Long Awaited but Never Forgotten… New Mortality Rates Apply in 2018
The IRS has posted final regulations requiring new mortality rates to be used in various calculations under single-employer defined benefit plans beginning with 2018 plan years.
The initial impact of the new rates will be most visible as:
- an increase in minimum funding requirements,
- an increase in PBGC premiums,
- an increase in lump sum values, and
- a decrease in plan funded percentages.
Although there was some dissent among the masses regarding the finalization of these rates, the majority of the pension and actuarial community recognized that increased longevity needed to be incorporated in the calculation of liabilities; and ultimately the IRS determined that these rates published by the Society of Actuaries were the best available for this purpose. The published rates include base mortality rates and a mortality improvement scale. The improvement scale will be updated routinely in future years.
It is estimated that these mortality rates will increase liabilities on average 5% in 2018, depending on individual plan demographics, plan design, and specific variances of the mortality tables being used.
Please contact us if you have questions or would like to discuss the mortality rates that apply in 2018.
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