IRS Issues Final Rule on Mortality Tables for Determining Present Value under Defined Benefit Pension Plans
Published October 20, 2023
The Department of the Treasury and the Internal Revenue Service (IRS) issued final regulations prescribing mortality tables to be used for most defined benefit (DB) pension plans.
These regulations include the updated methodology for determining the generally applicable mortality tables that are used to calculate present value under section 430 of the Internal Revenue Code (Code). Pursuant to section 417(e)(3)(B), a modified version of these tables is used for purposes of determining the amount of a single-sum distribution (or another accelerated form of distribution). In addition, these tables are used to determine current liability for multiemployer plans under section 431(c)(6) and Cooperative and Small Employer Charity (CSEC) plans under section 433(h).
The mortality tables:
- Specify the probability of survival year-by-year for an individual based on age, gender, and other factors;
- Are 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 the plan; and
- Are relevant for determining the minimum required amount of a lump-sum distribution from such a plan.
The
regulations affect participants in, beneficiaries of, employers
maintaining, and administrators of certain defined benefit pension
plans. The tables would be used to determine current liability
for multiemployer plans and CSEC plans.
The regulations apply to valuation dates occurring on or after January 1, 2024.
The effective date of the final rule is October 20, 2023.
Additional Information: