By Jane Meacham, Contributing Editor
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The Internal Revenue Service’s (IRS) delay until 2018 of implementation of updated mortality tables for pensions gives defined benefit (DB) plan sponsors some extra time to prepare for significant changes tied to increased participant longevity. But the delay also may affect pension liability valuation in up to three ways, according to investment consulting firm Cambridge Associates.
The three areas of pension liability that may be touched by the delay are minimum required contributions, variable-rate Pension Benefit Guaranty Corporation (PBGC) premiums, and lump-sum distributions to terminated vested participants (see Consider These Steps When Administering DB Plan Lump-Sum Windows.)
In an April client brief about the implementation delay for the 2014 mortality assumptions known as RP-2014, Cambridge Associates said: “Practically speaking, this means that for the remainder of 2017, the liability valuation of these three purposes is temporarily lower (and funded status therefore temporarily higher), than it would be once the new tables are adopted.”
History of New Tables
The Society of Actuaries on Oct. 27, 2014, released the final
Jane Meacham is the editor of BLR's retirement plan compliance publications. She has nearly 30 years' experience as a writer/editor of financial services news.