Internal Revenue Bulletin:  2008-42 

October 20, 2008 

Rev. Proc. 2008-62


SECTION 1. PURPOSE AND CHANGES FROM REV. PROC. 2007-37

.01 The purpose of this revenue procedure is to set forth the procedure by which the sponsor of a defined benefit plan, other than a multiemployer plan, may request and obtain approval for the use of plan-specific substitute mortality tables in accordance with § 430(h)(3)(C) of the Internal Revenue Code (Code) and § 303(h)(3)(C) of the Employee Retirement Income Security Act of 1974, as amended (ERISA).

.02 This revenue procedure is an update of Rev. Proc. 2007-37, 2007-25 I.R.B. 1433. Rev. Proc. 2007-37 was based on the proposed regulations issued under § 430(h)(3)(C) of the Code and § 303(h)(3)(C) of ERISA published in the Federal Register on May 29, 2007, at 72 FR 29456 [REG-143601-06, 2007-24 I.R.B. 1398] (“proposed regulations”). Final regulations under § 430(h)(3)(C) were published in § 1.430(h)(3)-2 in the Federal Register on July 31, 2008, at 73 FR 44632 [T.D. 9419, 2008-40 I.R.B. 790] (“regulations” or “final regulations”). This revenue procedure reflects the provisions of the final regulations, and includes the following changes from Rev. Proc. 2007-37:

(1) The requirements in subsection 2.02 were updated to reflect the ability to use a period of up to 5 years (or such longer period as the Commissioner may permit in future guidance) for the Experience Study Period, and subsection 10.01 was revised to clarify that the Experience Study Period used to develop the unadjusted base tables must coincide with the Experience Study Period used to demonstrate credible mortality experience.

(2) Subsections 4.01 and 5.06 were updated to reflect the extension of the deadline for submitting requests to October 1, 2008, for substitute mortality tables to be used effective for plan years beginning in 2009.

(3) The definition of the Base Year in subsection 5.03 was updated to reflect the revised definition in § 1.430(h)(3)-2(c)(2)(iii) of the final regulations.

(4) A new subsection 7.03 was inserted (and the former subsection 7.03 was renumbered as subsection 7.04) to permit plans within a Permissive Group to use different Experience Study Periods (subject to specified conditions) if the plans have different plan years.

(5) Subsection 9.01 was revised to reflect the requirement in § 1.430(h)(3)-2(d)(1) of the final regulations to increase the length of the period used to demonstrate lack of credible mortality experience if the Experience Study Period is longer than 4 years.

(6) A new subsection 9.06 was inserted to provide guidance for demonstrating lack of credible mortality experience when the Experience Study Period is developed using the approach in new subsection 7.03.

(7) A new subsection 9.07 was inserted to permit alternative means of demonstrating lack of credible mortality experience.

(8) One set of sample annuity values was eliminated with respect to nonannuitant mortality tables and adjustments were made to the date of birth used for the annuity values reported in subsection 13.03.

(9) References throughout the revenue procedure to “newly acquired” plans were changed to “newly affiliated” plans to conform to the language in the final regulations.

SECTION 2. BACKGROUND INFORMATION

.01 Section 412 of the Code provides minimum funding requirements for defined benefit pension plans. Section 430, which was added by the Pension Protection Act of 2006, Pub. L. No. 109-280, 120 Stat. 780 (“PPA ’06”), specifies the minimum funding requirements for defined benefit plans other than multiemployer plans pursuant to § 412 and is generally effective for plan years beginning on or after January 1, 2008. Section 430(h)(3)(A) sets forth rules regarding the use of generally applicable mortality tables for purposes of § 430. Section 430(h)(3)(C) and § 303(h)(3)(C) of ERISA provide that the Secretary of the Treasury may approve substitute mortality tables to be used in determining any present value or making any computation under those sections for a period not to exceed ten years. Mortality tables meet the requirements for substitute mortality tables if the pension plan has a sufficient number of plan participants and the plan has been maintained for a sufficient period of time in order to have credible mortality experience, and such tables reflect the actual experience of the plan and projected trends in general mortality experience of participants in pension plans. Except as provided by the Secretary, a plan sponsor cannot use substitute mortality tables for any plan unless substitute mortality tables are established and used for each other plan subject to § 430 of the Code that is maintained by the plan sponsor and the plan sponsor’s controlled group.

.02 Section 1.430(h)(3)-1 of the Income Tax Regulations, which sets forth rules regarding the use of generally applicable mortality tables for purposes of § 430, and § 1.430(h)(3)-2, which sets forth rules for the use of substitute mortality tables under § 430(h)(3)(C), were published in the Federal Register in proposed form on May 29, 2007. Rev. Proc. 2007-37 was issued to provide procedures under which sponsors of eligible plans could request and obtain approval for plan-specific mortality tables in accordance with proposed regulation § 1.430(h)(3)-2. Final regulations under § 430(h)(3)(C) were published in § 1.430(h)(3)-2 in the Federal Register on July 31, 2008. This Rev. Proc. 2008-62 updates the procedures outlined in Rev. Proc. 2007-37 to reflect the changes in the final regulations.

Under both the proposed and final regulations, substitute mortality tables must reflect the actual mortality experience of the pension plan maintained by the plan sponsor for which the tables are to be used and that mortality experience must be credible. Separate mortality tables must be established for each gender under the plan, and a substitute mortality table is permitted to be established for a gender only if the plan has 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, then the substitute mortality tables are used for the gender that has credible mortality experience, and the mortality tables under § 1.430(h)(3)-1 are used for the gender that does not have credible mortality experience. If separate mortality tables under § 430(h)(3)(D) are used for certain disabled individuals under a plan, then those individuals are disregarded for all purposes with respect to substitute mortality tables under § 430(h)(3)(C). Thus, if the mortality tables under § 430(h)(3)(D) are used for certain disabled individuals under a plan, mortality experience with respect to those individuals must be excluded in determining mortality rates for substitute mortality tables with respect to a plan.

Under the proposed regulations, a substitute mortality table would be based on credible mortality experience for a gender within a plan if and only if the mortality experience is based on at least 1,000 deaths within that gender over the period covered by the experience study. The experience study would be based on mortality experience data over a 2, 3, or 4-consecutive year period, the last day of which must be less than 3 years before the first day of the first plan year for which the substitute mortality tables are to apply. The final regulations retain the above provisions, except that the maximum period of the experience study is extended to a 5-consecutive year period. In addition, the final regulations provide that the Commissioner may allow further extensions of the maximum experience study period in future guidance.

Development of a substitute mortality table under the regulations requires creation of a base table (Base Table) and identification of a base year (Base Year), which are then used to determine generational substitute mortality tables. The Base Table must be developed from a study of the mortality experience of the plan using amounts-weighted data. The regulations also set forth rules regarding development of amounts-weighted mortality rates for an age and the determination of the Base Year. The regulations provide that amounts-weighted mortality rates may be derived from amounts-weighted mortality rates for age groups.

The regulations provide that Base Tables may be constructed either directly through graduation of amounts-weighted mortality rates or indirectly by applying a level percentage to tables prescribed by § 430(h)(3)(A), provided that the resulting tables sufficiently reflect the plan’s mortality experience. The Service may permit the construction of Base Tables through application of a level percentage to other recognized mortality tables, applying similar standards to ensure that the resulting tables are sufficiently reflective of the plan’s mortality experience.

The final regulations provide that a plan sponsor cannot use substitute mortality tables for any plan for a plan year unless substitute mortality tables are established and used for each other plan subject to § 430 that is maintained by the plan sponsor and the plan sponsor’s controlled group for that plan year (or, for plans with different plan years, a portion of that plan year). Under the regulations, the use of substitute mortality tables for one plan would not be prohibited merely because another plan maintained by the plan sponsor (or by a member of the plan sponsor’s controlled group) cannot use substitute mortality tables because neither the males nor the females under that other plan have credible mortality experience for a plan year. Thus, if a sponsor’s controlled group maintains two pension plans subject to § 430, each of which has credible mortality experience for at least one gender, then either both plans must obtain approval from the Service to use substitute mortality tables or neither plan may use substitute mortality tables. By contrast, if, for one of those plans, neither males nor females have credible mortality experience, then the plan without credible mortality experience will not interfere with the ability of the plan with credible mortality experience to use substitute mortality tables.

SECTION 3. GENERAL ADMINISTRATIVE PROCEDURES

.01 Compliance with Regulations. Requests submitted on or after December 1, 2008, must satisfy the requirements of final regulation § 1.430(h)(3)-2 and this Rev. Proc. 2008-62. Requests submitted before December 1, 2008, may either satisfy those requirements or, alternatively, may satisfy the requirements of proposed regulation § 1.430(h)(3)-2 and Rev. Proc. 2007-37.

.02 Submission. Requests for the use of substitute mortality tables must be submitted to:

Internal Revenue Service
Attention: EP Letter Rulings
P.O. Box 27063
McPherson Station
Washington, D.C. 20038

The user fee required by paragraph (10) of subsection 6.01 of Rev. Proc. 2008-8, 2008-1 I.R.B. 233, or its successors, must be sent with such requests.

.03 Necessary Procedural Documents. A request will not be considered unless it complies with paragraphs (1) through (3) of this subsection 3.03, below.

(1) The request (and any subsequently provided additional information) must be signed by the employer maintaining the plan(s) (the “applicant”) or an authorized representative of the applicant who must be identified in (a), (b), (c), (d) or (e) of paragraph (11) of subsection 9.02 of Rev. Proc. 2008-4, 2008-1 I.R.B. 121, or its successors. Where an authorized representative signs the request or will appear before the Service in connection with the request, a properly signed and dated Form 2848, Power of Attorney and Declaration of Representative, must be submitted with the request.An individual is not an authorized representative of the applicant merely on account of being the administrator or trustee of the plan.

(2) The request also must contain a declaration in the following form: “Under penalties of perjury, I declare that I have examined this request, or this modification to the request, including accompanying documents, and, to the best of my knowledge and belief, the request or the modification contains all the relevant facts relating to the request, and such facts are true, correct, and complete.” This declaration must be signed by the applicant (e.g., an authorized officer of a corporation). The signature of an individual with a power of attorney will not suffice for the declaration. See paragraph (13) of subsection 9.02 of Rev. Proc. 2008-4.

(3) Because a request for the use of substitute mortality tables constitutes a request for a ruling, compliance with § 6110 of the Code is also required. Section 601.201 of the Statement of Procedural Rules sets forth the requirements applicable to requests for rulings and determination letters which are subject to § 6110. Section 601.201(e) furnishes specific instructions to applicants.

The applicant must provide with the request either a statement of proposed deletions and the statutory basis for each proposed deletion, or a statement that no information other than names, addresses, and taxpayer identifying numbers need be deleted.

.04 Checklist. A checklist has been provided in Appendix A, which must be signed and dated by the applicant or authorized representative and placed on top of the request.

SECTION 4. DEADLINE FOR REQUESTING THE USE OF SUBSTITUTE MORTALITY TABLES

.01 In General. A request for the use of substitute mortality tables generally must be submitted at least 7 months prior to the first day of the first plan year for which the substitute mortality tables are to apply. Thus, for example, if the first plan year to which substitute mortality tables are to apply is the plan year that begins January 1, 2010, then the deadline is June 1, 2009. Notwithstanding the generally applicable deadline, a request to use substitute mortality tables for a plan year that begins during 2009 is timely if it is submitted on or before October 1, 2008.

.02 Incomplete Requests. Generally, an incomplete request for the use of substitute mortality tables will be summarily denied absent mutual agreement of the Service and the applicant to extend the 180-day period specified under § 430(h)(3)(C)(v)(II). Except as provided in subsection 5.06 of this revenue procedure, the applicant should not assume that the Service will agree to extend the 180-day period for a request that does not include substantially all of the applicable information specified in sections 5 through 13 of this revenue procedure.

SECTION 5. GENERAL RULES

.01 The Service will deny a request if the request fails to meet the requirements of this revenue procedure or if the Service determines that a substitute mortality table does not sufficiently reflect the mortality experience of the applicable plan population.

.02 If separate mortality tables are used for disabled individuals pursuant to § 430(h)(3)(D), then those individuals are disregarded for all purposes under this revenue procedure.

.03 A separate request must be made with respect to each plan (the “Plan”), or group of plans that are permissively aggregated (the “Permissive Group”), for which the use of a substitute mortality table or tables is requested. The request must include a complete copy of the Base Tables that will form the basis for the substitute mortality tables that will be used. The request must state the first day of the first plan year for which the substitute mortality tables are to be applicable (the “Requested Effective Plan Year”) and must state the term of years (not more than 10) that the tables are requested to be used.

Each request also must identify the Base Year of the Base Tables. Under § 1.430(h)(3)-2(c)(2)(iii), the base year is the calendar year that contains the day before the midpoint of the Experience Study Period. For example, if an Experience Study Period consists of the 5-consecutive-year period beginning July 1, 2006, and ending June 30, 2011, the midpoint of the Experience Study Period is January 1, 2009, and the Base Year is 2008. If the Experience Study Period reflects different plan years for plans within the Permissive Group as described in subsection 7.03, the midpoint is determined taking into account the total number of years and months reflected in the Experience Study Period.

.04 The request must include a description of the populations within the Plan (or the Permissive Group) for which the use of substitute mortality tables is requested and a description of the populations, if any, for which the use of substitute mortality tables is not requested.

For example, if the use of substitute mortality tables is requested for nondisabled female individuals (but for no other individuals) where separate mortality tables are used for disabled individuals pursuant to § 430(h)(3)(D), then the population for whom the use of substitute mortality tables is requested would be described as “Nondisabled Females” and the population for whom the use of substitute mortality tables is not requested would be described as “Nondisabled Males.”

Similarly, if the use of substitute mortality tables is requested for male annuitants (but not male nonannuitants) and for females on a combined annuitant/nonannuitant basis, in each case including disabled individuals, then the populations for whom the use of substitute mortality tables is requested would be described as “Male Annuitants” and “Females,” and the population for whom the use of substitute mortality tables is not requested would be described as “Male Nonannuitants.”

.05 The request must include the plan identification information described in Section 6, the credible mortality experience demonstrations described in Section 7, the stability demonstrations described in Section 8, the lack of credible mortality experience demonstrations described in Section 9, the unadjusted mortality experience described in Section 10, the Base Table construction methods as set forth in Section 11 or 12, and the demonstrations with respect to the Base Tables described in Section 13.

.06 If there are other plans subject to § 430 maintained by the applicant, or members of the applicant’s controlled group, that have credible mortality experience for which the use of substitute mortality tables will be requested in a separate request, then the Service will not summarily deny the request for the use of substitute mortality tables on the grounds that all plans with credible mortality experience maintained by the applicant would not be using substitute mortality tables, but only if the applicant requests that the 180-day review period provided under § 430(h)(3)(C)(v)(II) not begin for the initial request and any such separate request until the date all such separate requests have been received, and only if those separate requests are submitted within 90 days after the receipt of the initial request (and no later than the deadline that applies to each such separate request under section 4 of this revenue procedure). In the absence of such a request for a delay in the start of the 180-day review period, or if all such separate requests are not submitted within 90 days after the receipt of the initial request, the Service will summarily deny the request for the use of substitute mortality tables on the grounds that all plans with credible mortality experience maintained by the applicant would not be using substitute mortality tables.

Example. Employer E maintains Plans A and B, both of which are calendar year plans that have each had over 2,500 deaths in each of the last five years. Employer E submits a request for the use of substitute mortality tables for Plan A for the 2010 plan year that is received on February 15, 2009 (the “A Request”). To avoid denial of the A Request on the grounds that all plans with credible mortality experience maintained by the applicant would not be using substitute mortality tables, Employer E requests that the 180-day review period of the A Request not begin until the receipt of a separate request for the 2010 plan year from Employer E for the use of substitute mortality tables by Plan B. The Service agrees to defer commencement of the 180-day period, but will summarily deny the application unless Employer E submits a separate request for the use of substitute mortality tables for Plan B no later than May 15, 2009.

.07 If two or more plans are permissively aggregated for the purpose of constructing substitute mortality tables, then such plans are treated as a single plan for all purposes of this revenue procedure. Accordingly, if two or more plans are permissively aggregated, then all populations within the plans must be so aggregated.

Example. Employer F maintains Plans C, D, and E, each of which had 500 male deaths and 100 female deaths in each of the last five years. Employer F may request to use one substitute male mortality table and one substitute female mortality table for the aggregation of Plans C, D, and E. However, Employer F may not aggregate Plans C, D, and E and request to use one substitute female mortality table for Plans C, D, and E, and three separate substitute male mortality tables for Plans C, D, and E.

SECTION 6. IDENTIFICATION OF PLANS

.01 The following plan information must be provided for the Plan (or for each plan within the Permissive Group) for which the use of substitute mortality tables is requested:

(1) Plan name;

(2) Plan number;

(3) Plan year (i.e., calendar, or if fiscal, the first and last day);

(4) Employer identification number;

(5) Date of plan establishment; and

(6) Copies of the actuarial valuation reports for each plan year which begins or ends during the Experience Study Period as defined in section 7 of this revenue procedure.

.02 The following information must be provided for each plan that is subject to § 430 maintained by the applicant, or members of the applicant’s controlled group, for which the use of substitute mortality tables is not requested:

(1) Plan name;

(2) Plan number;

(3) Plan year (i.e., calendar, or if fiscal, the first and last day);

(4) Employer identification number;

(5) Date of plan establishment;

(6) If the plan is a newly affiliated plan under § 1.430(h)(3)-2(d)(1)(iii)(B), the date of the merger, acquisition, or similar transaction described in § 1.410(b)-2(f), and the last day of the plan year described in § 1.430(h)(3)-2(d)(1)(iii)(A); and

(7) The Lack of Credible Mortality Experience Demonstration Period, or, if the plan is not required to identify such a period, the applicable exception. (See section 9 of this revenue procedure.)

.03 The following additional information must be provided with respect to each plan that is subject to § 430 that is maintained by the applicant, or member of the applicant’s controlled group, that was spun off from another plan that is maintained by the applicant within the five-year period preceding the date of the request:

(1) The plan name and the plan number of the spun off plan, and the plan name and number of the plan from which the spinoff occurred;

(2) The employer identification number of the employer maintaining the spun off plan and the employer identification number of the employer maintaining the plan from which the spinoff occurred;

(3) The date of the spinoff;

(4) The approximate number of individuals covered by the spun off plan as of the date of the spinoff and the approximate number of individuals covered by the plan from which the spinoff occurred, prior to the spinoff; and

(5) The reason for the spinoff.

SECTION 7. DEMONSTRATIONS OF CREDIBLE MORTALITY EXPERIENCE

.01 The applicant’s request must identify the period of time covered by the mortality experience study (the “Experience Study Period”) used to develop the Base Table(s) and must identify the Base Year. Different Experience Study Periods for different populations within a plan are not permitted. Except as provided in subsections .02 and .03 of this section, different Experience Study Periods for different plans within the Permissive Group are not permitted. Thus, a plan that does not have mortality experience for the entire Experience Study Period may not be included in the Permissive Group. Similarly, a plan that was acquired subsequent to the first day of the Experience Study Period may be included in the Permissive Group only if the applicant includes mortality experience for the full Experience Study Period. Thus, in such cases, the mortality experience study must include mortality experience that occurred before the date of acquisition.

.02 A plan that came into existence by reason of a spinoff from the Plan (or from a plan within the Permissive Group) during the Experience Study Period may be included in the Permissive Group. In such a case, the period of time covered by the mortality experience study with respect to the spun off plan will begin as of the date of the spinoff. However, the mortality experience of the individuals covered by the spun off plan from the first day of the Experience Study Period to the date of the spinoff would be included as part of the experience of the single plan that existed before the spinoff.

.03 If separate plans within a Permissive Group have different plan years, the Experience Study Period may consist of a combination of different periods for analyzing the experience data for each plan, provided that the period for each plan:

(1) is based on the plan year for that plan,

(2) consists of the same number of years,

(3) ends less than 3 years before the first day of the first plan year for which the substitute mortality table is to apply for any plan in the Permissive Group, and

(4) minimizes the total period of time covered by the overall Experience Study Period by overlapping (to the greatest extent possible) the periods used to analyze experience data for each plan in the Permissive Group.

For example, consider a Permissive Group consisting of two plans, Plan A with a calendar-year plan year and Plan B with a March 1-February 28 plan year, with experience data gathered by plan years for each plan. If the plan sponsor submits a request to use substitute mortality tables for the Permissive Group effective with the plan year beginning January 1, 2009, for Plan A and March 1, 2009, for Plan B, the plan sponsor may use an Experience Study Period ending as early as December 31, 2006, based on the first day of the plan year for Plan A. If the plan sponsor wishes to use the approach provided in this subsection .03 and uses a 4-year period ending on December 31, 2006, to analyze the experience data for Plan A, the period used to analyze the experience data for Plan B must be a 4-year period ending on February 28, 2007. The Experience Study Period in this case would be the period beginning January 1, 2003, and ending February 28, 2007.

.04 In order to demonstrate credible mortality experience, the number of deaths during each year of the Experience Study Period (and, in total, for the entire Experience Study Period) within each population for which the use of substitute mortality tables is requested must be provided in tabular form.

SECTION 8. DEMONSTRATION OF STABILITY

.01 The following information must be provided in tabular form for each population within the Plan (or plans within the Permissive Group) for which the use of a substitute mortality table is requested, aggregating all plans that have the same plan year:

(1) The average number of individuals within the population during the Experience Study Period; and

(2) The number of individuals within the population as of the last day of the plan year immediately preceding the plan year during which the use of substitute mortality tables is requested.

A reasonable estimate of the number of plan individuals, such as the estimated number of participants and beneficiaries used for purposes of PBGC Form 1-ES, may be used to provide the information requested in paragraph (2) of this subsection 8.01.

.02 If the difference between paragraphs (1) and (2) of subsection 8.01 within any population, for any plan year, reflects a difference of 20 percent or more, then an analysis that shows that the mortality experience during the Experience Study Period is still accurately predictive of the future mortality of the population must be submitted.

SECTION 9. DEMONSTRATIONS OF LACK OF CREDIBLE MORTALITY EXPERIENCE

.01 General Rule. For all plans maintained by the applicant, except as described in subsections .02 and .03 of this section, the period of time used to demonstrate a lack of credible mortality experience must be identified (the “Lack of Credible Mortality Experience Demonstration Period”). This period must consist of at least 4 consecutive years, with the last such year ending less than 3 years before the first day of the plan year for which lack of credible mortality experience is being demonstrated. However, if the Experience Study Period used for the substitute mortality tables for the Permissive Group is longer than 4 years, then the Lack of Credible Mortality Experience Demonstration Period must include the same number of years as the Experience Study Period and must end less than 3 years before the first day of the plan year for which lack of credible mortality experience is being demonstrated. See subsection .06 of this section for rules that apply when the Experience Study Period is a combination of different periods as described in subsection 7.03.

.02 General Exception. Plans described in paragraph (1), (2), or (3) of this subsection 9.02 are not required to identify a Lack of Credible Mortality Experience Demonstration Period.

(1) Plans for which the use of substitute mortality tables is requested for all populations (other than disabled populations for whom the tables prescribed under § 430(h)(3)(D) are used);

(2) Plans for which the use of substitute mortality tables has previously been approved by the Service and the term of years of such approval ends subsequent to the last day of the Requested Effective Plan Year; and

(3) Newly affiliated plans for which the last day of the plan year described in § 1.430(h)(3)-2(d)(1)(iii)(A) is a date on or after the first day of the plan year for which the use of substitute mortality tables is requested.

.03 Exception for Certain Newly Affiliated Plans. Newly affiliated plans (as defined in § 1.430(h)(3)-2(d)(1)(iii)(B)) for which the last day of the plan year described in § 1.430(h)(3)-2(d)(1)(iii)(A) is a date prior to the first day of the plan year for which the use of substitute mortality tables is requested, and for which the applicant has elected not to include mortality experience prior to the date of the acquisition, may identify a Lack of Credible Mortality Experience Demonstration Period consisting of fewer years than otherwise required under subsection .01 of this section. For such plans, the Lack of Credible Mortality Experience Demonstration Period must begin no later than the date the plan became newly affiliated and end not more than one year and one day before the first day of the plan year for which the use of substitute mortality tables is requested.

.04 Demonstration of Plan-Wide Lack of Credible Mortality Experience. The following information must be provided in tabular form for each plan that is not within the Permissive Group and which does not fall within one of the exceptions provided in subsection .02 of this section:

(1) The number of male deaths during the Lack of Credible Mortality Experience Demonstration Period; and

(2) The number of female deaths during the Lack of Credible Mortality Experience Demonstration Period.

.05 Demonstration of Lack of Credible Mortality Experience for Certain Populations. The number of male and female deaths during the Lack of Credible Mortality Experience Demonstration Period must be provided in tabular form for each relevant population within the Plan (or plans within the Permissive Group) for which the use of substitute mortality tables is not requested.

The relevant populations for this purpose would, for example, be nondisabled females if the request was to use a substitute mortality table for nondisabled males (but for no other individuals) where separate mortality tables were used for disabled individuals pursuant to § 430(h)(3)(D). Similarly, the relevant populations would be male nonannuitants and females, in each case including disabled individuals, if the request was to use a substitute mortality table for male annuitants (but not for male nonannuitants) where separate mortality tables were not used for disabled individuals pursuant to § 430(h)(3)(D).

.06 Application when Experience Study Period is a Combination of Different Periods as Described in Subsection 7.03. For plans or populations within a Permissive Group, if the Experience Study Period covers a period of more than 4 years because it consists of a combination of 4-year (or longer) periods for analyzing the experience data for individual plans included in the Permissive Group, the Lack of Credible Mortality Experience Demonstration Period must also consist of a combination of 4-year periods for each plan (or such longer periods as used for the Experience Study Period), subject to the same constraints as in subsection 7.03.

For example, the Permissive Group illustrated in subsection 7.03 used an Experience Study Period consisting of 4 years based on the plan year for Plan A and 4 years based on the plan year of Plan B (for an overall Experience Study Period of 4 years and 2 months). Therefore, lack of credible mortality experience must be demonstrated for any populations within that Permissive Group for which substitute mortality tables are not requested, on the basis of a Lack of Credible Mortality Experience Demonstration Period covering a 4-year period corresponding to the plan year for the plan covering the population (for an overall Lack of Credible Mortality Experience Demonstration Period of 4 years and 2 months). Accordingly, for demonstrations applying to plan years beginning in 2011, the Lack of Credible Mortality Experience Demonstration Period could either be based on 4-year periods ending December 31, 2008, for populations covered under Plan A and February 28, 2009, for populations covered under Plan B, or on 4-year periods ending December 31, 2009, for populations covered under Plan A and February 28, 2010, for populations covered under Plan B.

However, if the overall Experience Study Period is less than 4 years in length, or if the population or plan for which lack of credibility experience is being demonstrated is not in the Permissive Group, then the general rule of subsection .01 of this section is applied based on the number of years of data used for each plan in the Permissive Group. For example, if the periods used to analyze experience data for Plans A and B were only 2 years in length, the Lack of Credible Mortality Experience Demonstration Period for any plans or populations within the Permissive Group could either be a period of 4 years (with both plans using the same period of time to analyze experience data) or 4 years and 2 months (using 4-year periods corresponding to the plan year for each plan to analyze the experience data). In either case, the Lack of Credible Mortality Experience Demonstration Period must end less than 3 years before the first day of any plan year for which lack of credible mortality experience is being demonstrated.

.07 Alternative Demonstrations of Lack of Credible Mortality Experience. In lieu of the information described in subsections .04 through .06 of this section, lack of credible mortality experience may be demonstrated by providing alternative information if such information demonstrates to the satisfaction of the Commissioner that the number of male and/or female deaths would not exceed 1,000 during the Lack of Credible Mortality Experience Demonstration Period. For example, a year-by-year reconciliation of the participant population (such as might be shown in an actuarial valuation report) could be submitted showing that the total number of participants leaving the plan during the Lack of Credible Mortality Experience Demonstration Period is less than 1,000, as this would clearly show that the number of male and female deaths must also be less than 1,000 during that period. Similarly, if the total number of participants in the plan does not exceed 1,000 for any year during the Lack of Credible Mortality Experience Demonstration Period, the year-by-year number of participants in the plan during such period could be submitted in lieu of the information described in subsections .04 through .06 of this section, as this would indicate that it would be highly unlikely that the total number of deaths during that period would exceed 1,000.

SECTION 10. UNADJUSTED MORTALITY EXPERIENCE

.01 In General. The information below must be provided in tabular form for all individuals within each population for whom the use of a separate mortality table is requested, for each year of the Experience Study Period, and for the Experience Study Period in its entirety, for all ages between 18 and 100 (except as provided in subsection .03 of this section). The same Experience Study Period must be used to develop the information below as was used to demonstrate credible mortality experience in section 7.

(1) The sum of the accrued benefits (or payable benefits, in the case of individuals in pay status) of all individuals at that age at the beginning of the year, other than individuals who left the population during the year for reasons other than death;

(2) The sum of the accrued (or payable) benefits of all individuals at that age at the beginning of the year who left the population during the year for reasons other than death, adjusted to reflect exposure periods of less than one year;

(3) The sum of the accrued (or payable) benefits of all individuals at that age at the beginning of the year who died during the year;

(4) The quotient determined by dividing the sum of the accrued (or payable) benefits of all individuals at that age who died during the year by the sum of the accrued (or payable) benefits for all individuals at that age adjusted for individuals at that age who left the population for reasons other than death (i.e., the amount determined in paragraph (3), divided by the total of the amounts determined in paragraphs (1) and (2);

(5) The total number of individuals at that age at the beginning of the year;

(6) The total number of individuals at that age at the beginning of the year who left the population for reasons other than death;

(7) The total number of individuals at that age at the beginning of the year who died during the year; and

(8) The average accrued benefit of all individuals at that age at the beginning of the year.

.02 Adjustment for Exposure Periods of Less than One Year. The request must include a description of the method(s) used to adjust the accrued benefits of individuals who left for reasons other than death to reflect exposure periods of less than one year.

.03 Grouping of Ages. The information requested in subsection .01 of this section may be presented in five-year age groups. In such cases, the groups at the extreme ages may include more than five ages provided such groups either do not include ages greater than age 24 or do not include ages less than age 95. Thus, for example, an age group consisting of all ages 24 and lower would be permissible whereas an age group consisting of all ages 25 and lower would not be permissible.

.04 Unadjusted Base Tables. An Unadjusted Base Table for each population for which the use of substitute mortality tables is requested shall, for all ages or all groups of ages, consist of the quotients determined in paragraph (4) of subsection .01 of this section for the Experience Study Period in its entirety. The request must include a complete copy of each such Unadjusted Base Table.

SECTION 11. BASE TABLE CONSTRUCTION - GENERAL METHOD

.01 In General. Except as otherwise provided in section 12 of this revenue procedure, a Base Table for a population must 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 (e.g., Whittaker-Henderson Type B, Karup-King). Section 12 of this revenue procedure provides for an alternate 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.

.02 Information Regarding Graduation Methods. The graduation method must be identified and the parameters of the graduation method used must be specified (e.g., for Whittaker-Henderson Type B, the number of differences and the “h” value must be specified). If more than one graduation is performed, then the parameters must be specified for each such graduation.

.03 Intermediate Values. If more than one graduation is performed in the process of adjusting an Unadjusted Base Table to a Base Table, then a copy of each intermediate table so created must be provided.

.04 Rationale. The rationale for the selection of each particular graduation method used must be provided along with the rationale for the selection of the particular parameters used as part of the method.

.05 Extension to Extreme Ages. At extreme ages for which insufficient data exists, the Base Tables must be extended to blend into the applicable Standard Mortality Table, provided in subsection .06 of this section, projected to the Base Year using Projection Scale AA, as set forth in the regulations. In such cases, the method (and the rationale for the method) used for the extension must be described.

.06 Standard Mortality Tables. For purposes of this revenue procedure, the following are the Standard Mortality Tables:

(1) The Male Base Nonannuitant Mortality Table (Year 2000) as set forth in § 1.430(h)(3)-1;

(2) The Male Base Annuitant Mortality Table (Year 2000) as set forth in § 1.430(h)(3)-1;

(3) The Female Base Nonannuitant Mortality Table (Year 2000) as set forth in § 1.430(h)(3)-1;

(4) The Female Base Annuitant Mortality Table (Year 2000) as set forth in § 1.430(h)(3)-1;

(5) The Male Base Combined Mortality Table (Year 2000) determined in accordance with subsection .07 of this section; and

(6) The Female Base Combined Mortality Table (Year 2000) determined in accordance with subsection .07 of this section.

.07 Gender-Specific Base (Year 2000) Mortality Combined Tables. For purposes of this revenue procedure, the Male Base Combined Mortality Table (Year 2000) is the table determined through application of the male Weighting Factors for Small Plans (the “Weights”) to the Male Base Nonannuitant and Annuitant Mortality Tables (Year 2000) as set forth in § 1.430(h)(3)-1. Similarly, the Female Base Combined Mortality Table (Year 2000) is the table determined through application of the female Weights to the Female Base Nonannuitant and Annuitant Mortality Tables (Year 2000) as set forth in § 1.430(h)(3)-1.

SECTION 12. BASE TABLE CONSTRUCTION - ALTERNATE METHOD

.01 General Rule. A Base Table for a population may be created by applying a fixed percentage (the “Fixed Percentage”) to the mortality rates in the Projected Applicable Standard Mortality Table only if the requirements of subsections .02 and .03 of this section are satisfied and the Service determines that the resulting Base Table sufficiently reflects the mortality experience of the applicable plan population. For this purpose the Projected Applicable Standard Mortality Table is the applicable Standard Mortality Table, projected to the Base Year using Projection Scale AA, as set forth in § 1.430(h)(3)-1. See subsection .05 of this section with regard to the possible use of other mortality tables for this purpose.

Under this section 12, the Unadjusted Base Mortality Tables must be constructed using five-year age groups. For each Base Table constructed using the alternate method described in this section, the Fixed Percentage and the mortality table to which such percentage is to be applied must be identified. In addition, for each so constructed Base Table, the ratios of the mortality rates from the Unadjusted Base Mortality Table for the population to the central age mortality rates (i.e., the mortality rates for the ages that are the midpoints of the age ranges) from the Projected Applicable Standard Mortality Table must be provided, in tabular form, for all five-year age groups for which mortality experience is available.

.02 Selection of the Fixed Percentage.

(1) If the applicable Standard Mortality Table for a population is the table provided in either paragraph (1) or paragraph (3) of subsection 11.06, then the Fixed Percentage must be within two percentage points of the arithmetic average of the ratios of the mortality rates from the Unadjusted Base Mortality Table for the population to the central age mortality rates from the Projected Applicable Standard Mortality Table of each of the five-year age groups from the 35-39 age group to the 60-64 age group, inclusive, unless the applicant can demonstrate that a different set of five-year age groups (consisting of no less than six such groups) is more appropriate for this purpose.

(2) If the applicable Standard Mortality Table for a population is the table provided in either paragraph (2) or paragraph (4) of subsection 11.06, then the Fixed Percentage must be within two percentage points of the arithmetic average of the ratios of the mortality rates from the Unadjusted Base Mortality Table for the population to the central age mortality rates from the Projected Applicable Standard Mortality Table of each of the five-year age groups from the 55-59 age group to the 80-84 age group, inclusive, unless the applicant can demonstrate that a different set of five-year age groups (consisting of no less than six such groups) is more appropriate for this purpose.

(3) If the applicable Standard Mortality Table for a population is the table provided in either paragraph (5) or paragraph (6) of subsection 11.06, then the Fixed Percentage must be within two percentage points of the arithmetic average of the ratios of the mortality rates from the Unadjusted Base Mortality Table for the population to the central age mortality rates from the Projected Applicable Standard Mortality Table of each of the five-year age groups from the 45-49 age group to the 80-84 age group, inclusive, unless the applicant can demonstrate that a different set of five-year age groups (consisting of no less than eight such groups) is more appropriate for this purpose.

.03 Consistency Requirement. The consistency requirement of this subsection .03 is satisfied only if each of the applicable ratios described in subsection .02 of this section is within 10 percentage points of the Fixed Percentage.

.04 Terminal Age. Notwithstanding subsection .01 of this section, the mortality rate for the terminal age in any Base Table created by applying a Level Percentage to a Standard Mortality Table shall be 1.000.

.05 Other Mortality Tables. The Service will consider requests for the approval of Base Tables constructed through the application of a fixed percentage to the mortality rates of other published generally accepted mortality tables (e.g., the 1983 Group Annuity Mortality Table) using standards similar to those provided in subsections .01 through .04 of this section.

.06 Example. The age group rates from the Male Unadjusted Base Table (determined in accordance with section 10 of this revenue procedure), the central age rates from the Male Base Combined Mortality Table (Year 2000), projected to the Base Year, and the ratios of such rates are as follows:

  A B C
Age Group Mortality Rate from Unadjusted Base Mortality Table Base Combined Mortality Table (Year 2000), Projected to the Base Year, Age Group Mortality Rate Ratio of Mortality Rate from Unadjusted Mortality Table to Base Mortality Rate (Year 2000)
45 to 49 0.00163 0.00165 98.79%
50 to 54 0.00211 0.00241 87.55%
55 to 59 0.00376 0.00431 87.24%
60 to 64 0.00765 0.00812 94.21%
65 to 69 0.01569 0.01506 104.18%
70 to 74 0.02439 0.02502 97.48%
75 to 79 0.03768 0.04387 85.89%
80 to 84 0.07948 0.07732 102.79%
Arithmetic Average Percentage 94.77%

In accordance with subsection .02 of this section, the Fixed Percentage to be applied to the Male Base Mortality Table (Year 2000), projected to the Base Year, must be between 92.77% and 96.77%. However, a Fixed Percentage that is less than 94.18% would fail to satisfy the requirements of subsection .03 of this section because the ratio for the 65-69 Age Group (i.e., 104.18%) would then not be within 10 percentage points of a Fixed Percentage less than 94.18%. Similarly, a Fixed Percentage that is greater than 95.89% would fail the requirements of subsection .03 because the ratio for the 75-79 Age Group (i.e., 85.89%) would then not be within 10 percentage points of a Fixed Percentage greater than 95.89%. Accordingly, under the facts in this example, if the applicant were to request the use of a Base Table constructed through the application of a percentage to the Male Base Mortality Table (Year 2000) that is a fixed integer, the applicant would be limited to a Fixed Percentage of 95%.

SECTION 13. DEMONSTRATIONS WITH RESPECT TO BASE TABLES

The following information must be provided with respect to each population for which the use of substitute mortality tables is requested:

.01 Generational Mortality Tables. Sample generational mortality tables, as of the Requested Effective Plan Year, for individuals whose years of birth are 1940, 1950, and 1960, constructed from the Base Tables using a methodology in accordance with § 1.430(h)(3)-1 (except that the projection period used to determine each particular mortality improvement factor is the number of years between the Base Year and the year for which the probability of death is determined).

.02  Funding Target Comparisons.  The liability of the plan(s) for which the use of substitute mortality tables is requested as of the valuation date for a plan year ending no earlier than one year and one day before the first plan year to which the substitute mortality tables will apply (the “Comparison Year”).  The liability is to be measured using generational mortality tables determined in accordance with the methodology described in subsection .01 of this section. The liability is to be provided separately for active participants, terminated vested participants, and retirees and beneficiaries in pay status, and is to be determined as follows:

(1) For Comparison Years beginning in 2007, the liability to be reported is the Current Liability determined in accordance with § 412(l) as it existed prior to PPA ’06 and, for comparison, what the Current Liability would have been if the substitute mortality table(s) had been used to determine Current Liability, holding all other assumptions constant.

(2) For Comparison Years beginning after 2007, the liability to be reported is the Funding Target, determined without regard to at-risk assumptions under § 430(i), and, for comparison, what the Funding Target would have been if the substitute mortality table(s) had been used to determine the Funding Target, holding all other assumptions constant.

.03 Annuity Factors. The following annuity factors based on generational mortality tables for individuals whose year of birth is 20 years before the Base Year, determined using interest and mortality assumptions consistent with those used under subsection .02 of this section.

(1) For all Base Tables with the exception of annuitant Base Tables, deferred to age 55 factors at quinquennial ages from 20 to 50.

(2) For all Base Tables with the exception of nonannuitant Base Tables, immediate annuity factors at quinquennial ages from 50 to 90.

.04 Graphical Displays. A comparison in the form of graphs with the X-axis representing age and the Y-axis representing the mortality rate, for each of the following pairs of mortality rates, for each population for which the use of substitute mortality tables is requested:

(1) The mortality rates from the Base Unadjusted Mortality Table and the mortality rates from the proposed Base Table; and

(2) The mortality rates from the proposed Base Table and from the applicable Standard Mortality Table (as described in subsection 11.06 of this revenue procedure), projected to the Base Year.

SECTION 14. EFFECTIVE DATE

This revenue procedure is effective for all requests for the use of plan-specific substitute mortality tables in accordance with § 430(h)(3)(C) of the Code and § 303(h)(3)(C) of ERISA submitted on or after December 1, 2008. Requests submitted prior to December 1, 2008, may rely on this revenue procedure or Rev. Proc. 2007-37.

SECTION 15. PAPERWORK REDUCTION ACT

The collection of information contained in this revenue procedure has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. section 3507) under control number 1545-2073.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number.

The collection of information in this revenue procedure is in sections 3 through 13. This collection of information is required to evaluate, process and obtain approval of the request for the use of substitute mortality tables. This information will be used to make determinations under § 430(h)(3) of the Code. The likely respondents are businesses or other for-profit institutions and nonprofit institutions.

The estimated total annual reporting/recordkeeping burden is 25,400 hours.

The estimated annual burden per respondent/recordkeeper varies from 335 to 681 hours, depending on individual circumstances, with an estimated average burden of 508 hours. The estimated annual number of respondents/recordkeepers is 50.

The estimated annual frequency of responses is once every 10 years.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. section 6103.

DRAFTING INFORMATION

The principal author of this revenue procedure is Carolyn E. Zimmerman of the Employee Plans, Tax Exempt and Government Entities Division. For further information regarding this revenue procedure, please contact Ms. Zimmerman at retirementplanquestions@irs.gov.

 
Appendix A
REQUEST FOR THE USE OF SUBSTITUTE MORTALITY TABLES CHECKLIST IS YOUR SUBMISSION COMPLETE?
 
Instructions
The Service will be able to respond more quickly to your request for the use of substitute mortality tables if it is carefully prepared and complete. To ensure your request is in order, use this checklist. Answer each question in the checklist by indicating Y for yes, N for no, or N/A for not applicable. Explanations must be provided for N or N/A responses. Sign and date the checklist (as taxpayer or authorized representative) and place it on top of your request.
You must submit a completed copy of this checklist with your request. If a completed checklist is not submitted with your request or if explanations are not provided for N and N/A responses, then your submission will be considered incomplete for purposes of determining the first day of the 180-day period described in § 430(h)(3)(C)(v)(II) of the Code.
1. If you want to designate an authorized representative, have you included a properly executed Form 2848 (Power of Attorney and Declaration of Representative)?
2. Have you satisfied all the requirements of Rev. Proc. 2008-4 or its successors (especially concerning signatures and penalties of perjury statement)? (See paragraphs (1) and (2) of subsection 3.03)
3. Have you included a statement of proposed deletions? (See paragraph (3) of subsection 3.03)
4. Have you included the user fee required under Rev. Proc. 2008-8 or its successors? (See subsection 3.02)
5. Have you included a copy of the Base Tables which will form the basis for the substitute mortality tables whose use is requested? (See subsection 5.03)
6. Have you identified the first day of the first plan year for which the use of substitute mortality tables is requested? (See subsection 5.03)
7. Have you stated the number of years for which the use of substitute mortality tables is requested? (See subsection 5.03)
8. Have you identified the Base Year of the Base Tables? (See subsection 5.03)
9. Have you included a description of the populations for which the use of substitute mortality tables is requested? (See subsection 5.04)
10. Have you included a description of the populations for which the use of substitute mortality tables is not requested? (See subsection 5.04)
11. Have you requested that the 180-day review period not begin until a separate request is received for another plan(s) maintained by the applicant is received? (See subsection 5.06)
12. Have you identified all plans subject to § 430 maintained by the applicant, or members of the applicant’s controlled group, including the additional information required for spun-off plans under subsection 6.03? (See section 6)
13. Have you identified the Experience Study Period for each plan in the Permissive Group? (See subsections 7.01 through 7.03)
14. Have you included a table showing the number of deaths, for each applicable population within the Plan (or within the Permissive Group), for each year (and in total) of the Experience Study Period? (See subsection 7.04)
15. Have you included a table showing the average number of individuals during the Experience Study Period and the number of individuals within the population as of the last day of the plan year immediately preceding the plan year during which the use of substitute mortality tables is requested for each population within the Plan (or plans within the Permissive Group) for which the use of a substitute mortality table is requested? (See section 8)
16. Have you included a table for each plan that is not within the Permissive Group showing the number of male and female deaths during the plan’s Lack of Credible Mortality Experience Demonstration Period, including identification of the Lack of Credible Mortality Experience Demonstration Period? (See subsections 9.01, 9.04, and 9.06.) Alternatively, have you provided other information that demonstrates that the number of deaths during the Lack of Credible Mortality Experience Demonstration Period would not exceed 1,000? (See subsection 9.07)
17. Have you included a table for each population within the Plan (or plans within the Permissive Group) for which the use of substitute mortality tables is not requested, showing the number of deaths within the population? (See subsections 9.01, 9.05, and 9.06) Alternatively, have you provided other information that demonstrates that the number of deaths during the Lack of Credible Mortality Experience Demonstration Period would not exceed 1,000? (See subsection 9.07)
18. Have you included a table showing the accrued benefits, counts of individuals covered under the plan, and other information for all ages (or groups of ages) for each year (and in total) of the Experience Study Period? (See subsection 10.01)
19. Have you included a description of the method(s) used to adjust the accrued benefits of individuals who left for reasons other than death? (See subsection 10.02)
20. Have you included complete copies of each Unadjusted Base Table? (See subsection 10.04)
21. Have you identified the graduation method(s) used to create the Base Table(s) from the Unadjusted Base Table(s), along with any intermediate tables resulting from applying the graduation method(s)? (See subsections 11.02 and 11.03)
22. Have you provided the rationale(s) for use of the particular graduation method(s) selected? (See subsection 11.04)
23. Have you described the method used to extend the Base Tables to extreme ages? (See subsection 11.05)
24. Have you identified a Fixed Percentage and a mortality table associated with all Base Tables constructed using the alternate method provided in section 12? (See subsection 12.01)
25. Have you included a table showing the ratios of the mortality rates from the Unadjusted Base Mortality Table to the central age mortality rates from the Projected Applicable Standard Mortality Table for each Base Table constructed using the alternate method of section 12? (See subsection 12.01)
26. Have you included (three) sample generational mortality tables as of the Requested Effective Plan Year? (See subsection 13.01)
27. Have you included a comparison of hypothetical funding targets determined using standard mortality tables and generational tables developed from the proposed Base Tables? (See subsection 13.02)
28. Have you included annuity factors for each Base Table, based on generational mortality tables for individuals whose year of birth is 20 years before the applicable Base Year? (See subsection 13.03)
29. Have you included graphical displays of the rates from the Base Unadjusted Mortality Tables, the proposed Base Tables, and the applicable Standard Mortality Tables? (See subsection 13.04)

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