Minimum funding standards for single-employer defined benefit pension plans

lignific::ant Index No. 0430.00-00
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DEPARTMENT OF THE TREASURY
TAX IUMflT AND
00¥IUINM&NT11NTfflU
DM9ION
Number: 202250014
Release Date: 12/16/2022
Re: Subltltute Mortality Table Ruing
EIN: -
SEP 20211!
Plans for which aubltlt.ute mortally tables are requeetad:
EIN: - (Plan No. )
Plan 5 •
EIN; - (Plan No. )
Other defined bena• plans in the Taxpayer's controlad group:
Plan 1 •
EIN: -
(Plan No. )
Plan2•
EIN: -
(Plan No. )
Plan3• EIN: .
(Plan No. )
Plan8• EIN: -
(Plan No. )
Dear
Thia letter la ft!N1P011N ID the Taxpayeta NqUNt dated Mardi 22, 2022 along wlh supplemental infomlation provided by the Taxpayer'• authorized reprwntalvee via alectlonic mal on May 27, 2022, J&ma 10, 2022, and June 23, 2022.
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The following facts and reprwtn1ation1 have been submlted under penalil& of perjury
In support of the ruling requestad.
Plan 1, Plan 2, Plan 3. Plan 4, Plan 5, and Plan 8 .. the only defined benefll ndnment plans In the T...,,. controlad group. TtMn WU one addllonal defined benefit relnment plan hit left the Taxpayer's COlatmflecl group N of that WU not Included In the Taxpayer'• exper1enoe study. Taxpayer does not aponaor any multipkMmployer plans.
Taxpayer requests approval for 1he fobtJlng tiplCHic populations:
• Plan 4 and Plan 5 combined - Male partiapan19 (annuitllnta and nonannultants combNd), includtng dllablad participants.
• Plan 4 and Plan 5 combined - Female parlcipanta (annuitants and nonannuitants combined), Including dlubled panicipanta.
Taxpayer indic: ■lld that Plan 8 does not ttaw cradl>le mortality experience and thenlllore, the ...-.claRI mortality_... will be UNd for calculatlona under MCtion 430 of 1he Internal Revenue Code f'Code1.
Taxpayer ta aleo requesting approval for tubltltute mortally tllblN for Plan 1, Plan 2, and Plan 3, which will be addl'MNd In 111 ..,_ .. ruling letter.
Effeclive the Taxpayer transferred approximately 3,300 deferred veiled panicipanta from Plan 4 to Plan 6. Effective the Taxpayer tranafarred approximately deferred WIited and in-pay partlcipanle from Plan 4 to Plan 5. nw tranlfers • not expected to have any inpact on u. mortality analrbecalM the two Impacted plans are being atudled togelta a If being a lhlgle plan.
The data for al participant9 in 1heee two plans waa Included in Nch year of the expertenoa study (I.e.. the apun-al ,, … ,.,. .-. included in the analyaia • full year expoautw).
An annuity COlltrad was aecured to take the obligations of certain annuitanll with benefita under I per month from Plan 5 and under S per month from Plan 4 on This wt rectuc.d the combined plane' parttclpant count bV roughly partlcipal~._ … _ Slmllarly, an annuity C01nct wu eecured to take the obltgatlona of certain annultanta with beneftlll undlr I per month from Plan 5 and under$ per month from Plan 4 on Thia event A!lduced the combined plans' pal1icipant count by roughly participants.
8olh annuily buyouts were only for in-pay pa1lcipara in Plan 4 and Plan 5. Thentfore, al aclive and d~ weted plan participanla In Plen 4 and Plan 5 with benefita under the lated 1hNllholda ...,.lned part of each plan after the annuity buyouts. Addlionally, a 8ffllll number din-pay participants in Plan 4 and Plan 5 with blnefitl under U. lilted 3 thresholds were excluded from the annuity buyouts. Theae partioipanCI went excluded due to data lncompleteneu or payment complexitiea that ware excluded due to data lncompleteneu or payment complmdUea that were unable to be property handled by the admini8billlon 111me d the inaurance carnpanla. For example, certain partldpan1s have benefit amounts that are ICheduled to change owr time, and thill wa1 • fNture that the IMlnnoe oompuiee wen1 not comtmable inheritilig. Taxpayer le unaware of _, cha~ relllng to this small group of perticipanta that would cau• them to have materially diflnnt mortality uperience than ollel' ainilar particlpanta who we Included In the annuity buyouts.
The annuity buyouta aignificantly reduced the number of partioipanCI In Plan 4 and
Plan 5 that wil be ,._led once 1he p,opo1ed morlallty tablN are being Ulld
(beginning In ). While the size of a particlpanfa benelt is not beleved to be
C0INlated to faders that do have cmaal … ,. for such dffrerencea. Aa IUCh, experience for annuitants wilh … t.l'lder the dollar per monlh threeholda noted above_,.. excluded I they were part of the annuity buyouts or if they would have bean part d the annuity t,uvou1a had they aurvlved to the date of the buyout execution.
Neer the end of a fl.mp 11.m window was offered to terminated veatad partlcipanta in Plan 4 and Plan 5. The window signiftcantly reduced 118 number of terminated Wllt8d participants remalnlna In the pention.,.. once 1he propoeed mortalily tablN wil be ueed (begirl1ing in ~. It ia po11l,le that the portion of the population 1hlt elecild to take a ILmP sum may have d...,._. mortality experience from the portion of the population that did not (I.e .• there may be anti Nlection). and becauee the Taxpayer doet not have polt-unp tum window expe,tence, the Taxpayer has excluded the entire terminated vel1ad population from the experience analysis.
Taxpayer'• pn)DOlld mortality … were developed baled on an experience etudy period from. through wlh a b8N year of Taxpayer'• propo1ed mortality ratea were calculated by adjusting the applicable andanJ mortality tablN In eection 1.430(h)(3)-1(d) of the Treaaury Regulationa ("Reaulationa,. UlinQ the mortally rllllo and cndlbllly uaightinu factor incllvldualy determined for each population. • shown in the table below. llortallty CNMlblllty
- . .. ratio
• . .. factor . ,.
Plan 4 and Plan 5 combined - Male par1icipanta
(annunanta and nonannuitanta combined). includina dllabled --~nta
Plan 4 and Plan 5 combined - Female parttc.,ams
(annuttanta and nonannuttanta cambined), lncludina dillbled-::_:_ ___
Taxpayer's ,.._. is made in accontance wilh section 430(h)(3)(C) of the Code,
NCtlon 303(h)(3) of the Employee Retirement Income Security Ad of 1974. wtion 1.'30(h)(3)-2 ofht Regulations, and Revenue Procedure 2017-55.
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9818d on the above facts and repre111nlationa, the Taxpayer requests a ruling to UN the aubatitute mortality tables for making computationa under section 430 of the Code.
Taxpayer requeata this ruling to be effactlve for a period of up to 5 plan yeara beginning with the plan year commencing Taxpayer'• propo11d ba1e mortality rates an1 as follows: lubetltutl llortallty TalllN Propo•ed for UN beginning with the plan ,-r commencing … , … Male Pllrtlclpanta. Female Parllclpanta, lncludlng DINbled lncludlng DINbled Ana Partlclnanta Partlcl 1 2 3 4 5 8 7 8 9 10 11 12 13 14 15 18 17 18 19 20 21 22 23 24 25 28 27 28 29 30 5 … Participants, Including Dleabled
Partlclnants
Aae
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
81
82
63
64
85
86
87
68
69
70
71
72
Female Participants,
Including Dlubled
Partlclnanta
6
Male Partlclpanls,
Including Dlubled
Aaa Partlclaanta
73
74
75
76
77
78
79
80
81
82
83
84
85
88
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
Female Participants,
Including Dlubled
Partlclnanta
A
115
118
117
118
119
120
7
… Partlclpanta,
Including Dlubled
Parllcl n1a
Female Participants, lncludlng Dlubled
Partlcl nts
Section 430(h)(3)(A) of the Code states, in relevant part, that the Secretary shall by regulation prescribe mortality tables to be used In detarmining any praeent value of making any computation under section 430 of the Code.
Section 430(h)(3)(C) of the Code states, that upon request by the plan sponsor and approval by the Secretary, a mortality table shall be used in determining any present value or making any computation under section 430 of the Code during the period of consecutive plan years (not to exceed 1 0) specified in the request.
Section 430(h)(3)(C)(ii) of the Code states, in relevant part, a substitute mortality table shall ceaae to be in effect as of the eartiest of:
• the date on which there is a significant change in the participants in the plan by reason of a plan spinoff or merger or otherwise, or
• the date on which the plan actuary determines that such substitute mortality table does not meet the following requirements of Section 430(h)(3)(C)(lii) of the Code.
Section 430(h)(3)(C)(iil) of the Code states, in relevant part, that a mortality table meets the requirements of this section if: o there is a sufficient number of plan participants, and the pension plans have been maintained for a sufficient period of time, to have credible lnfonnation necessary, and o auch substitute mortality table reflects the actual experience of the pension plans maintained by the sponsor and prqected trends in general mortality experience.
Section 1.430(h)(3)-2(c)(3) of the Regulations states, in relevant part, that the baee year for the bale substitute mortality table Is the calendar year that contains the day before the midpoint of the experience study period. Additionally, a plan'• subatitute mortality tables must be generational mortality tables.
Section 1.430(h)(3)-2(c)(8)(ii) of the Regulations states, in relevant part, that a plan's aubatitute mortality table& must not be used beginning with the earliest of:
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• For a plan using a substitute mortality table for only one gender, the first plan year for which there is full or partial credible mortality information with respect to the other gender that had lacked credible mortality information (unless an approved substitute mortality table is used for that gender),
• The first plan year in which the plan fails to satisfy the requirement that other plane and populations in the controlled group must also use substitute mortality tables unless It can be demonatn1ted that they do not have credible mortality information (taking into account the transition period for newly affiHatacl companies),
• The second plan year following the plan year for which there is a significant change in individuals covered by the plan as described in section 1.430(h)(3)-2(c)(8)(iii) of the Regulations.
• The plan yNr following the plan year In which a aubatitute mortality tabla uaad for a plan population is no longer accurately predictive of future mortality of that population, as determined by the Commiaaioner or as certified by the plan's actuary to the satisfaction of the Commissioner, or
• The date apecified in guidance published in the Internal Revenue Bulletin pursuant to a replacement of mortality tables specified under section 430(h)(3)(A) of the Code and section 1.430(h)(3)-1 of the Regulations, other than annual updates to the static mortality tables issued pursuant to saction 1.430(h)(3)-1 (a)(3) of the Regulations or changes to the mortality improvement rates pursuant to section 1.430(h)(3)-1 (a)(2)(i)(C) of the Regulations.
Section 1.430(h)(3)-2(c)(6)(iii) of the Regulations states, in relevant part. a significant change in the Individuals coverad by a substitute mortality tabla for a plan year occurs If the number of lndMduals covered by the substitute mortality table for the plan year 18 leel than 80% or more than 120% of either the average number of individuals in that population over the years covered by the experience study on which the substitute mortality tablea are based, or the number of individuals covered by the •ubatitute mortality table In a plan year for which a certifk:ation (described below) waa 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 Conmlesioner that the substitute mortality tables used for the population continue to be accurately prediative of future mortality of that population (taking into account the effect of the change in the populatiOn).
Section 1.430(h)(3)-2(d)(2) of the Regulations states, in relevant part, that the experience atudy period must consist of 2. 3, 4, or 5 consecutive 12-month periods, and must be the same period for all populations. The last day of the experience study period 9 fflUlt be last than 3 yea,s tklfofe the 11,st day of the first plan year for Which the
9Ubltltute mortally tables are to apply.
Section 1.430(h)(3)-2(d)(4) of1he Regulations statea, in relevant part. that1he bale mortally ,_. are determined by multiplying the mortality rate from the atandard morlllity table by the mortality ratio.
SectiOn 1.'30(h)(3)-2(e)(1) of the Regulatlana stM11, in relevant part. that ifl'le actual number of de..,_ la leu tha, the U credl>lllly thntahold, then the baae mortally ratea are determined U1ing a partial credl:,ilty ¼feigt,ting tactor.
Section 1.430(h)(3)-2(f) of the Regulationl providea apecial Nies for nMWJ-allllated plans - a plan ii a newt,,efflllated ptan if the plan aponaor becomel a rwnber of the new conboled group in connectioft Wllh a nwger, acqut■ftlon, or almllar trantJIICtion delcrlbld In§ 1.410(b),-2(f). A plan allo is treated • a nawly-afflliated plan for pwpolN of thia w:tion if the plan is eetablilhed In conneotlon with a tranafer of•••• and llabllltlea from another emp1aywa plan in conmctioft with a rneraer. acQltidion. or unllr transaction deacrl>ed In f 1.410(b)-2(f).
The Internal Revenue 5ervice hll revtewed the 8UbtUtute mortality,._ and supporting information and hfll delermlned that baaed on the information submitted, 1tl9 ratel were developed in accordance wilh NCtion 1.430('1)(3)-2 of the Regulatb,a and Revenue Plvcedure 2017•55.
Permillion ii hereby granted for the Taxpayer to use the propoaed eubellute mortality
1'11181 lhown above for participantl In Plan 4 and Plan 5 (including dlaabled pa,ticlpantl).
The appftMld aubdtule mortally,_. (lhOWn above) must be applied on a gen111donal belia, u provided in eaction 1.430(h)(3)-2(c)(3) of the Regulallona.
Your ltfllltion ii called to the earty termination rules under aection '430(h)(3)(C) of the
Code •nd Wllion 1.GO(h)(3)-2(c)(8) of the Ragulatlonl. which detcrtbe the ciramllancN in which the uee of the approved aubatitute mortality tlblH will tenninate before the end of the approved period (deacribed abcM,). we allo draw you, attention to the fact that the male particlpanta in Plan 8 (annuftllnla and nonannull8n1S combined, Inducing diubled male participanta) nperlenced ..,. and female parlicipantl In Plan 8 (annuitants and nonannuitanta combined, including dilabled female participantl) experienced deaths dfJl'irG the experience atudy period. Note thllt "1eN populationl wll have a-edible mortality uparience f they expe,tence at INllt 100 deatha dwtng any period coneaponding to the length of the expedence study ueed to conatruGt the approved tubltitute mortality tablell (shown above). It II important to mornb thele populationl to ensure that approprlaut action is llllaln. 9hould thla occur, to avoid violating the early amination rules under NGtion 1.430(h)(3)-2(c)(6) of the Regulalionl. ...
0
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1!l~111tg1111 '• 11,1i11111~ I i'iti a.s I
9.
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• !5 i
I ,t 1 r s!r
11 o the percentage of the population, by the following monthly single life annuity brackets:
• under $100,
• between $100 and $250,
• between S250 to $500,
• between $500 to $1,000,
• between $1,000 and $1,500, and
• $1,500 and over, along with the average age and average benefit amount for the population in total. This infonnation should also be provided for the population in the experience study and at the end of each plan year, beginning with the valuation date for the firat plan year that the certification is required, through the date Immediately preceding the moat rec;ent actuarial valuation at the time the information is reported.
• An explanation of any material changes In the population.
This information must be provided to Mr. David M. Ziegler (or to another Individual designated by the lntemal Revenue Service) at the following address: lntemal Revenue Service Attn: Mr. David M. Ziegler TE/GE: SE:T:EP:RA:T:A2 IR-8213 1111 Constitution Ave. NW Washington DC 20224-0002 Failure to provide this Information by the due date may reeult in a requirement that the standard mortality tablee must be used for purposes of section 430 of the Code, beginning wfth the earlier of:

(1) the plan year for which the deadline for providing this information le mi88ed, or

(2) the date required for early termination of the use of the substitute mortality tables pursuant to eectlon 1.430(h)(3)-2(c)(8) of the Regulations.
No opinion ia expreaaed as to the tax treatment of the transaction described herein under the provision• of any other section of either the Code or Regulations which may be applicable thereto, as appropriate.
In granting 1hia approval, we have only considered whether the substitute mortality rates were developed In accordance with section 1.430(h)(3)-2 of the Regulations and Revenue Procedure 2017-55. Accordingly, we are not expreealng any opinion as to the accuracy or acceptability of any calculations or other material submitted with your
NqUHt.
This ruling ia directed only to the taxpayer that requested it. Section 6110(k)(3) of the
Code provides that It may not be used or cited by others as precedent.
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'Nlw'I fling Form 5500 for 1ha plan yeat"I for which the lubltitute mortality tables are
Uled. pleaee note 1ha Information that ia NqUired to be atlached to SchecUe SB
(Actuarial lnfonnallon) In accordance wilh 1ha inltrUctlonl to lhat form.
Punulnt to a power d attorney on file wlh this office, a copy of this letter ruling ii being eent to your aUlhodzed raprwntalhlN.
Addilionaly. a copy of thil letter ruing ii beilg aent to 1ha Manager. EP ClaNlflcation in
Houatont Tem and to the Manager, EP Compliance Uni in Chicago, llllnola.
If you wiah to inquint about this ruling. pla•e contact (ID Badge
Number ) at' ( ) - . PINN addntN all correspondence to
SE:T:EP:RA:T:A2.
Encloluree
Sinoen,ty you,a,
David M. Zler,llr. Manager
Employee Plana Actuarial Group 2
Notice 437. Notice of Intention to Diacloae (Rulings)
A deleted copy of the ruling cc: