Abstract
The Internal Revenue Service will adopt new regulations replacing outdated mortality tables RP-2000 and improvement factor AA with RP-2014 and MP-2016 (RP for “retirement plan” and MP for “mortality projection”) for plan years beginning on or after January 1, 2018. The new tables will affect plan valuation (that drive employer contributions), Pension Benefit Guaranty Corporation’s variable rate premiums and the calculation of lump sum distributions. They will substantially increase the cost of sponsoring a traditional defined benefit pension plan. This article explains the workings and function of mortality tables and life expectancy, traces the development of the new tables by the Society of Actuaries and their adoption by the IRS, assesses their likely impact and examines probable responses by plan sponsors.
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