On October 8, 2015, The Retirement Plans Experience Committee (RPEC) of the Society of Actuaries released an updated mortality improvement scale called MP-2015. The scale updates MP-2014, and is not a replacement of the base mortality tables which were released last year, but rather a supplement. The MP-2015 scale is based upon data from the Social Security Administration and incorporates two additional years of data that reflect smaller improvements in longevity.
As stated in the report issued by the RPEC, "To reflect this latest available data, RPEC is now publishing this 2015 update and intends on providing future annual updates to the model as soon as practicable following the public release of updated data upon which the model is constructed. RPEC expects the release of such annual updates to have a number of advantages including: (a) A decrease in the lag time between the most recent data used in the improvement scale and the date of application of that scale (b) More stable financial results, especially during multi-year periods over which mortality improvement is consistently increasing or decreasing." Additionally, the report states that the RPEC is "actively investigating the possibility of obtaining more current information from the Centers for Medicare & Medicaid Services (CMS), the Centers for Disease Control and Prevention (CDC), and the Human Mortality Database (HMD)."
The impact of adopting the MP-2015 scale on pension and postretirement welfare benefit obligations is expected to be approximately 2% less than obligations measured using the RP-2014 tables. However, for plan sponsors that developed their own individualized mortality tables, based upon their specific mortality experience, the MP-2015 scales will further support their assumption and adjustment to the respective benefit obligation. The release of this new scale is an important consideration for plan sponsors in selecting their mortality assumptions going forward - and plan sponsors will need to consider plan type, plan provisions and as participant traits when assessing and/or adopting plan assumptions.
As a reminder, MP-2015/RP-2014 base mortality tables and the MP-2015 scale are for financial reporting purposes only and have no impact on the pension funding or determination of minimum lump sums payments. The IRS stated in September 2015 that it does not intend to adopt the new mortality tables as issued by the SOA until 2017 at the earliest.
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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.