer's controlled group is greater than 50 percent. 
Thus, such an employer is subject to the controlled group consistency 
rule with respect to the multiple-employer plan and any other plans 
subject to section 430 maintained by that employer (or any member of 
that employer's controlled group). By contrast, if the proportion of 
the multiple-employer plan's funding target attributable to the 
employees and former employees of the employer and members of the 
employer's controlled group is less than or equal to 50 percent, then 
that employer is not subject to the controlled group consistency rule 
with respect to the multiple-employer plan and any other plans subject 
to section 430 maintained by that employer (and any member of that 
employer's controlled group).

[[Page 46396]]

2. Option To Use Combined Male and Female Mortality Experience
    Some commenters requested the ability to develop and use substitute 
mortality tables based on the combined experience of both males and 
females in the plan, to increase the credibility of mortality 
experience for a smaller population. Treasury and the IRS have 
determined that this approach is consistent with established actuarial 
credibility theory. Accordingly, the final regulations provide that a 
single mortality ratio may be developed for both genders and then used 
to construct separate gender-specific base substitute mortality tables 
for the plan. If this option is applied for a plan, then substitute 
mortality tables used for all plans in the plan sponsor's controlled 
group must be constructed in this manner (except for plans for which 
both the male and female populations, considered separately, have 
mortality experience with full credibility). In addition, if this 
option is applied for a plan, then the mortality experience for both 
genders must be combined for all other purposes under the regulations, 
including the determination of: (1) Whether a plan has credible 
mortality information for purposes of the controlled group consistency 
requirement; (2) whether the mortality experience for a plan has full 
credibility; and (3) the partial credibility weighting factor.
3. Special Rules for Newly-Affiliated Plans
    The proposed regulations provide for a transition period during 
which the controlled group consistency requirement does not apply with 
respect to a newly-affiliated plan (that is, a plan that has become 
maintained within the new controlled group in connection with a 
transaction described in Sec.  1.410(b)-2(f)). In response to comments, 
the final regulations extend the transition period during which the 
controlled group consistency requirement does not apply with respect to 
a newly-affiliated plan so that it ends on the last day of the plan 
year that immediately follows the period described in section 
410(b)(6)(C)(ii) for any of the plans in the controlled group 
(whichever ends latest). For example, if all of the plans involved have 
a plan year that is the calendar year and a corporate transaction 
occurs during 2017, then the transition period during which the 
controlled group consistency requirement does not apply ends on 
December 31, 2019 (the end of the plan year that immediately follows 
December 31, 2018, which is the end of the period described in section 
410(b)(6)(C)(ii)). This longer transition period will ensure that the 
plan sponsor has adequate time to complete an experience study covering 
the newly-affiliated plan for use in its submission for approval of 
substitute mortality tables for a plan year beginning January 1, 2020. 
As under the proposed regulations, the final regulations provide that 
this experience study may exclude the pre-affiliation data and the 
experience study period may be as short as 1 year (instead of 2 years). 
Therefore, under the facts of this example, the experience study used 
to develop substitute mortality tables for the plan may cover only 
calendar year 2018.\27\
---------------------------------------------------------------------------

    \27\ However, if the experience study is used to demonstrate a 
lack of credible mortality information, the experience study period 
may be shorter than required under the otherwise applicable rules 
only if it starts on the date the plan becomes a newly-affiliated 
plan.
---------------------------------------------------------------------------

4. Early Termination of Use of Substitute Mortality Tables and 
Transition Rule
    The final regulations retain the rules from the 2008 substitute 
mortality table regulations regarding the termination of use of 
substitute mortality tables before their originally scheduled 
expiration. Among the circumstances that lead to early termination is 
the replacement of the generally applicable mortality tables (other 
than annual updates to the static mortality tables or changes to the 
mortality improvement rates).
    In response to comments, the final regulations include a transition 
rule under which previously approved base substitute mortality tables 
continue to apply for plan years beginning in 2018 (assuming that plan 
year is covered by the original approval and that substitute mortality 
tables are used by all of the plans within the controlled group that 
have credible mortality experience under the standards in the 2008 
substitute mortality table regulations). In addition, previously 
approved base substitute mortality tables continue to apply to later 
plan years during the term of their original approval, provided that 
the plan sponsor satisfies the requirement that substitute mortality 
tables be used for all plans in the controlled group that have credible 
mortality information under the standards in these regulations. 
However, the mortality improvement rates under the final regulations, 
rather than the Scale AA Projection Factors (which were used under the 
2008 substitute mortality table regulations), must be applied to 
previously approved base substitute mortality tables beginning in 2019.

G. Effective Date

    These regulations regarding substitute mortality tables apply to 
plan years beginning on or after January 1, 2018, subject to certain 
transition relief. In addition to the transition relief for previously 
approved base mortality tables described in section III.F.4 of the 
Explanation of Provisions portion of this preamble, the requirement 
that a plan sponsor apply for approval to use substitute mortality 
tables at least 7 months before the beginning of the plan year will be 
treated as satisfied if the plan sponsor's application is submitted on 
or before February 28, 2018, provided that the plan sponsor agrees to a 
90-day extension of the 180-day review period.

Statement of Availability of IRS Documents

    IRS Revenue Rulings, Revenue Procedures, and Notices cited in this 
document are published in the Internal Revenue Bulletin (or Cumulative 
Bulletin) and are available from the Superintendent of Documents, U.S. 
Government Printing Office, Washington, DC 20402, or by visiting the 
IRS Web site at www.irs.gov.

Special Analyses

Regulatory Planning and Review (Executive Orders 12866 and 13563)

    It has been determined that these regulations constitute a 
significant regulatory action as defined in Executive Order 12866, as 
supplemented by Executive Order 13563. Accordingly, these rules have 
been reviewed by the Office of Management and Budget. The Regulatory 
Impact Assessment prepared by Treasury for these regulations is 
provided below. This rule is not subject to the requirements of 
Executive Order 13771 because this rule results in no more than de 
minimis costs.
1. Description of Need for the Regulations
    Section 430 of the Internal Revenue Code specifies the minimum 
funding requirements that apply generally to defined benefit plans that 
are not multiemployer plans. Section 430(h)(3) contains rules regarding 
the mortality tables to be used under section 430. Under section 
430(h)(3)(A), the Secretary is to prescribe by regulation mortality 
tables to be used in determining any present value or making any 
computation under section 430.\28\ Under section 430(h)(3)(B), the

[[Page 46397]]

Secretary is required to revise any mortality table in effect under 
section 430(h)(3)(A) at least every 10 years to reflect actual 
mortality experience of pension plan participants and projected trends 
in that experience.
---------------------------------------------------------------------------

    \28\ Those mortality tables must be based on the actual 
mortality experience of pension plan participants and projected 
trends in that experience. In prescribing those mortality tables, 
the Secretary is required to take into account results of available 
independent studies of mortality of individuals covered by pension 
plans.
---------------------------------------------------------------------------

    Section 430(h)(3)(C) prescribes rules for a plan sponsor's use of 
substitute mortality tables reflecting the specific mortality 
experience of a plan's population. Section 503 of the Bipartisan Budget 
Act of 2015 requires certain changes in the rules for developing a 
plan's substitute mortality tables.
    The existing regulations regarding mortality tables were issued in 
2008, for use beginning in 2008. Those tables were based on a study of 
mortality experience of pension plan participants covering the years 
1990-1994 that was published in 2000. Since that time, studies have 
shown that people are living longer. For example, a study that RPEC 
published in 2014 indicates that the mortality tables issued under the 
2008 general mortality table regulations no longer reflect the actual 
mortality experience of pension plan participants and projected trends 
in that experience. In accordance with section 430(h)(3)(B), the 
Secretary is required to revise the mortality tables in the existing 
regulations as a result of these changes in the actual mortality 
experience and projected trends in that experience. In addition, 
changes in the existing regulations regarding substitute mortality 
tables are required under the provisions of the Bipartisan Budget Act 
of 2015.
2. Affected Population
    The final regulations affect participants in private-sector defined 
benefit plans and employers sponsoring those plans.
3. Baseline and Summary of Impacts
    As required by OMB Circular A-4, the following table summarizes the 
estimated economic impact of the final regulations. The baseline for 
this estimate is the mortality tables issued under the existing 
regulations. Because the new tables reflect the fact that participants 
are living longer, the primary impact of the final regulations is to 
increase the reported liability for future benefit payments from 
pension plans; this higher reported liability will result in higher 
pension contributions. The higher liability will also result in an 
increase in PBGC premiums, which are a function of a plan's funded 
status. Because pension contributions and premiums are deductible from 
firms' incomes, tax revenues will fall.
    As described in the effective date discussion in section II.D of 
the Explanation of Provisions portion of this preamble, these 
regulations include an option for a plan sponsor that is not using 
plan-specific mortality tables to delay the application of the new 
tables in certain circumstances. Because it is difficult to predict how 
many plan sponsors will utilize this option, the following tables 
provide a range of estimates of the economic impact of these 
regulations. The first row of numbers in the tables, labeled ``full 
take-up amount,'' is based on the assumption that all plan sponsors 
will use the option to delay the application of the new mortality 
tables; the second row of numbers, labeled ``no take-up amount,'' is 
based on the assumption that no plan sponsors will use the option to 
delay application of the new mortality tables. As noted in the 
effective date discussion in section II.D of the Explanation of 
Provisions portion of this preamble, the use of this option will not 
affect the mortality table used to determine minimum present value 
under section 417(e).
---------------------------------------------------------------------------

    \29\ The present values are discounted to the beginning of 2019.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                   Year                        2018       2019       2020       2021       2022       2023       2024       2025       2026       2027
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              Estimated change in tax revenue (in millions of 2017 dollars)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Full take-up amount.......................          0       -123       -499       -914     -1,170     -1,278     -1,216     -1,081       -807       -353
No take-up amount.........................        -84       -362       -717     -1,025     -1,241     -1,314     -1,238     -1,042       -604       -228
--------------------------------------------------------------------------------------------------------------------------------------------------------
Present Value \29\ with full take-up of delay option (3% Discount Rate): -$6,372 million
Present Value with no take-up of delay option (3% Discount Rate): -$6,821 million
Present Value with full take-up of delay option (7% Discount Rate): -$5,245 million
Present Value with no take-up of delay option (7% Discount Rate): -$5,718 million
Annualized Estimate with full take-up of delay option (3% Discount Rate): -$747 million
Annualized Estimate with no take-up of delay option (3% Discount Rate): -$800 million
Annualized Estimate with full take-up of delay option (7% Discount Rate): -$747 million
Annualized Estimate with no take-up of delay option (7% Discount Rate): -$814 million
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             Estimated change in contributions (in millions of 2017 dollars)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Full take-up amount.......................          0      2,933      4,873      6,071      6,574      6,069      5,322      3,667        750        407
No take-up amount.........................      2,151      3,631      5,418      6,391      6,694      6,194      5.373      1,751        815        797
--------------------------------------------------------------------------------------------------------------------------------------------------------
Present Value with full take-up of delay option (3% Discount Rate): $32,417 million
Present Value with no take-up of delay option (3% Discount Rate): $35,100 million
Present Value with full take-up of delay option (7% Discount Rate): $27,784 million
Present Value with no take-up of delay option (7% Discount Rate): $30,595 million
Annualized Estimate with full take-up of delay option (3% Discount Rate): $3,800 million
Annualized Estimate with no take-up of delay option (3% Discount Rate): $4,115 million
Annualized Estimate with full take-up of delay option (7% Discount Rate): $3,956 million
Annualized Estimate with no take-up of delay option (7% Discount Rate): $4,356 million
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             Estimated change in PBGC premiums (in millions of 2017 dollars)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Full take-up amount.......................          0        293        287        187         91          0          0          0          0         81
No take-up amount.........................        293        287        280        183         89          0          0          0          0         80
--------------------------------------------------------------------------------------------------------------------------------------------------------
Present Value with full take-up of delay option (3% Discount Rate): 869 million
Present Value with no take-up of delay option (3% Discount Rate): 1,143 million
Present Value with full take-up of delay option (7% Discount Rate): $791 million
Present Value with no take-up of delay option (7% Discount Rate): $1,067 million
Annualized Estimate with full take-up of delay option (3% Discount Rate): $102 million

[[Page 46398]]

 
Annualized Estimate with no take-up of delay option (3% Discount Rate): $134 million
Annualized Estimate with full take-up of delay option (7% Discount Rate): $113 million
Annualized Estimate with no take-up of delay option (7% Discount Rate): $152 million
--------------------------------------------------------------------------------------------------------------------------------------------------------

    For pension payments that are paid over a retiree's lifetime, the 
actual liability will depend on how long the retiree actually lives, 
and the impact of reflecting longer life expectancies in the 
calculation of present values under these regulations will merely 
accelerate the time when additional contributions attributable to 
longer lifetimes will need to be made. For pension payments that are 
lump-sum settlements in lieu of lifetime payments, the new tables will 
increase the amount of the lump sum. If the plan has a lump sum-based 
benefit formula, such as a cash balance plan, there will be no impact 
on the amount of a lump sum, but the optional annuity may be 
smaller.\30\ However, it is difficult to quantify the impact of these 
changes.
---------------------------------------------------------------------------

    \30\ The optional annuity may be smaller because, when 
converting the lump sum in which the participant's benefit is stated 
under the plan to an stream of annuity payments for the life of the 
participant (and the life of the participant's spouse if 
applicable), the lifetime(s) over which the payments must be paid 
will generally be assumed to be longer if the new tables are used 
for this purpose rather than the prior tables. To pay a fixed sum 
over a longer period, the amount of the periodic payments must be 
reduced. However, a plan is not required to use these tables for 
this purpose and a recent study indicates that relatively few 
participants take an annuity distribution from plans with lump sum 
based benefit formulas See Sudipto Banerjee, Ph.D., Employee 
Benefits Research Institute, Issue Brief: Annuity and Lump-Sum 
Decisions in Defined Benefit Plans: The Role of Plan Rules, January 
2013, available at https://www.ebri.org/pdf/briefspdf/EBRI_IB_01-13.No381.LSDs2.pdf.
---------------------------------------------------------------------------

4. Cost Associated With the Regulation
    Substantially all of the amounts involved (decreased tax revenue, 
increased plan contributions and PBGC premiums) constitute transfer 
payments, rather than costs. This is because these amounts are monetary 
payments from one entity to another that do not affect total resources 
available to society.
    We believe that the incremental administrative costs to implement 
this regulation are negligible, because plan sponsors would have to 
incur the same costs to update their plan administration software to 
reflect the new mortality tables under these regulations as they would 
incur in implementing the annual update to the mortality tables that 
would apply in the absence of these regulations. Moreover, the specific 
mortality rates used to calculate benefits for individuals normally are 
not provided to individual plan participants, so there will be no need 
to distribute information about the new mortality tables. Rather, plan 
sponsors and administrators provide individual participants who are 
considering retiring in the near future with individualized estimates 
of their benefits and that process is not dependent on the specific 
mortality rates used to determine benefits under the plan. Furthermore, 
Treasury and the IRS are issuing these regulations at a similar time of 
year as mortality tables were issued in prior years (and close in time 
to the issuance of the earliest interest rates that may be used in 
calculating the amount of a lump sum benefit to be distributed during a 
plan year beginning in 2018). In other words, these costs are included 
in the baseline of the analysis, not as new incremental costs 
associated with this rulemaking.
    In terms of the use of the mortality tables for purposes of 
applying the funding requirements of section 430, these regulations 
(like the current regulations) permit actuaries to use static mortality 
tables that approximate the present value determined using the 
generational mortality tables. Even if a plan's actuary chooses to use 
generational mortality tables (including plan-specific mortality 
tables) instead of the static mortality tables, actuarial software 
capable of applying that approach (including generational mortality 
tables determined using mortality improvement rates that vary by both 
age and calendar year) should be readily available, as such 
generational mortality tables determined using varying mortality 
improvement rates have been used routinely for financial reporting 
purposes by large employers since the Mortality Improvement Scale MP-
2014 Report was issued in 2014. In addition, these regulations permit 
any previously approved plan-specific mortality tables to continue to 
be used for the duration of the original approval period. Accordingly, 
any additional cost as a result of the issuance of these regulations 
should be negligible.

Regulatory Flexibility Act (5 U.S.C. Chapter 6)

    It is hereby certified that this rule will not have a significant 
economic impact on a substantial number of small entities. This rule 
applies to all employers that sponsor defined benefit plans regardless 
of size. As stated above, this rule implements the statutorily-required 
updates and any compliance costs related to this rule are small and are 
consistent with previously issued annual updates.
    Pursuant to section 7805(f) of the Internal Revenue Code, the 
notice of proposed rulemaking preceding these regulations was submitted 
to the Chief Counsel for Advocacy of the Small Business Administration 
for comment on its impact on small business.

Drafting Information

    The principal authors of these regulations are Arslan Malik and 
Linda S.F. Marshall of the Office of Associate Chief Counsel (Tax 
Exempt and Government Entities). However, other personnel from Treasury 
and the IRS participated in the development of these regulations.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 1 is amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read, in 
part, as follows:

    Authority:  26 U.S.C. 7805 * * *


0
Par. 2. Section 1.430(h)(3)-1 is revised to read as follows:


Sec.  1.430(h)(3)-1  Mortality tables used to determine present value.

    (a) Basis for mortality tables--(1) In general. Pursuant to section 
430(h)(3)(A), this section provides generally applicable mortality 
tables that are used to determine present value for purposes of section 
430, and rules regarding the use of those mortality tables. Either the 
generational mortality tables under paragraph (a)(2) of this section or 
the static mortality tables under paragraph (a)(3) of this section may 
be used for a plan. In lieu of using the mortality tables provided 
under this section, plan-specific substitute mortality tables may be 
used pursuant to section 430(h)(3)(C), provided that the requirements 
of Sec.  1.430(h)(3)-2 are satisfied. Mortality tables that may be used 
with respect to disabled

[[Page 46399]]

individuals are provided in guidance published in the Internal Revenue 
Bulletin. See Sec.  601.601(d)(2)(ii)(b) of this chapter.
    (2) Generational mortality tables--(i) In general--(A) Use of 
generational mortality tables. The generational mortality tables that 
are permitted to be used under section 430(h)(3)(A) and paragraph 
(a)(1) of this section are determined using the base mortality tables 
described in paragraph (a)(2)(i)(B) of this section and the mortality 
improvement rates described in paragraph (a)(2)(i)(C) of this section.
    (B) Base mortality tables. The base mortality tables are set forth 
in paragraph (d) of this section. The base year for those tables is 
2006.
    (C) Mortality improvement rates. The mortality improvement rates 
for valuation dates occurring during 2018 are the mortality improvement 
rates contained in the Mortality Improvement Scale MP-2016 Report 
(issued by the Retirement Plans Experience Committee (RPEC) of the 
Society of Actuaries and available at www.soa.org/Research/Experience-Study/Pension/research-2016-mp.aspx). For later years, updated 
mortality improvement rates that take into account new data for 
mortality improvement trends of the general population will be provided 
in guidance published in the Internal Revenue Bulletin. See Sec.  
601.601(d)(2)(ii)(b) of this chapter.
    (D) Application of mortality improvement rates. Under the 
generational mortality tables described in this paragraph (a)(2), the 
probability of an individual's death at a particular age in the future 
is determined as the individual's base mortality rate that applies at 
that age (that is, the applicable mortality rate from the table set 
forth in paragraph (d) of this section for that age, gender, and status 
as an annuitant or a nonannuitant) multiplied by the cumulative 
mortality improvement factor for the individual's gender and for that 
age for the period from 2006 through the calendar year in which the 
individual is projected to reach the particular age. Paragraph 
(a)(2)(ii) of this section shows how the base mortality tables in 
paragraph (d) of this section and the mortality improvement rates for 
valuation dates occurring during 2018 are combined to determine 
projected mortality rates.
    (E) Cumulative mortality improvement factor. The cumulative 
mortality improvement factor for an age and gender for a period is the 
product of the annual mortality improvement factors for that age and 
gender for each year within that period.
    (F) Annual mortality improvement factor. The annual mortality 
improvement factor for an age and gender for a year is 1 minus the 
mortality improvement rate that applies for that age and gender for 
that year.
    (ii) Example of calculation--(A) Calculation of mortality rate. The 
mortality rate for 2018 that is applied to male annuitants who are age 
66 in 2018 is equal to the product of the mortality rate for 2006 that 
applied to male annuitants who were age 66 in 2006 (0.013855) and the 
cumulative mortality improvement factor for age 66 males from 2006 to 
2018. The cumulative mortality improvement factor for age 66 males for 
the period from 2006 to 2018 is 0.8929, and the mortality rate for 2018 
for male annuitants who are age 66 in that year would be 0.012371, as 
shown in the following table.

----------------------------------------------------------------------------------------------------------------
                                                                      Annual
                                                   Scale MP-2016     mortality      Cumulative
                                                     mortality      improvement      mortality
                  Calendar year                     improvement     factor  (1-     improvement   Mortality rate
                                                       rate        scale MP-2016      factor
                                                                       rate)
----------------------------------------------------------------------------------------------------------------
2006............................................             n/a             n/a             n/a        0.013855
2007............................................          0.0237          0.9763          0.9763  ..............
2008............................................          0.0211          0.9789          0.9557  ..............
2009............................................          0.0180          0.9820          0.9385  ..............
2010............................................          0.0142          0.9858          0.9252  ..............
2011............................................          0.0099          0.9901          0.9160  ..............
2012............................................          0.0053          0.9947          0.9112  ..............
2013............................................          0.0043          0.9957          0.9072  ..............
2014............................................          0.0035          0.9965          0.9041  ..............
2015............................................          0.0030          0.9970          0.9014  ..............
2016............................................          0.0028          0.9972          0.8988  ..............
2017............................................          0.0030          0.9970          0.8961  ..............
2018............................................          0.0036          0.9964          0.8929        0.012371
----------------------------------------------------------------------------------------------------------------

    (B) Probability of survival for an individual. After the projected 
mortality rates are derived for each age for each year, the rates are 
used to calculate the present value of a benefit stream that depends on 
the probability of survival year-by-year. For example, for purposes of 
calculating the present value (for a 2018 valuation date) of future 
payments in a benefit stream payable for a male annuitant who is age 66 
in 2018, the probability of survival for the annuitant is based on the 
mortality rate for a male annuitant who is age 66 in 2018 (0.012371), 
and the projected mortality rate for a male annuitant who will be age 
67 in 2019 (0.013302), age 68 in 2020 (0.014321), and so on.
    (3) Static mortality tables. The static mortality tables that are 
permitted to be used under section 430(h)(3)(A) and paragraph (a)(1) of 
this section are updated annually by the IRS according to the 
methodology described in paragraph (c)(2) of this section. Paragraph 
(e) of this section sets forth static tables that are permitted to be 
used for valuation dates in 2018. For valuation dates in later years, 
static mortality tables will be provided in guidance published in the 
Internal Revenue Bulletin. See Sec.  601.601(d)(2)(ii)(b) of this 
chapter.
    (b) Use of the tables--(1) Separate tables for annuitants and 
nonannuitants--(i) In general. Separate tables are provided for use for 
annuitants and nonannuitants. The nonannuitant mortality table is 
applied to determine the probability of survival for a nonannuitant for 
the period before the nonannuitant is projected to commence receiving 
benefits. The annuitant mortality table is applied to determine the 
present value of benefits for each annuitant. In addition, the 
annuitant mortality table is applied for each nonannuitant with respect 
to each assumed commencement of benefits for the period beginning with 
that assumed

[[Page 46400]]

commencement. For purposes of this section, an annuitant means a plan 
participant who has commenced receiving benefits, and a nonannuitant 
means a plan participant who has not yet commenced receiving benefits 
(for example, an active employee or a terminated vested participant). A 
participant whose benefit has partially commenced is treated as an 
annuitant with respect to the portion of the benefit that has commenced 
and treated as a nonannuitant with respect to the balance of the 
benefit. In addition, with respect to a beneficiary of a participant, 
the annuitant mortality table applies for the period beginning with 
each assumed commencement of benefits for the participant. If the 
participant has died (or to the extent the participant is assumed to 
die before commencing benefits), the annuitant mortality table applies 
with respect to the beneficiary for the period beginning with each 
assumed commencement of benefits for the beneficiary.
    (ii) Examples of calculation using separate annuitant and 
nonannuitant tables. With respect to a 45-year-old active participant 
who is projected to commence receiving an annuity at age 55, the 
funding target is determined using the nonannuitant mortality table for 
the period before the participant attains age 55 (so that, if the 
static mortality tables are used pursuant to paragraph (a)(3) of this 
section, the probability of an active male participant living from age 
45 to age 55 using the table that applies for a valuation date in 2018 
is 0.988857) and using the annuitant mortality table for the period 
ages 55 and above. Similarly, for a 45-year-old terminated vested 
participant who is projected to commence an annuity at age 65, the 
funding target is determined using the nonannuitant mortality table for 
the period before the participant attains age 65 and using the 
annuitant mortality table for ages 65 and above.
    (2) Small plan tables. If static mortality tables are used pursuant 
to paragraph (a)(3) of this section, as an alternative to the separate 
static tables specified for annuitants and nonannuitants pursuant to 
paragraph (b)(1) of this section, combined static tables that apply the 
same mortality rates to both annuitants and nonannuitants are permitted 
to be used for a small plan. For this purpose, a small plan is defined 
as a plan with 500 or fewer total participants (including both active 
and inactive participants and beneficiaries of deceased participants) 
on the valuation date. The combined static tables that are permitted to 
be used for small plans pursuant to this paragraph (b)(2) are 
constructed from the separate nonannuitant and annuitant static 
mortality tables using the weighting factors for small plans that are 
set forth in paragraph (d) of this section. The weighting factors are 
applied to develop these combined static tables using the following 
equation: Combined mortality rate = [nonannuitant rate * (1 - weighting 
factor)] + [annuitant rate * weighting factor].
    (c) Static tables--(1) Source of rates. The static mortality tables 
that are used pursuant to paragraph (a)(3) of this section are 
determined using the base mortality tables described in paragraph 
(a)(2)(i)(B) of this section taking into account the mortality 
improvement rates described in paragraph (a)(2)(i)(C) of this section, 
in accordance with the rules of paragraph (c)(3) of this section.
    (2) Selection of static tables. The static mortality tables that 
are used for a valuation date are the static mortality tables for the 
calendar year that contains the valuation date.
    (3) Projection of mortality improvements--(i) General rule. Except 
as provided in paragraph (c)(3)(iii) of this section, the static 
mortality tables for a calendar year are determined by multiplying the 
applicable mortality rate for each age from the base mortality tables 
by both--
    (A) The cumulative mortality improvement factor (determined under 
the rules of paragraph (a)(2) of this section) for the period from 2006 
through that calendar year; and
    (B) The cumulative mortality improvement factor (determined under 
the rules of paragraph (a)(2) of this section) for the period beginning 
in that calendar year and continuing beyond that calendar year for the 
number of years in the projection period described in paragraph 
(c)(3)(ii) of this section.
    (ii) Projection period for static mortality tables--(A) In general. 
The projection period is 8 years for males and 9 years for females, as 
adjusted based on age as provided in paragraph (c)(3)(ii)(B) of this 
section.
    (B) Age adjustment. For ages below 80, the projection period is 
increased by 1 year for each year below age 80. For ages above 80, the 
projection period is reduced (but not below zero) by \1/3\ year for 
each year above 80.
    (iii) Fractional projection periods. If for an age the number of 
years in the projection period determined under this paragraph (c)(3) 
is not a whole number, then the mortality rate for that age is 
determined by using linear interpolation between--
    (A) The mortality rate for that age that would be determined under 
paragraph (c)(3)(i) of this section if the number of years in the 
projection period were the next lower whole number; and
    (B) The mortality rate for that age that would be determined under 
paragraph (c)(3)(i) of this section if the number of years in the 
projection period were the next higher whole number.
    (iv) Example. The following example illustrates how the mortality 
rates in the static mortality tables issued under the provisions of 
this paragraph (c) are calculated:

    Example.  At age 85, the projection period for a male is 6\1/3\ 
years (8 years minus \1/3\ year for each of the 5 years above age 
80). For a valuation date in 2018, the mortality rate in the static 
mortality table for an 85-year-old male is based on a projection of 
mortality improvement for 6\1/3\ years beyond 2018. Under paragraph 
(c)(3)(iii) of this section, the mortality rate for an 85-year-old 
male annuitant in the static mortality table for 2018 is \2/3\ times 
the projected mortality rate for a male annuitant that age in 2024 
plus \1/3\ times the projected mortality rate for a male annuitant 
that age in 2025. Accordingly, the mortality rate for an 85-year-old 
male annuitant in the static mortality table for 2018 is 0.075196 
(\2/3\ times the projected mortality rate for an 85-year old male 
annuitant in 2024 (0.075447) plus \1/3\ times the projected 
mortality rate for an 85-year old male annuitant in 2025 
(0.074693)).

    (d) Base mortality tables. The following are the base mortality 
tables. The base year for these tables is 2006.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Males                                          Females
                                                         -----------------------------------------------------------------------------------------------
                           Age                                                               Weighting                                       Weighting
                                                           Non-annuitant     Annuitant      factor for     Non-annuitant     Annuitant      factor for
                                                                                            small plans                                     small plans
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.......................................................        0.008878        0.008878               0        0.007278        0.007278               0
1.......................................................        0.000515        0.000515               0        0.000451        0.000451               0
2.......................................................        0.000348        0.000348               0        0.000295        0.000295               0
3.......................................................        0.000289        0.000289               0        0.000220        0.000220               0

[[Page 46401]]

 
4.......................................................        0.000225        0.000225               0        0.000165        0.000165               0
5.......................................................        0.000197        0.000197               0        0.000149        0.000149               0
6.......................................................        0.000177        0.000177               0        0.000137        0.000137               0
7.......................................................        0.000156        0.000156               0        0.000127        0.000127               0
8.......................................................        0.000132        0.000132               0        0.000117        0.000117               0
9.......................................................        0.000107        0.000107               0        0.000109        0.000109               0
10......................................................        0.000090        0.000090               0        0.000102        0.000102               0
11......................................................        0.000095        0.000095               0        0.000105        0.000105               0
12......................................................        0.000142        0.000142               0        0.000121        0.000121               0
13......................................................        0.000187        0.000187               0        0.000137        0.000137               0
14......................................................        0.000230        0.000230               0        0.000151        0.000151               0
15......................................................        0.000274        0.000274               0        0.000165        0.000165               0
16......................................................        0.000318        0.000318               0        0.000177        0.000177               0
17......................................................        0.000364        0.000364               0        0.000187        0.000187               0
18......................................................        0.000412        0.000412               0        0.000196        0.000196               0
19......................................................        0.000463        0.000463               0        0.000202        0.000202               0
20......................................................        0.000510        0.000510               0        0.000202        0.000202               0
21......................................................        0.000552        0.000552               0        0.000197        0.000197               0
22......................................................        0.000587        0.000587               0        0.000191        0.000191               0
23......................................................        0.000599        0.000599               0        0.000190        0.000190               0
24......................................................        0.000594        0.000594               0        0.000188        0.000188               0
25......................................................        0.000545        0.000545               0        0.000186        0.000186               0
26......................................................        0.000510        0.000510               0        0.000186        0.000186               0
27......................................................        0.000486        0.000486               0        0.000188        0.000188               0
28......................................................        0.000472        0.000472               0        0.000192        0.000192               0
29......................................................        0.000468        0.000468               0        0.000198        0.000198               0
30......................................................        0.000470        0.000470               0        0.000209        0.000209               0
31......................................................        0.000480        0.000480               0        0.000222        0.000222               0
32......................................................        0.000495        0.000495               0        0.000238        0.000238               0
33......................................................        0.000514        0.000514               0        0.000257        0.000257               0
34......................................................        0.000534        0.000534               0        0.000278        0.000278               0
35......................................................        0.000557        0.000557               0        0.000301        0.000301               0
36......................................................        0.000581        0.000581               0        0.000325        0.000325               0
37......................................................        0.000611        0.000611               0        0.000355        0.000355               0
38......................................................        0.000648        0.000648               0        0.000389        0.000389               0
39......................................................        0.000694        0.000694               0        0.000428        0.000428               0
40......................................................        0.000750        0.000750               0        0.000471        0.000471               0
41......................................................        0.000814        0.000823           .0045        0.000518        0.000515               0
42......................................................        0.000890        0.000969           .0091        0.000570        0.000603               0
43......................................................        0.000982        0.001188           .0136        0.000628        0.000735               0
44......................................................        0.001088        0.001480           .0181        0.000691        0.000911               0
45......................................................        0.001207        0.001846           .0226        0.000758        0.001131           .0084
46......................................................        0.001342        0.002285           .0272        0.000831        0.001395           .0167
47......................................................        0.001487        0.002797           .0317        0.000908        0.001703           .0251
48......................................................        0.001643        0.003382           .0362        0.000986        0.002055           .0335
49......................................................        0.001807        0.004040           .0407        0.001065        0.002451           .0419
50......................................................        0.001979        0.004771           .0453        0.001151        0.002891           .0502
51......................................................        0.002159        0.005059           .0498        0.001242        0.002993           .0586
52......................................................        0.002351        0.005343           .0686        0.001344        0.003124           .0744
53......................................................        0.002539        0.005592           .0953        0.001458        0.003291           .0947
54......................................................        0.002741        0.005839           .1288        0.001588        0.003499           .1189
55......................................................        0.002967        0.006102           .2066        0.001735        0.003755           .1897
56......................................................        0.003231        0.006399           .3173        0.001902        0.004065           .2857
57......................................................        0.003548        0.006746           .3780        0.002091        0.004435           .3403
58......................................................        0.003932        0.007155           .4401        0.002302        0.004869           .3878
59......................................................        0.004396        0.007639           .4986        0.002537        0.005373           .4360
60......................................................        0.004954        0.008211           .5633        0.002795        0.005942           .4954
61......................................................        0.005616        0.008878           .6338        0.003080        0.006581           .5805
62......................................................        0.006392        0.009646           .7103        0.003388        0.007283           .6598
63......................................................        0.007291        0.010523           .7902        0.003724        0.008043           .7520
64......................................................        0.008320        0.011514           .8355        0.004089        0.008870           .8043
65......................................................        0.009486        0.012621           .8832        0.004482        0.009760           .8552
66......................................................        0.010668        0.013855           .9321        0.005004        0.010731           .9118
67......................................................        0.011973        0.015221           .9510        0.005575        0.011790           .9367
68......................................................        0.013414        0.016736           .9639        0.006205        0.012952           .9523
69......................................................        0.015006        0.018421           .9714        0.006898        0.014226           .9627
70......................................................        0.016761        0.020288           .9740        0.007662        0.015628           .9661
71......................................................        0.018690        0.022348           .9766        0.008507        0.017170           .9695
72......................................................        0.020824        0.024638           .9792        0.009438        0.018861           .9729
73......................................................        0.023176        0.027176           .9818        0.010470        0.020723           .9763

[[Page 46402]]

 
74......................................................        0.025770        0.029992           .9844        0.011615        0.022780           .9797
75......................................................        0.028623        0.033113           .9870        0.012887        0.025057           .9830
76......................................................        0.031761        0.036585           .9896        0.014301        0.027590           .9864
77......................................................        0.035214        0.040457           .9922        0.015885        0.030438           .9898
78......................................................        0.039007        0.044778           .9948        0.017656        0.033653           .9932
79......................................................        0.043169        0.049605           .9974        0.019639        0.037296           .9966
80......................................................        0.047750        0.055022             1.0        0.021859        0.041440             1.0
81......................................................        0.049804        0.061087             1.0        0.023791        0.046181             1.0
82......................................................        0.053911        0.067902             1.0        0.027655        0.051564             1.0
83......................................................        0.060072        0.075550             1.0        0.033451        0.057714             1.0
84......................................................        0.068286        0.084162             1.0        0.041179        0.064709             1.0
85......................................................        0.078554        0.093775             1.0        0.050838        0.072601             1.0
86......................................................        0.090876        0.104507             1.0        0.062429        0.081490             1.0
87......................................................        0.105251        0.116487             1.0        0.075952        0.091444             1.0
88......................................................        0.121680        0.129770             1.0        0.091407        0.102470             1.0
89......................................................        0.140162        0.144470             1.0        0.108794        0.114635             1.0
90......................................................        0.160698        0.160698             1.0        0.128113        0.128113             1.0
91......................................................        0.177741        0.177741             1.0        0.142619        0.142619             1.0
92......................................................        0.195154        0.195154             1.0        0.157939        0.157939             1.0
93......................................................        0.212642        0.212642             1.0        0.173886        0.173886             1.0
94......................................................        0.230055        0.230055             1.0        0.190319        0.190319             1.0
95......................................................        0.247257        0.247257             1.0        0.207191        0.207191             1.0
96......................................................        0.265940        0.265940             1.0        0.225057        0.225057             1.0
97......................................................        0.284940        0.284940             1.0        0.243507        0.243507             1.0
98......................................................        0.304432        0.304432             1.0        0.262587        0.262587             1.0
99......................................................        0.324272        0.324272             1.0        0.282171        0.282171             1.0
100.....................................................        0.344364        0.344364             1.0        0.302162        0.302162             1.0
101.....................................................        0.364420        0.364420             1.0        0.322282        0.322282             1.0
102.....................................................        0.384058        0.384058             1.0        0.342371        0.342371             1.0
103.....................................................        0.403188        0.403188             1.0        0.362210        0.362210             1.0
104.....................................................        0.421533        0.421533             1.0        0.381534        0.381534             1.0
105.....................................................        0.438903        0.438903             1.0        0.400321        0.400321             1.0
106.....................................................        0.455492        0.455492             1.0        0.418418        0.418418             1.0
107.....................................................        0.470810        0.470810             1.0        0.435390        0.435390             1.0
108.....................................................        0.484965        0.484965             1.0        0.451459        0.451459             1.0
109.....................................................        0.498023        0.498023             1.0        0.466408        0.466408             1.0
110.....................................................        0.509768        0.509768             1.0        0.480123        0.480123             1.0
111.....................................................        0.512472        0.512472             1.0        0.492664        0.492664             1.0
112.....................................................        0.509296        0.509296             1.0        0.503970        0.503970             1.0
113.....................................................        0.506193        0.506193             1.0        0.507361        0.507361             1.0
114.....................................................        0.503061        0.503061             1.0        0.503564        0.503564             1.0
115.....................................................        0.500000        0.500000             1.0        0.500000        0.500000             1.0
116.....................................................        0.500000        0.500000             1.0        0.500000        0.500000             1.0
117.....................................................        0.500000        0.500000             1.0        0.500000        0.500000             1.0
118.....................................................        0.500000        0.500000             1.0        0.500000        0.500000             1.0
119.....................................................        0.500000        0.500000             1.0        0.500000        0.500000             1.0
120.....................................................        1.000000        1.000000             1.0        1.000000        1.000000             1.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

    (e) Static tables for 2018. The following static mortality tables 
are used pursuant to paragraph (a)(3) of this section for determining 
present value or making any computation under section 430 with respect 
to valuation dates occurring during 2018.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Males                                          Females
                                                         -----------------------------------------------------------------------------------------------
                                                                                             Optional                                        Optional
                           Age                                                            combined table                                  combined table
                                                           Non-annuitant     Annuitant       for small     Non-annuitant     Annuitant       for small
                                                                                               plans                                           plans
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.......................................................        0.002420        0.002420        0.002420        0.002234        0.002234        0.002234
1.......................................................        0.000142        0.000142        0.000142        0.000140        0.000140        0.000140
2.......................................................        0.000097        0.000097        0.000097        0.000092        0.000092        0.000092
3.......................................................        0.000081        0.000081        0.000081        0.000070        0.000070        0.000070
4.......................................................        0.000064        0.000064        0.000064        0.000053        0.000053        0.000053
5.......................................................        0.000056        0.000056        0.000056        0.000048        0.000048        0.000048
6.......................................................        0.000051        0.000051        0.000051        0.000045        0.000045        0.000045
7.......................................................        0.000046        0.000046        0.000046        0.000042        0.000042        0.000042
8.......................................................        0.000039        0.000039        0.000039        0.000039        0.000039        0.000039

[[Page 46403]]

 
9.......................................................        0.000032        0.000032        0.000032        0.000037        0.000037        0.000037
10......................................................        0.000027        0.000027        0.000027        0.000035        0.000035        0.000035
11......................................................        0.000029        0.000029        0.000029        0.000036        0.000036        0.000036
12......................................................        0.000044        0.000044        0.000044        0.000042        0.000042        0.000042
13......................................................        0.000058        0.000058        0.000058        0.000048        0.000048        0.000048
14......................................................        0.000072        0.000072        0.000072        0.000053        0.000053        0.000053
15......................................................        0.000087        0.000087        0.000087        0.000059        0.000059        0.000059
16......................................................        0.000102        0.000102        0.000102        0.000064        0.000064        0.000064
17......................................................        0.000118        0.000118        0.000118        0.000068        0.000068        0.000068
18......................................................        0.000135        0.000135        0.000135        0.000072        0.000072        0.000072
19......................................................        0.000153        0.000153        0.000153        0.000075        0.000075        0.000075
20......................................................        0.000170        0.000170        0.000170        0.000076        0.000076        0.000076
21......................................................        0.000192        0.000192        0.000192        0.000078        0.000078        0.000078
22......................................................        0.000214        0.000214        0.000214        0.000080        0.000080        0.000080
23......................................................        0.000229        0.000229        0.000229        0.000084        0.000084        0.000084
24......................................................        0.000238        0.000238        0.000238        0.000087        0.000087        0.000087
25......................................................        0.000230        0.000230        0.000230        0.000090        0.000090        0.000090
26......................................................        0.000226        0.000226        0.000226        0.000094        0.000094        0.000094
27......................................................        0.000226        0.000226        0.000226        0.000099        0.000099        0.000099
28......................................................        0.000230        0.000230        0.000230        0.000105        0.000105        0.000105
29......................................................        0.000238        0.000238        0.000238        0.000111        0.000111        0.000111
30......................................................        0.000249        0.000249        0.000249        0.000120        0.000120        0.000120
31......................................................        0.000263        0.000263        0.000263        0.000130        0.000130        0.000130
32......................................................        0.000278        0.000278        0.000278        0.000142        0.000142        0.000142
33......................................................        0.000294        0.000294        0.000294        0.000155        0.000155        0.000155
34......................................................        0.000309        0.000309        0.000309        0.000168        0.000168        0.000168
35......................................................        0.000323        0.000323        0.000323        0.000182        0.000182        0.000182
36......................................................        0.000336        0.000336        0.000336        0.000196        0.000196        0.000196
37......................................................        0.000350        0.000350        0.000350        0.000213        0.000213        0.000213
38......................................................        0.000366        0.000366        0.000366        0.000231        0.000231        0.000231
39......................................................        0.000385        0.000385        0.000385        0.000251        0.000251        0.000251
40......................................................        0.000410        0.000410        0.000410        0.000273        0.000273        0.000273
41......................................................        0.000438        0.000443        0.000438        0.000298        0.000296        0.000298
42......................................................        0.000474        0.000516        0.000474        0.000326        0.000344        0.000326
43......................................................        0.000518        0.000627        0.000519        0.000358        0.000419        0.000358
44......................................................        0.000573        0.000779        0.000577        0.000395        0.000520        0.000395
45......................................................        0.000636        0.000973        0.000644        0.000436        0.000651        0.000438
46......................................................        0.000712        0.001213        0.000726        0.000484        0.000813        0.000489
47......................................................        0.000798        0.001502        0.000820        0.000538        0.001010        0.000550
48......................................................        0.000896        0.001844        0.000930        0.000597        0.001245        0.000619
49......................................................        0.001005        0.002248        0.001056        0.000661        0.001522        0.000697
50......................................................        0.001128        0.002719        0.001200        0.000734        0.001844        0.000790
51......................................................        0.001265        0.002963        0.001350        0.000814        0.001961        0.000881
52......................................................        0.001418        0.003224        0.001542        0.000903        0.002099        0.000992
53......................................................        0.001580        0.003481        0.001761        0.001003        0.002263        0.001122
54......................................................        0.001761        0.003751        0.002017        0.001114        0.002454        0.001273
55......................................................        0.001964        0.004040        0.002393        0.001235        0.002673        0.001508
56......................................................        0.002200        0.004357        0.002884        0.001367        0.002921        0.001811
57......................................................        0.002474        0.004704        0.003317        0.001509        0.003200        0.002084
58......................................................        0.002796        0.005088        0.003805        0.001661        0.003512        0.002379
59......................................................        0.003174        0.005515        0.004341        0.001823        0.003860        0.002711
60......................................................        0.003613        0.005989        0.004951        0.001994        0.004238        0.003106
61......................................................        0.004122        0.006516        0.005639        0.002181        0.004659        0.003619
62......................................................        0.004705        0.007100        0.006406        0.002381        0.005119        0.004188
63......................................................        0.005364        0.007742        0.007243        0.002600        0.005616        0.004868
64......................................................        0.006111        0.008457        0.008071        0.002842        0.006165        0.005515
65......................................................        0.006940        0.009234        0.008966        0.003107        0.006766        0.006236
66......................................................        0.007779        0.010103        0.009945        0.003465        0.007430        0.007080
67......................................................        0.008697        0.011056        0.010940        0.003863        0.008170        0.007897
68......................................................        0.009709        0.012114        0.012027        0.004308        0.008993        0.008770
69......................................................        0.010836        0.013302        0.013231        0.004806        0.009912        0.009722
70......................................................        0.012093        0.014637        0.014571        0.005366        0.010945        0.010756
71......................................................        0.013486        0.016126        0.016064        0.006001        0.012111        0.011925
72......................................................        0.015044        0.017799        0.017742        0.006711        0.013412        0.013230
73......................................................        0.016794        0.019693        0.019640        0.007521        0.014886        0.014711
74......................................................        0.018751        0.021823        0.021775        0.008439        0.016552        0.016387
75......................................................        0.020950        0.024237        0.024194        0.009485        0.018443        0.018291
76......................................................        0.023428        0.026986        0.026949        0.010678        0.020600        0.020465
77......................................................        0.026183        0.030081        0.030051        0.012035        0.023061        0.022949
78......................................................        0.029308        0.033645        0.033622        0.013582        0.025888        0.025804

[[Page 46404]]

 
79......................................................        0.032774        0.037661        0.037648        0.015347        0.029144        0.029097
80......................................................        0.036705        0.042295        0.042295        0.017347        0.032886        0.032886
81......................................................        0.038556        0.047291        0.047291        0.019058        0.036992        0.036992
82......................................................        0.042087        0.053009        0.053009        0.022345        0.041662        0.041662
83......................................................        0.047283        0.059466        0.059466        0.027251        0.047017        0.047017
84......................................................        0.054248        0.066860        0.066860        0.033811        0.053130        0.053130
85......................................................        0.062990        0.075196        0.075196        0.042053        0.060056        0.060056
86......................................................        0.073605        0.084646        0.084646        0.052009        0.067888        0.067888
87......................................................        0.086115        0.095308        0.095308        0.063725        0.076724        0.076724
88......................................................        0.100513        0.107196        0.107196        0.077205        0.086549        0.086549
89......................................................        0.116840        0.120431        0.120431        0.092462        0.097426        0.097426
90......................................................        0.135087        0.135087        0.135087        0.109484        0.109484        0.109484
91......................................................        0.150610        0.150610        0.150610        0.122541        0.122541        0.122541
92......................................................        0.166534        0.166534        0.166534        0.136397        0.136397        0.136397
93......................................................        0.182546        0.182546        0.182546        0.150811        0.150811        0.150811
94......................................................        0.198598        0.198598        0.198598        0.165818        0.165818        0.165818
95......................................................        0.214442        0.214442        0.214442        0.181360        0.181360        0.181360
96......................................................        0.232944        0.232944        0.232944        0.198746        0.198746        0.198746
97......................................................        0.251903        0.251903        0.251903        0.216930        0.216930        0.216930
98......................................................        0.271612        0.271612        0.271612        0.235921        0.235921        0.235921
99......................................................        0.291889        0.291889        0.291889        0.255617        0.255617        0.255617
100.....................................................        0.312680        0.312680        0.312680        0.275938        0.275938        0.275938
101.....................................................        0.333720        0.333720        0.333720        0.296628        0.296628        0.296628
102.....................................................        0.354570        0.354570        0.354570        0.317471        0.317471        0.317471
103.....................................................        0.375136        0.375136        0.375136        0.338385        0.338385        0.338385
104.....................................................        0.395172        0.395172        0.395172        0.358868        0.358868        0.358868
105.....................................................        0.413945        0.413945        0.413945        0.379183        0.379183        0.379183
106.....................................................        0.432145        0.432145        0.432145        0.398878        0.398878        0.398878
107.....................................................        0.449197        0.449197        0.449197        0.417703        0.417703        0.417703
108.....................................................        0.465497        0.465497        0.465497        0.435384        0.435384        0.435384
109.....................................................        0.480869        0.480869        0.480869        0.452108        0.452108        0.452108
110.....................................................        0.495080        0.495080        0.495080        0.467928        0.467928        0.467928
111.....................................................        0.500557        0.500557        0.500557        0.482562        0.482562        0.482562
112.....................................................        0.500454        0.500454        0.500454        0.496164        0.496164        0.496164
113.....................................................        0.500352        0.500352        0.500352        0.502110        0.502110        0.502110
114.....................................................        0.500201        0.500201        0.500201        0.500952        0.500952        0.500952
115.....................................................        0.500000        0.500000        0.500000        0.500000        0.500000        0.500000
116.....................................................        0.500000        0.500000        0.500000        0.500000        0.500000        0.500000
117.....................................................        0.500000        0.500000        0.500000        0.500000        0.500000        0.500000
118.....................................................        0.500000        0.500000        0.500000        0.500000        0.500000        0.500000
119.....................................................        0.500000        0.500000        0.500000        0.500000        0.500000        0.500000
120.....................................................        1.000000        1.000000        1.000000        1.000000        1.000000        1.000000
--------------------------------------------------------------------------------------------------------------------------------------------------------

    (f) Effective/applicability date--(1) In general. Except as 
provided in paragraph (f)(2) of this section, this section applies to 
plan years beginning or after January 1, 2018.
    (2) Option to apply prior regulations in certain circumstances. For 
a plan for which substitute mortality tables are not used pursuant to 
Sec.  1.430(h)(3)-2 for a plan year beginning during 2018, mortality 
tables determined in accordance with Sec.  1.430(h)(3)-1 as in effect 
on December 31, 2017 (as contained in 26 CFR part 1 revised April 1, 
2017) may be used for purposes of applying the rules of section 430 for 
a valuation date occurring during 2018 if the plan sponsor--
    (i) Concludes that the use of mortality tables determined in 
accordance with this section for the plan year would be 
administratively impracticable or would result in an adverse business 
impact that is greater than de minimis; and
    (ii) Informs the actuary of the intent to apply the option under 
this paragraph (f)(2).

0
Par. 3. Section 1.430(h)(3)-2 is revised to read as follows:


Sec.  1.430(h)(3)-2  Plan-specific substitute mortality tables used to 
determine present value.

    (a) In general. This section provides rules for the use of 
substitute mortality tables under section 430(h)(3)(C) in determining 
any present value or making any computation under section 430 in 
accordance with Sec.  1.430(h)(3)-1(a)(1). To use substitute mortality 
tables for a plan, a plan sponsor must first obtain approval to use the 
tables in accordance with the procedures described in paragraph (b) of 
this section. Paragraph (c) of this section provides rules for the 
development of substitute mortality tables, including guidelines 
providing that a plan must have either fully or partially credible 
mortality information in order to use substitute mortality tables. 
Paragraph (d) of this section describes the requirements for full 
credibility. Paragraph (e) of this section describes the requirements 
for partial credibility. Paragraph (f) of this section provides special 
rules for newly-affiliated plans. Paragraph (g) of this section 
specifies the effective date and applicability date of this section. 
The Commissioner may, in revenue rulings and procedures, notices, or 
other guidance published in the Internal Revenue Bulletin (see Sec.  
601.601(d)(2)(ii)(b) of this chapter), provide additional guidance 
regarding approval and use of substitute mortality

[[Page 46405]]

tables under section 430(h)(3)(C) and related matters.
    (b) Procedures for obtaining approval to use substitute mortality 
tables--(1) Written request for approval to use substitute mortality 
tables--(i) General requirements. To use substitute mortality tables, a 
plan sponsor must first submit a written request to the Commissioner 
demonstrating that those substitute mortality tables meet the 
requirements of section 430(h)(3)(C) and this section. This request 
must specify the first plan year, and the term of years (not more than 
10), for which the tables are to apply.
    (ii) Time for written request. Substitute mortality tables may not 
be used for a plan year unless the plan sponsor submits the written 
request described in paragraph (b)(1)(i) of this section at least 7 
months before the first day of the first plan year for which the 
substitute mortality tables are to apply.
    (2) Commissioner's review of request--(i) In general. During the 
180-day period that begins on the date the plan sponsor submits a 
request for approval to use substitute mortality tables for a plan 
pursuant to this section, the Commissioner will determine whether the 
request for approval to use substitute mortality tables satisfies the 
requirements of this section (including any published guidance issued 
pursuant to paragraph (a) of this section), and will either approve or 
deny the request. The Commissioner will deny a request if the request 
fails to meet the requirements of this section or if the Commissioner 
determines that a substitute mortality table does not reflect the 
actual mortality experience of the applicable population.
    (ii) Request for additional information. The Commissioner may 
request additional information with respect to the submission and deny 
a request to use substitute mortality tables if the additional 
information is not provided in a timely manner.
    (iii) Deemed approval. Except as provided in paragraph (b)(2)(iv) 
of this section, if the Commissioner does not issue a denial within the 
180-day review period, the request is deemed to have been approved.
    (iv) Extension of time permitted. The Commissioner and a plan 
sponsor may, before the expiration of the 180-day review period, agree 
in writing to extend that period.
    (c) Development of substitute mortality tables--(1) Substitute 
mortality tables must be used for all plans in controlled group--(i) 
General rule. Except as otherwise provided in this paragraph (c), 
substitute mortality tables are permitted to be used for a plan for a 
plan year only if, for that plan year (or any portion of that plan 
year), substitute mortality tables are also approved and used for each 
other pension plan subject to the requirements of section 430 that is 
maintained by the plan sponsor and by each member of the plan sponsor's 
controlled group. For purposes of this section, the term controlled 
group means any group that is treated as a single employer under 
paragraph (b), (c), (m), or (o) of section 414. See paragraph (c)(7) of 
this section for special rules applicable to multiple-employer plans.
    (ii) Treatment of plans without credible mortality information. The 
rule of paragraph (c)(1)(i) of this section does not prohibit use of 
substitute mortality tables for one plan for a plan year if the only 
other plan or plans maintained by the plan sponsor (or by a member of 
the plan sponsor's controlled group) for which substitute mortality 
tables are not used are too small to have fully or partially credible 
mortality information for the plan year. For this purpose, the 
demonstration that neither males nor females under a plan have credible 
mortality information for a plan year must be made by analyzing the 
actual number of deaths over a period that is the same length as the 
longest experience study period used for any plan within the controlled 
group and that ends less than three years before the first day of the 
plan year.
    (2) Mortality experience requirements--(i) In general. Substitute 
mortality tables must reflect the actual mortality experience of the 
pension plan for which the tables will be used, and that mortality 
experience must consist of credible mortality information as described 
in paragraph (c)(2)(ii) of this section. Separate substitute mortality 
tables must be established for each gender and, except as provided in 
paragraph (d)(6) of this section, a substitute mortality table is 
permitted to be established for a gender only if the plan has credible 
mortality information for that gender. See paragraph (d)(5) of this 
section for rules permitting the use of substitute mortality tables for 
separate populations within a gender in certain circumstances.
    (ii) Credible mortality information--(A) In general. A plan has 
credible mortality information for a gender if and only if the 
mortality experience with respect to that gender satisfies the 
requirement for either full credibility (as described in paragraph (d) 
of this section) or partial credibility (as described in paragraph (e) 
of this section).
    (B) Simplified rule. Whether there is credible mortality 
information for a gender may be determined by only taking into account 
people who are at least age 50 and less than age 100. If there is 
credible mortality information for a gender using this simplified rule, 
the entire gender (not just those who are at least age 50 and less than 
age 100) has credible mortality information.
    (iii) Gender without credible mortality information--(A) In 
general. If, for the first plan year substitute mortality tables will 
be used for a plan, one gender has credible mortality information but 
the other gender does not have credible mortality information, then 
substitute mortality tables are established for the gender that has 
credible mortality information, and the mortality tables under Sec.  
1.430(h)(3)-1 are used for the gender that does not have credible 
mortality information. For a subsequent plan year, the plan sponsor may 
continue to use substitute mortality tables for the gender with 
credible mortality information without using substitute mortality 
tables for the other gender only if the other gender continues to lack 
credible mortality information for that subsequent plan year.
    (B) Demonstration of lack of credible mortality information for a 
gender. The demonstration that a gender does not have credible 
mortality information (that is, the individuals of that gender had 
fewer than the minimum number of actual deaths to have partial 
credibility, as described in paragraph (e)(1) of this section) for a 
plan year must be made by analyzing the actual number of deaths over a 
period that is the same length as the period for the experience study 
on which the substitute mortality tables are based and that ends less 
than three years before the first day of the plan year.
    (3) Determination of substitute mortality tables--(i) Requirement 
to use generational mortality table. A plan's substitute mortality 
tables must be generational mortality tables. A plan's substitute 
mortality tables are determined using the plan's base substitute 
mortality tables developed pursuant to paragraph (d) or (e) of this 
section and the mortality improvement factors described in paragraph 
(c)(3)(ii) of this section.
    (ii) Determination of mortality improvement factors. The mortality 
improvement factor for an age and gender is the cumulative mortality 
improvement factor determined under Sec.  1.430(h)(3)-1(a)(2)(i)(E) for 
that age and gender for the applicable period. The applicable period is 
the period beginning with the base year for the

[[Page 46406]]

base substitute mortality table determined under paragraph (d) or (e) 
of this section and ending in the calendar year in which the individual 
attains the age for which the probability of death is being determined. 
The base year for the base substitute mortality table is the calendar 
year that contains the day before the midpoint of the experience study 
period.
    (4) Disabled individuals. Under section 430(h)(3)(D), separate 
mortality tables are permitted to be used for certain disabled 
individuals. If the separate mortality tables issued under section 
430(h)(3)(D) for certain disabled individuals are used, then those 
disabled individuals are disregarded for all purposes under this 
section. Thus, if the mortality tables under section 430(h)(3)(D) are 
used for disabled individuals under a plan, mortality experience with 
respect to those individuals must be excluded in developing mortality 
rates for substitute mortality tables under this section.
    (5) Aggregation--(i) Permissive aggregation of plans. A plan 
sponsor may use the same substitute mortality tables for two or more of 
its plans provided that the rules of this section are applied by 
treating those plans as a single plan. In such a case, the substitute 
mortality tables must be based on data collected with respect to those 
aggregated plans.
    (ii) Required aggregation of plans. In general, plans are not 
required to be aggregated for purposes of applying the rules of this 
section. However, for purposes of this section, a plan is required to 
be aggregated with any plan that was previously spun off from that plan 
if a purpose of the spinoff is to avoid the use of substitute mortality 
tables for any of the plans that were involved in the spinoff.
    (iii) Special rule regarding experience study if aggregated plans 
have different plan years. If two or more plans are aggregated pursuant 
to this paragraph (c)(5) and not all of the plans have the same plan 
year, then the experience study period may be a period that is not a 
multiple of 12 months, provided that--
    (A) The period over which mortality experience is collected for 
each plan (the data study period) is a multiple of 12 months and is 
based on the plan year for that plan;
    (B) The data study periods for all of the plans consist of the same 
number of years;
    (C) The data study periods for all of the plans satisfy the 
experience study period requirements of paragraph (d)(2)(ii) of this 
section; and
    (D) The data study periods for all of the plans have been selected 
to minimize the total period of time covered by the experience study 
period by overlapping (to the greatest extent possible) those data 
study periods.
    (6) Duration of use of tables--(i) General rule. Except as provided 
in this paragraph (c)(6), substitute mortality tables are used for a 
plan for the term of consecutive plan years specified in the plan 
sponsor's written request for approval to use such tables under 
paragraph (b)(1) of this section and approved by the Commissioner, or a 
shorter period prescribed by the Commissioner in the approval to use 
substitute mortality tables. Following the end of the approved term of 
use, or following any early termination of use described in this 
paragraph (c)(6), the mortality tables specified in Sec.  1.430(h)(3)-1 
must be used for the plan unless approval under paragraph (b)(1) of 
this section has been received by the plan sponsor to use substitute 
mortality tables based on an updated experience study for a further 
term.
    (ii) Early termination of use of tables. A plan's substitute 
mortality tables must not be used beginning with the earliest of--
    (A) For a plan using a substitute mortality table for only one 
gender because of a lack of credible mortality information with respect 
to the other gender, the first plan year for which there is credible 
mortality information with respect to the gender that had lacked 
credible mortality information (unless an approved substitute mortality 
table is used for that gender);
    (B) The first plan year for which the plan fails to satisfy the 
requirements of paragraph (c)(1) of this section (regarding use of 
substitute mortality tables for all plans in the controlled group), 
taking into account the rules of paragraph (f)(3) of this section 
(regarding the transition period for newly-affiliated plans);
    (C) The second plan year following the plan year for which there is 
a significant change in individuals covered by the plan as described in 
paragraph (c)(6)(iii) of this section;
    (D) The first plan year following the plan year for which a 
substitute mortality table used for a population is no longer 
accurately predictive of future mortality of that population, as 
determined by the Commissioner or as certified by the plan's actuary to 
the satisfaction of the Commissioner; or
    (E) The date specified in guidance published in the Internal 
Revenue Bulletin (see Sec.  601.601(d)(2)(ii)(b) of this chapter) in 
conjunction with a replacement of mortality tables specified under 
section 430(h)(3)(A) and Sec.  1.430(h)(3)-1 (other than annual updates 
to the static mortality tables issued pursuant to Sec.  1.430(h)(3)-
1(a)(3) or changes to the mortality improvement rates pursuant to Sec.  
1.430(h)(3)-1(a)(2)(i)(C)).
    (iii) Significant change in coverage--(A) Change in coverage from 
time of experience study. For purposes of applying the rules of 
paragraph (c)(6)(ii)(C) of this section, a significant change in the 
individuals covered by a substitute mortality table for a plan year 
occurs if the number of individuals covered by the substitute mortality 
table for the plan year is less than 80 percent or more than 120 
percent of the average number of individuals in that population over 
the years covered by the experience study on which the substitute 
mortality tables are based. However, a change in coverage is not 
treated as significant if the plan's actuary certifies in writing to 
the satisfaction of the Commissioner that the substitute mortality 
tables used for the population continue to be accurately predictive of 
future mortality of that population (taking into account the effect of 
the change in the population).
    (B) Change in coverage from time of certification. For purposes of 
applying the rules of paragraph (c)(6)(ii)(C) of this section, a 
significant change in the individuals covered by a substitute mortality 
table for a plan year occurs if the number of individuals covered by 
the substitute mortality table for the plan year is less than 80 
percent or more than 120 percent of the number of individuals covered 
by the substitute mortality table in a plan year for which a 
certification described in paragraph (c)(6)(iii)(A) of this section was 
made on account of a prior change in coverage. However, a change in 
coverage is not treated as significant if the plan's actuary certifies 
in writing to the satisfaction of the Commissioner that the substitute 
mortality tables used by the plan with respect to the covered 
population continue to be accurately predictive of future mortality of 
that population (taking into account the effect of the change in the 
population).
    (7) Multiple-employer plans--(i) General rule. In the case of a 
multiple-employer plan described in section 413(c), the plan 
administrator (as described in section 414(g)) is treated as the plan 
sponsor for purposes of this section. If approval is received to use 
substitute mortality tables by a plan, those tables must apply on a 
plan-wide basis (even if the plan is subject to the rules of section 
413(c)(4)(A)).
    (ii) Application of controlled group consistency rules. In the case 
of an

[[Page 46407]]

employer that participates in a multiple-employer plan, if the 
proportion of the plan's funding target attributable to the employees 
and former employees of the employer and members of its controlled 
group represents more than 50 percent of the plan's funding target, 
then the employer is treated as maintaining the plan for purposes of 
paragraph (c)(1) of this section. Thus, for a multiple-employer plan 
with credible mortality information that is treated as maintained by an 
employer under this paragraph (c)(7), unless substitute mortality 
tables are used for that plan, substitute mortality tables may not be 
used for any plan maintained by that employer or a member of its 
controlled group (and if substitute mortality tables are used for any 
other plan maintained by any member of the employer's controlled group, 
they must be used for the multiple-employer plan). By contrast, if the 
proportion of the plan's funding target attributable to the employees 
and former employees of the employer and members of its controlled 
group represents 50 percent or less of the funding target for a 
multiple-employer plan in which it participates, then the employer is 
not treated as maintaining the plan for purposes of paragraph (c)(1) of 
this section. Accordingly, whether substitute mortality tables may be 
used for other plans in such an employer's controlled group is 
independent of whether substitute mortality tables are used for the 
multiple-employer plan.
    (d) Full credibility--(1) In general. The mortality experience with 
respect to a gender or other population within a plan has full 
credibility if the actual number of deaths for that population during 
the experience study period described in paragraph (d)(2) of this 
section is at least the full credibility threshold described in 
paragraph (d)(3) of this section. Paragraph (d)(4) of this section 
provides rules for the creation of a base substitute mortality table 
from the experience study, which apply if the mortality experience for 
the population has full credibility. Paragraph (d)(5) of this section 
provides rules regarding the use of separate substitute mortality 
tables for plan populations within a gender. Paragraph (d)(6) of this 
section provides an option to use the combined mortality experience of 
both genders to determine the existence and extent of credible 
mortality information and to develop a single mortality ratio for use 
in constructing substitute mortality tables.
    (2) Experience study period requirements--(i) General rule. The 
base substitute mortality table for a gender or other population must 
be developed from an experience study of the mortality experience of 
that population that is collected over an experience study period. The 
experience study period must consist of 2, 3, 4, or 5 consecutive 12-
month periods, and must be the same period for all populations except 
as provided in paragraph (c)(5)(iii) of this section.
    (ii) Requirement to use recent experience data--(A) General rule. 
Except as provided in paragraph (d)(2)(ii)(B) of this section, the last 
day of the experience study period must be less than 3 years before the 
first day of the first plan year for which the substitute mortality 
tables are to apply. For example, if January 1, 2019, is the first day 
of the first plan year for which the substitute mortality tables will 
be used, then an experience study using calendar year data generally 
must include data collected for a period that ends no earlier than 
December 31, 2016.
    (B) Exception for submission between 1 and 2 years before effective 
date of table. If the plan sponsor submits a request for approval to 
use of substitute mortality tables more than 1 year (and less than 2 
years) before the first day of the first plan year for which the 
substitute mortality tables are to apply, then the experience study is 
not treated as failing to satisfy the rule in paragraph (d)(2)(ii)(A) 
of this section if the last day of the final year reflected in the 
experience data is less than 2 years before the date of submission. For 
example, if an application for approval to use of substitute mortality 
tables that would apply for plan years beginning on or after January 1, 
2019 year is submitted in 2017, then an experience study using calendar 
year data may be based on data collected for a period that ends as 
early as December 31, 2015.
    (iii) Experience study based on benefit amount. As provided in 
paragraph (d)(4)(i) of this section, the mortality rates under the base 
substitute mortality tables are amounts-weighted mortality rates that 
are derived from the experience study. An individual's benefit amount 
(which is used to determine amounts-weighted mortality rates and for 
other purposes under this paragraph (d)) is the individual's accrued 
benefit expressed in the form of an annual benefit commencing at normal 
retirement age (or at the current age, if later) if an individual has 
not commenced benefits and the individual's annual payment if the 
individual has commenced benefits. Because amounts-weighted mortality 
rates for a plan are determined using benefit amounts, the experience 
study used to develop a base substitute mortality table may not include 
periods before the plan was established.
    (3) Full credibility threshold--(i) Threshold number of deaths. The 
full credibility threshold for a gender or other population is the 
product of 1,082 and the population's benefit dispersion factor. In 
calculating the population's benefit dispersion factor, for purposes of 
paragraphs (d)(3)(iii), (iv), and (v) of this section, the population 
is adjusted, as appropriate, for individuals who leave the population 
on account of a reason other than death.
    (ii) Population's benefit dispersion factor. The population's 
benefit dispersion factor is equal to--
    (A) The number of expected deaths for the population during the 
experience study period (as defined in paragraph (d)(3)(iii) of this 
section); multiplied by
    (B) The sum of the mortality-weighted squares of the benefits (as 
defined in paragraph (d)(3)(iv) of this section); divided by
    (C) The square of the sum of the mortality-weighted benefits (as 
defined in paragraph (d)(3)(v) of this section).
    (iii) Number of expected deaths. For a population, the number of 
expected deaths during the experience study period is equal to the sum, 
for all years in the experience study period, of the expected number of 
deaths in the population during the year using the mortality rates from 
the standard mortality tables determined under paragraph (d)(4)(iii) of 
this section. This amount is equal to:
[GRAPHIC] [TIFF OMITTED] TR05OC17.000


Where E is equal to the number of years in the experience study period, 
t represents each year during the experience study period, x represents 
an individual in the population during year t, q<INF>xt</INF> is the 
mortality rate for that individual's age and gender for the calendar 
year in which year t begins under the applicable standard mortality 
table determined under paragraph (d)(4)(iii) of this section, and 
N<INF>t</INF> is equal to the number of individuals in the population 
in year t.
    (iv) Sum of the mortality-weighted squares of the benefits--(A) 
Determination. For a population, the sum of the mortality-weighted 
squares of the benefits is the sum, for all years in the experience 
study period, for all individuals in the population at the beginning of 
the year, of the product of--
    (1) The probability of death for the individual using the mortality 
rate for

[[Page 46408]]

the individual's age and gender from the standard mortality table 
determined under paragraph (d)(4)(iii) of this section; and
    (2) The square of the benefit amount for the individual.
    (B) Expression as formula. The sum of the mortality-weighted 
squares of the benefits for a population determined pursuant to 
paragraph (d)(3)(iv)(A) of this section is equal to:
[GRAPHIC] [TIFF OMITTED] TR05OC17.001


Where E is equal to the number of years in the experience study period, 
t represents each year during the experience study period, x represents 
an individual in the population during year t, q<INF>xt</INF> is the 
mortality rate for that individual's age and gender for the calendar 
year in which year t begins under the applicable standard mortality 
table determined under paragraph (d)(4)(iii) of this section, 
b<INF>xt</INF> is equal to the benefit amount for that individual for 
year t, and N<INF>t</INF> is equal to the number of individuals in the 
population in year t.
    (v) Square of the sum of the mortality-weighted benefits--(A) 
Determination. For a population, the square of the sum of the 
mortality-weighted benefits is equal to the square of the sum, for all 
years in the experience study period, for all individuals in the 
population at the beginning of the year, of the product of--
    (1) The probability of death of the individual using the mortality 
rate for the individual's age and gender from the standard mortality 
table determined under paragraph (d)(4)(iii) of this section; and
    (2) The benefit amount for the individual.
    (B) Expression as formula. The square of the sum of the mortality-
weighted benefits for a population determined pursuant to paragraph 
(d)(3)(v)(A) of this section is equal to:
[GRAPHIC] [TIFF OMITTED] TR05OC17.002


Where E is equal to the number of years in the experience study period, 
t represents each year during the experience study period, x represents 
an individual in the population during year t, q<INF>xt</INF> is the 
mortality rate for that individual's age and gender for the calendar 
year in which t begins under the applicable standard mortality table 
determined under paragraph (d)(4)(iii) of this section, b<INF>xt</INF> 
is equal to the benefit amount for that individual for year t, and 
N<INF>t</INF> is equal to the number of individuals in the population 
in year t.
    (4) Development of mortality rates--(i) In general. The mortality 
rates under the base substitute mortality tables must be amounts-
weighted mortality rates that are derived from the experience study. 
Except as provided in paragraph (d)(4)(iv) of this section, the 
mortality rate for an age and gender is determined by multiplying the 
mortality rate for that age and gender from the standard mortality 
table determined under paragraph (d)(4)(iii) of this section by the 
mortality ratio determined under paragraph (d)(4)(ii) of this section. 
If the simplified rule of paragraph (c)(2)(ii)(B) of this section is 
used for the population, then the mortality ratio is determined only 
taking into account people who are at least 50 years old and less than 
100 years old, but the mortality ratio is applied to all ages.
    (ii) Mortality ratio--(A) In general. Except as provided in 
paragraph (d)(6) of this section, a mortality ratio is determined for a 
gender or other population within a gender, and is equal to the 
quotient determined by dividing--
    (1) The sum, for all years in the experience study period, of the 
benefit amount for all individuals in the population at the beginning 
of the year who died during the year, by
    (2) The sum, for all years in the experience study period, for all 
individuals in the population at the beginning of the year (adjusted, 
as appropriate, for individuals who leave on account of reason other 
than death), of the product of--
    (i) The probability of death of the individual using the mortality 
rate for the individual's age and gender from the standard mortality 
table determined under paragraph (d)(4)(iii) of this section; and
    (ii) The benefit amount for the individual.
    (B) Expression as formula. For purposes of determining a mortality 
ratio as described in paragraph (d)(4)(ii)(A) of this section, the 
amount described in paragraph (d)(4)(ii)(A)(2) of this section is equal 
to:
[GRAPHIC] [TIFF OMITTED] TR05OC17.003


Where E is equal to the number of years in the experience study period, 
t represents each year during the experience study period, x represents 
an individual in the population during year t, q<INF>xt</INF> is the 
mortality rate for that individual's age and gender for the calendar 
year in which t begins under the applicable standard mortality table 
determined under paragraph (d)(4)(iii) of this section, b<INF>xt</INF> 
is equal to the benefit amount for that individual for year t, and 
N<INF>t</INF> is equal to the number of individuals in the population 
in year t.
    (iii) Standard mortality table--(A) Projection of base table. The 
standard mortality table for a year is the mortality table determined 
by applying cumulative mortality improvement factors determined under 
Sec.  1.430(h)(3)-1(a)(2)(i)(E) to the base mortality table under Sec.  
1.430(h)(3)-1(d) for the period beginning with 2006 and ending in the 
base year for the base substitute mortality table determined under 
paragraph (c)(3)(ii) of this section. For purposes of the previous 
sentence, the cumulative mortality improvement factors are determined 
using the mortality improvement rates described in Sec.  1.430(h)(3)-
1(a)(2)(i)(C) that apply for the calendar year during which the plan 
sponsor submits the request for approval to use substitute mortality 
tables. If the plan sponsor submits such a request during 2017, then 
the cumulative mortality improvement factors are determined using the 
mortality improvement rates contained in the Mortality Improvement 
Scale MP-2016 Report (issued by the Retirement Plans Experience 
Committee (RPEC) of the Society of Actuaries and available at 
www.soa.org/Research/Experience-Study/Pension/research-2016-mp.aspx).
    (B) Selection of base table. If the population consists solely of 
annuitants, the annuitant base mortality table set forth in Sec.  
1.430(h)(3)-1(d) must be used for purposes of paragraph (d)(4)(iii)(A) 
of this section. If the population consists solely of nonannuitants, 
the nonannuitant base mortality table set forth in Sec.  1.430(h)(3)-
1(d) must be used for that purpose. If the population includes both 
annuitants and nonannuitants, a combination of the annuitant and 
nonannuitant base tables set forth in Sec.  1.430(h)(3)-1(d) must be 
used for that purpose. The combined table is constructed using the 
weighting factors for small plans that are set forth in Sec.  
1.430(h)(3)-1(d). The weighting factors are applied to develop the 
combined table using the following equation: Combined mortality rate = 
[nonannuitant rate * (1 - weighting

[[Page 46409]]

factor)] + [annuitant rate * weighting factor].
    (iv) Modification for ages 96 and older. Mortality rates for ages 
96 and older under the base substitute mortality table are determined 
using the rules of paragraph (d)(4)(i) of this section but substituting 
a modified mortality ratio for the mortality ratio determined under 
paragraph (d)(4)(ii) of this section. The modified mortality ratio is 
determined as follows--
    (A) For ages 96 through 109, if the mortality ratio is greater than 
1.0, the modified mortality ratio is equal to the mortality ratio for 
the population reduced by 1/15th of the excess of the mortality ratio 
over 1.0 for each year that the age exceeds 95.
    (B) For ages 96 through 109, if the mortality ratio is less than 
1.0, the modified mortality ratio is equal to the mortality ratio for 
the population increased by 1/15th of the excess of 1.0 over the 
mortality ratio for each year that the age exceeds 95.
    (C) For ages 110 and older, the modified mortality ratio is equal 
to 1.0.
    (v) Change in number of individuals covered by table. Experience 
data may not be used to develop a base table if the number of 
individuals in the population covered by the table (for example, the 
male annuitant population) as of the last day of the plan year before 
the year the request for approval to use the substitute mortality table 
is made is less than 80 percent or more than 120 percent of the average 
number of individuals in that population over the years covered by the 
experience study on which the substitute mortality tables are based, 
unless it is demonstrated to the satisfaction of the Commissioner that 
the experience data is accurately predictive of future mortality of 
that population (taking into account the effect of the change in 
individuals) after appropriate adjustments to the data are made (for 
example, excluding data from individuals with respect to a spun-off 
portion of the plan). For this purpose, a reasonable estimate of the 
number of individuals in the population covered by the table may be 
used.
    (5) Separate tables for specified populations--(i) In general. 
Except as provided in this paragraph (d)(5), separate substitute 
mortality tables are permitted to be used for separate populations 
within a gender only if--
    (A) All individuals of that gender are divided into separate 
populations;
    (B) Each separate population has mortality experience that has full 
credibility as determined under the rules of paragraph (d)(5)(iii) of 
this section; and
    (C) The separate base substitute mortality table for each separate 
population is developed applying the rules of paragraphs (d)(1) through 
(4) of this section using an experience study that takes into account 
solely members of that population.
    (ii) Annuitant and nonannuitant separate populations. 
Notwithstanding paragraph (d)(5)(i)(B) of this section, a gender may be 
separated into separate populations of annuitants and nonannuitants for 
the purpose of developing and using substitute mortality tables, even 
if only one of those separate populations has credible mortality 
information. Similarly, if separate populations that satisfy paragraph 
(d)(5)(i)(B) of this section are established, then any of those 
populations may be further subdivided into separate annuitant and 
nonannuitant subpopulations, provided that at least one of the two 
resulting subpopulations has credible mortality information. The 
standard mortality tables under Sec.  1.430(h)(3)-1 are used for a 
resulting subpopulation that does not have credible mortality 
information. For example, if the male hourly and salaried populations 
under a plan each have mortality experience with full credibility and 
the male salaried annuitant population has credible mortality 
information, then substitute mortality tables may be used for the plan 
with respect to the male salaried annuitant population even if the 
standard mortality tables under Sec.  1.430(h)(3)-1 are used with 
respect to the male salaried nonannuitant population (because that 
nonannuitant population does not have credible mortality information).
    (iii) Credible mortality information for separate populations. In 
determining whether the mortality experience for a separate population 
within a gender has full credibility, the rules of paragraph (d)(1) of 
this section must be applied to that separate population. In 
demonstrating that an annuitant (or nonannuitant) population within a 
gender or within a separate population does not have credible mortality 
information, the rules of paragraph (c)(2)(iii)(B) of this section are 
applied by substituting the annuitant (or nonannuitant) population for 
the gender.
    (6) Option to determine a single mortality ratio for both genders. 
Base substitute mortality tables for a plan may be constructed by 
developing and applying a single mortality ratio for both genders, but 
only if the substitute mortality tables used for all plans maintained 
by members of the plan sponsor's controlled group (except for plans for 
which both the male and female populations, considered separately, have 
mortality experience with full credibility) are constructed in this 
manner. If the option under this paragraph (d)(6) is applied for a plan 
then, for all plans maintained by members of the plan sponsor's 
controlled group, whether both the male and female populations within 
the plan have credible mortality information (and, if that combined 
population's mortality experience does not have full credibility, the 
partial credibility weighting factor for the plan) is determined using 
the combined mortality experience for both genders.
    (e) Partial credibility--(1) In general. The mortality experience 
with respect to a population has partial credibility if the actual 
number of deaths for that population during the experience study period 
described in paragraph (d)(2) of this section is at least equal to 100 
and is less than the full credibility threshold described for the 
population in paragraph (d)(3) of this section. If the mortality 
experience for the population has partial credibility, then in lieu of 
creating a base substitute mortality table as described in paragraph 
(d) of this section, the base substitute mortality table is created as 
the sum of--
    (i) The product of--
    (A) The partial credibility weighting factor determined under 
paragraph (e)(2) of this section; and
    (B) The mortality rates that are derived from the experience study 
determined under paragraph (d)(4)(i) of this section, and
    (ii) The product of--
    (A) One minus the partial credibility weighting factor described in 
paragraph (e)(2) of this section; and
    (B) The mortality rate from the standard mortality tables described 
in paragraph (d)(4)(iii) of this section.
    (2) Partial credibility weighting factor. The partial credibility 
weighting factor is equal to the square root of the fraction--
    (i) The numerator of which is the actual number of deaths for the 
population during the experience study period, and
    (ii) The denominator of which is the full credibility threshold for 
the population described in paragraph (d)(3) of this section.
    (f) Special rules for newly-affiliated plans--(1) In general. This 
paragraph (f) provides special rules that provide temporary relief from 
certain rules in this section in the case of a controlled group that 
includes a newly-affiliated plan (as defined in paragraph (f)(2) of 
this section). Paragraph (f)(3) of this section provides a transition 
period

[[Page 46410]]

during which the requirement in paragraph (c)(1) of this section (that 
is, the requirement that all plans within the controlled group that 
have credible mortality information must use substitute mortality 
tables) is not applicable. Paragraph (f)(4) of this section provides 
special rules that permit the use of a shorter experience study period 
in the case of a newly-affiliated plan that excludes the mortality 
experience data for the period before the date the plan becomes a 
newly-affiliated plan.
    (2) Definition of newly-affiliated plan. For purposes of this 
paragraph (f), a plan is a newly-affiliated plan if the plan sponsor 
becomes a member of the new controlled group in connection with a 
merger, acquisition, or similar transaction described in Sec.  
1.410(b)-2(f). A plan also is treated as a newly-affiliated plan for 
purposes of this section if the plan is established in connection with 
a transfer of assets and liabilities from another employer's plan in 
connection with a merger, acquisition, or similar transaction described 
in Sec.  1.410(b)-2(f).
    (3) Transition period for newly-affiliated plans. The use of 
substitute mortality tables for a plan within a controlled group is not 
prohibited merely because, during the transition period, substitute 
mortality tables are not used for a newly-affiliated plan that fails to 
demonstrate a lack of credible mortality information during that 
period. Similarly, during the transition period, the use of substitute 
mortality tables for a newly-affiliated plan is not prohibited merely 
because substitute mortality tables are not used for another plan 
within the controlled group that fails to demonstrate a lack of 
credible mortality information during that period. The transition 
period begins on the date of the transaction that results in the plan 
becoming a newly-affiliated plan and ends on the last day of the plan 
year that immediately follows the latest ending period described in 
section 410(b)(6)(C)(ii) with respect to that transaction for any of 
the plans in the controlled group.
    (4) Experience study period for newly-affiliated plan--(i) In 
general. The mortality experience data for a newly-affiliated plan may 
either include or exclude mortality experience data for the period 
before the date the plan becomes a newly-affiliated plan. If a plan 
sponsor excludes mortality experience data for the period before the 
date the plan becomes a newly-affiliated plan, the exclusion must apply 
for all populations within the plan.
    (ii) Demonstration relating to lack of credible mortality 
information. If the experience study for a newly-affiliated plan 
excludes mortality experience data for the period prior to the date the 
plan becomes a newly-affiliated plan, then the demonstration that the 
plan does not have credible mortality information for a plan year that 
begins after the transition period can be made using a shorter 
experience study period than would otherwise be permitted under 
paragraph (c)(2)(iii)(B) of this section, provided that the experience 
study period begins with the date the plan becomes a newly-affiliated 
plan and ends not more than one year and one day before the first day 
of the plan year.
    (iii) Demonstration relating to credible mortality information. If 
the experience study for a newly-affiliated plan excludes mortality 
experience data for the period before the date the plan becomes a 
newly-affiliated plan and the plan fails to demonstrate that it does 
not have credible mortality information for the plan year under the 
rules of paragraph (f)(4)(ii) of this section, then other plans within 
the controlled group may continue to use substitute mortality tables 
only if substitute mortality tables are used for the newly-affiliated 
plan for the plan year. In such a case, the experience study period for 
the newly-affiliated plan may consist of a 12-month period.
    (g) Effective/applicability date--(1) General rule. This section 
applies for plan years beginning on or after January 1, 2018. Except as 
provided in paragraph (g)(2) of this section, the substitute mortality 
table used for a plan for such a plan year must comply with the rules 
of paragraphs (a) through (f) of this section.
    (2) Transition rule for previously approved substitute mortality 
tables--(i) Applicability for 2018. If a plan sponsor has received 
approval from the Commissioner to use substitute mortality tables for a 
plan year beginning in 2017, then that previous approval applies to a 
plan year beginning in 2018 provided that--
    (A) The previous approval period had not ended;
    (B) Substitute mortality tables are used for all plans in the plan 
sponsor's controlled group in accordance with the terms of that 
approval; and
    (C) The projection factors provided in Projection Scale AA, as set 
forth in Sec.  1.430(h)(3)-1(d) as in effect on December 31, 2017 (as 
contained in 26 CFR part 1 revised April 1, 2017) are applied to the 
base substitute mortality table.
    (ii) Applicability for later plan years. If a plan sponsor is 
described in paragraph (g)(2)(i) of this section, then that previous 
approval applies to a later plan year provided that--
    (A) The previous approval period had not ended;
    (B) Substitute mortality tables are used for all plans in the plan 
sponsor's controlled group that have credible mortality information 
within the meaning of paragraph (c)(2)(ii) of this section; and
    (C) The mortality improvement factors described in paragraph 
(c)(3)(ii) of this section are applied to the base substitute mortality 
table.
    (3) Transition rule for requests for approval to use substitute 
mortality tables. A written request described in paragraph (b)(1)(i) of 
this section to use substitute mortality tables for a plan year that 
begins during 2018 does not fail to satisfy the timing requirement of 
paragraph (b)(1)(ii) of this section if it is submitted no later than 
February 28, 2018, provided that the plan sponsor agrees to a 90-day 
extension of the 180-day review period in accordance with paragraph 
(b)(2)(iv) of this section.

0
Par. 4. Section 1.431(c)(6)-1 is revised to read as follows:


Sec.  1.431(c)(6)-1  Mortality tables used to determine current 
liability.

    (a) Mortality tables used to determine current liability. The 
mortality assumptions that apply to a defined benefit plan for the plan 
year pursuant to section 430(h)(3)(A) and Sec.  1.430(h)(3)-1(a) are 
used to determine a multiemployer plan's current liability for purposes 
of applying the rules of section 431(c)(6). Either the generational 
mortality tables used pursuant to Sec.  1.430(h)(3)-1(a)(2) or the 
static mortality tables used pursuant to Sec.  1.430(h)(3)-1(a)(3) may 
be used for a multiemployer plan for this purpose. However, for this 
purpose, substitute mortality tables under Sec.  1.430(h)(3)-2 may not 
be used for a multiemployer plan.
    (b) Effective/applicability date. This section applies for plan 
years beginning on or after January 1, 2018. For rules that apply to 
plan years beginning before January 1, 2018 and on or after January 1, 
2008, see Sec.  1.431(c)(6)-1 (as contained in 26 CFR part 1 revised 
April 1, 2015).

0
Par. 5. Section 1.433(h)(3)-1 is added to read as follows:


Sec.  1.433(h)(3)-1  Mortality tables used to determine current 
liability.

    (a) Mortality tables used to determine current liability. In 
accordance with section 433(h)(3)(B), the mortality assumptions that 
apply to a defined benefit plan for the plan year pursuant to section 
430(h)(3)(A) and

[[Page 46411]]

Sec.  1.430(h)(3)-1(a) are used to determine a CSEC plan's current 
liability for purposes of applying the rules of section 433(c)(7)(C). 
Either the static mortality tables used pursuant to Sec.  1.430(h)(3)-
1(a)(3) or generational mortality tables used pursuant to Sec.  
1.430(h)(3)-1(a)(2) may be used for a CSEC plan for this purpose, but 
substitute mortality tables under Sec.  1.430(h)(3)-2 may not be used 
for this purpose.
    (b) Effective/applicability date. This section applies for plan 
years beginning on or after January 1, 2018.

Kirsten Wielobob,
Deputy Commissioner for Services and Enforcement.
    Approved: August 21, 2017.
David Kautter,
Assistant Secretary of the Treasury for Tax Policy.
[FR Doc. 2017-21485 Filed 10-3-17; 4:15 pm]
BILLING CODE 4830-01-P