March 29, 2017


On December 29, 2016, the IRS issued a proposed rule on Mortality Tables for Determining Present Value Under Defined Benefit Pension Plans to update the requirements that a plan sponsor must meet to obtain IRS approval when using mortality tables specific to the plan for minimum funding purposes instead of generally applicable tables. In response, the U.S. Chamber of Commerce and the National Association of Manufacturers submitted a joint comment letter on March 29, 2017.

March 29, 2017

Internal Revenue Service

CC:PA:LPD:PR (REG112324-15), Room 5203,

PO Box 7604, Ben Franklin Station,

Washington, DC 20044

Re: Pension Mortality Table Update

To Whom It May Concern:

The undersigned organizations represent employers of all sizes throughout the United

States and across all industries that sponsor defined benefit (DB) pension plans. We appreciate

the opportunity to comment in response to the Internal Revenue Service (IRS) proposed rule on

Mortality Tables for Determining Present Value Under Defined Benefit Pension Plans. The

undersigned organizations appreciate that the IRS makes an effort to provide for some flexibility

when adopting updated tables to be used by these DB plans. However, we want to reiterate

how important it is for the IRS to be very flexible in allowing for the use of substitute mortality

tables for pension funding purposes and additional time for plan sponsors to adapt and plan for

these changes in its final rule.

Many employers still provide DB pension plans to their employees, but this benefit is not

without cost. In October 2014, the Society of Actuaries (SOA) released an update of their

pension plan mortality tables -- the RP-2014 base mortality tables and MP-2014 improvement

scale -- intended to reflect the latest longevity data that people are living longer. As a result of

the new table, the SOA estimated there could be a four to eight percent increase in private

pension plan liability, which translates to hundreds of millions of dollars in increased costs for

many plan sponsors. While the IRS is using the SOA’s most updated scale, MP-2016 to reflect

a somewhat smaller improvement in longevity, employers may still expect a significant increase

in plan liabilities as a result of the updated tables. Requiring essentially immediate adoption of a

new table resulting in such large increases in cost represents a significant burden on plan

sponsors. The significant additional cost of drawing more capital into the pension plan in the

form of higher contributions rather than being available to invest this capital into their

businesses is extremely detrimental, not only for the company but also for economic growth.

Since the change affects lump sum values, this change in tables will also affect pension

administration systems resulting in additional plan administrative burdens in 2017 and may

result in transition issues for lump sums paid in 2018. Plans providing lump sums based on

statutory mortality may have a significant change in the amount of available lump sum for

participants commencing in the first month of the 2018 plan year.

For these reasons, the undersigned organizations appreciate that the IRS proposal

allows the expanded use of substitute mortality tables for pension funding purposes, rather than

requiring the adoption of the SOA tables. Consistent with Congressional intent in the Bipartisan

Budget Act of 2015, the use of substitute tables would better allow for plan sponsors to

consider their unique populations and actual plan experience when developing longevity assumptions.

In particular, the use of substitute tables will provide manufacturers and other plan

sponsors with greater flexibility, while also providing a more accurate actuarial reflection of their

pension plan population and aligning funding requirements more closely with US GAAP

accounting. Use of a plan-specific mortality table would more closely align the IRS methods for

determining plan funding requirements to the methods that are used by companies in their

audited financial statements.

Some companies have also suggested that the IRS should consider allowing industrybased

mortality tables or similar pooled mortality experience if a plan does not have enough

participants to achieve full or partially credible experience to be able to construct a plan-specific

mortality table. For example, grouping by broad existing classification codes, such as mining,

metals, heavy manufacturing, etc., would also align with methods plan sponsors use for

industry-based mortality tables that have been acceptable to enrolled actuaries and

independent registered public accounting firms for audited financial statements. This approach

represents one way to allow plans that do not have credible populations to use a table that is

closer to their own experience.

Given the request to allow more flexibility in the implementation of the updated mortality

tables, the undersigned organizations also requests that the IRS delay implementation beyond

the 2018 calendar year to allow for further study and additional time for plan sponsors to plan for

the additional funding obligations. In addition, consideration should be given to relaxing the 180

day request deadline for requesting approval of substitute mortality tables. Otherwise, plans with

years beginning on January 1, 2018 may not have time to submit the required information for a

substitute mortality table. Alternatively, plans could be allowed a one year transition period if

they indicate the intent to submit a substitute table, and in this case a pension plan should be

allowed to continue to use the same mortality table method in 2018 as it used in 2017.

The IRS also should consider a multiple year phase-in option for funding and

administrative requirements, rather than having such a significant impact in a single year. This is

very important to plan sponsors who may need to otherwise contribute large sums of money to

a plan to reach a certain funded percentage, such as an 80 percent level, to avoid benefit

payment restrictions. Other IRS method changes allow multiple years to completely settle the

cash impacts of a change, and mortality changes should be treated similarly.

Thank you in advance for considering our request for a more flexible approach to the

implementation of the updated mortality tables as well as additional time for plan sponsors to

adapt and plan for these changes.


National Association of Manufacturers

U.S. Chamber of Commerce