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IRS Provides Mortality Table, Guidance For Plan Benefits.

NOV. 6, 2007

Rev. Rul. 2007-67; 2007-48 I.R.B. 1047

DATED NOV. 6, 2007
DOCUMENT ATTRIBUTES
  • Institutional Authors
    Internal Revenue Service
  • Cross-Reference
    For Rev. Rul. 2001-62, 2001-2 C.B. 632, see Doc 2001-30966 or

    2001 TNT 242-10.

    Part I

    Section 417. -- Definitions and Special Rules For Purposes of Minimum

    Survivor Annuity Requirements

    26 CFR 1.417(e)-1: Restrictions and valuations of distributions from

    plans subject to sections 401(a)(11) and 417.
  • Code Sections
  • Subject Areas/Tax Topics
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 2007-24764
  • Tax Analysts Electronic Citation
    2007 TNT 216-9
Citations: Rev. Rul. 2007-67; 2007-48 I.R.B. 1047

Rev. Rul. 2007-67

ISSUES

1. Do the timing rules for the determination of the applicable interest rate under §§ 1.417(e)-1(d)(4) and 1.417(e)-1(d)(10)(ii) of the Income Tax Regulations continue to apply for distributions with annuity starting dates occurring during plan years beginning on or after January 1, 2008?

2. What mortality table is the applicable mortality table under § 417(e)(3)(B) of the Internal Revenue Code ("Code") for distributions with annuity starting dates occurring during plan years beginning on or after January 1, 2008?

3. Does an amendment that implements the new interest rates and mortality table under § 417(e)(3) violate the requirements of § 411(d)(6)?

LAW AND ANALYSIS

Section 417(e)(3) provides rules for the determination of the present value of plan benefits for purposes of § 417(e). Section 417(e)(3)(A) generally provides that for purposes of § 417(e)(1) and (e)(2), the present value is not permitted to be less than the present value calculated by using the applicable mortality table and the applicable interest rate as defined in § 417(e)(3)(B) and (C) respectively. In addition, § 411(a)(11)(B) provides that the determination of present value for purposes of § 411(a)(11)(A) is calculated in accordance with § 417(e)(3). Sections 203(e)(1), 203(e)(2), and 205(g)(3) of the Employee Retirement Income Security Act of 1974 (ERISA) provide corresponding provisions to §§ 411(a)(11)(A), 411(a)(11)(B), and 417(e)(3) of the Code.

Section 1.417(e)-1(d)(1) provides that a defined benefit plan must provide that the present value of any accrued benefit and the amount (subject to §§ 411(c)(3) and 415) of any distribution, including a single sum, must not be less than the amount calculated using the applicable interest rate described in § 1.417(e)-1(d)(3) (determined for the month described in § 1.417(e)-1(d)(4)) and the applicable mortality table described in § 1.417(e)-1(d)(2). The present value of any optional form of benefit cannot be less than the present value of the normal retirement benefit determined in accordance with the rules described in the preceding sentence. Under § 1.417(e)-1(d)(1), these rules must also be used to compute the present value of the benefit for purposes of determining whether consent for a distribution is required. Section 1.417(e)-1(d)(6) sets forth exceptions from the otherwise applicable minimum present value requirements of § 1.417(e)-1(d)(1). In addition, § 411(a)(13)(A) provides an exception for certain applicable defined benefit plans described in § 411(a)(13)(C).

The U.S. Supreme Court, in Arizona v. Norris, 463 U.S. 1073, 1084-1086 (1983), held that the application of sex-distinct actuarial tables to employees based upon their gender in calculating the amount of retirement benefits violates Title VII of the Civil Rights Act of 1964.

For plan years beginning prior to January 1, 2008, § 417(e)(3)(A)(ii)(II) defines the term "applicable interest rate" as the annual rate of interest on 30-year Treasury securities for the month before the date of distribution or such other time as the Secretary may by regulations prescribe. Section 1.417(e)-1(d)(4) generally provides that a plan must provide for the applicable interest rate to be held constant for a stability period of one calendar month, one plan quarter, one calendar quarter, one plan year, or one calendar year, and that the applicable interest rate for each stability period is the annual rate of interest on 30-year Treasury constant maturities for a specified lookback month that is the first, second, third, fourth, or fifth full calendar month preceding the first day of the stability period.

For plan years beginning prior to January 1, 2008, § 417(e)(3)(A)(ii)(I) defines the term "applicable mortality table" as the mortality table prescribed by the Secretary and provides that such table shall be based on the prevailing commissioners' standard table (described in § 807(d)(5)(A)) used to determine group reserves for group annuity contracts issued on the date as of which the present value is determined. Rev. Rul. 2001-62, 2001-2 C.B. 632, provided the applicable mortality table for plan years beginning prior to January 1, 2008, for distributions with annuity starting dates on or after December 31, 2002. Rev. Rul. 2001-62 also permitted a plan to specify any earlier date in 2002 for the required use of the mortality table set forth in that revenue ruling. Rev. Rul. 95-6, 1995-1 C.B. 80 provided the applicable mortality table for distributions with annuity starting dates prior to the application of Rev. Rul. 2001-62.

For plan years beginning on or after January 1, 2008, section 302 of the Pension Protection Act of 2006, Public Law 109-280 (PPA '06), changed the present value determination under § 417(e)(3) of the Code. For such plan years, § 417(e)(3)(C) defines the term "applicable interest rate" as the adjusted first, second, and third segment rates applied under rules similar to the rules of § 430(h)(2)(C) for the month before the date of the distribution or such other time as the Secretary may by regulations prescribe. For this purpose, the adjusted first, second, and third segment rates are determined without regard to the 24-month averaging provided under § 430(h)(2)(D)(i), and § 417(e)(3)(D)(ii) provides a transition rule that phases in the use of the segment rates over five years.

In addition, for plan years beginning on or after January 1, 2008, § 417(e)(3)(B) defines the term "applicable mortality table" as a mortality table, modified as appropriate by the Secretary, based on the mortality table specified for the plan year under subparagraph (A) of § 430(h)(3) (without regard to subparagraph (C) or (D) of such section). In contrast to the phase in of the use of the segment rates with regard to the applicable interest rate, there is no transition rule with regard to the applicable mortality table. In addition, PPA '06 left unchanged the mortality table which generally must be used for the purposes of adjusting any benefit or limitation under § 415(b)(2)(B), (C), or (D).

Notice 2007-81, 2007-44 I.R.B. 899, specifies how the adjusted segment rates that are used to determine minimum present values pursuant to § 417(e)(3) are determined, and specifies those rates for August 2007.

Section § 1.430(h)(3)-1 of the proposed Income Tax Regulations (72 FR 29456) proposes rules for the mortality tables to be used in determining present value or making any computation under § 430. The proposed regulation provides for separate mortality tables for male and females and for annuitants and nonannuitants. The proposed regulation also provides an option for smaller plans to use male and female blended static tables for all participants -- in lieu of separate tables for annuitants and nonannuitants. Under the proposed regulation, expected improvements in mortality would be taken into account through the use of static tables that are updated annually, or through the use of generational tables. The proposed regulation provides the static mortality tables that are to be used with respect to valuation dates occurring during 2008. The static mortality tables that are to be used with respect to valuation dates occurring in later years are to be published in the Internal Revenue Bulletin.

Section 411(d)(6)(A) generally prohibits a plan amendment that decreases a participant's accrued benefit. Section 411(d)(6)(B) provides that an amendment that eliminates an optional form of benefit is treated as reducing a participant's accrued benefit, but permits the Secretary of Treasury to provide for the elimination of certain optional forms of benefits under regulations. Section 1.411(d)-3(a)(1) provides that under § 411(d)(6)(A), a plan is not a qualified plan (and a trust forming part of such plan is not a qualified trust) if a plan amendment decreases the accrued benefit of any plan participant, except as provided under § 412(c)(8)1 of the Code, section 4281 of the ERISA, or other applicable law.

Under section 1107 of PPA '06, a plan sponsor is permitted to delay adopting a plan amendment pursuant to statutory provisions under PPA '06 (or pursuant to any regulation issued under PPA '06) until the last day of the first plan year beginning on or after January 1, 2009 (January 1, 2011 in the case of governmental plans). This amendment deadline applies to both interim and discretionary amendments that are made pursuant to PPA '06 statutory provisions or any regulation issued under PPA '06. If section 1107 of PPA '06 applies to an amendment of a plan, the plan does not fail to satisfy the requirements of § 411(d)(6) of the Code by reason of the amendment except as provided by the Secretary of the Treasury.

HOLDING

Issue 1

Pursuant to this revenue ruling, the rules of §§ 1.417(e)-1(d)(4) and 1.417(e)-1(d)(10)(ii) regarding the time for determining the applicable interest rate continue to apply for plan years beginning on or after January 1, 2008, without regard to the change in the basis for determining the applicable interest rate. If the first day of the first plan year beginning on or after January 1, 2008, does not coincide with the first day of a stability period for a plan, the applicable interest rate for distributions with annuity starting dates during the stability period that contains the first day of the plan year will change during that period. For distributions with annuity starting dates within that period that are before the effective date of the PPA '06 statutory change, the applicable interest rate is determined without regard to the statutory change, and for distributions with annuity starting dates within that period that are on or after the effective date of the statutory change, the applicable interest rate is determined reflecting the statutory change.

Issue 2

The § 417(e)(3) applicable mortality table for 2008 is published in the Appendix to this revenue ruling (the "2008 Applicable Mortality Table"). This mortality table is based upon a fixed blend of 50 percent of the static male combined mortality rates and 50 percent of the static female combined mortality rates published in § 1.430(h)(3)-1 of the proposed regulations for valuation dates occurring in 2008. The table shows, for each age, the number living based upon a starting population of one million lives at age 1 (lx), and the annual rate of mortality (qx).

The § 417(e)(3) applicable mortality table for each subsequent year will be published in the future (the "Subsequent Applicable Mortality Tables"). Except as otherwise stated in future guidance, the applicable mortality table for each subsequent year will be determined from the § 430(h)(3)(A) mortality tables on the same basis as the applicable mortality table for 2008.

In general, the applicable mortality table for a year applies to distributions with annuity starting dates that occur during stability periods that begin during the calendar year to which the applicable mortality table applies. However, pursuant to the effective date rules of PPA' 06, the 2008 Applicable Mortality Table does not apply before the first day of the first plan year beginning in 2008. Thus, for example, in the case of a plan with a September 1 to August 31 plan year, and a calendar year stability period, the 2008 Applicable Mortality Table (as well as the applicable interest rates that are based on the § 430(h)(2)(C) segment rates) would not apply to distributions with annuity starting dates prior to September 1, 2008, but would apply to distributions with annuity starting dates beginning on or after September 1, 2008.

A reference in a plan to the applicable § 417(e)(3) mortality table will, as of a particular date, be treated as a reference to the table that applies to distributions with annuity starting dates (other than a retroactive annuity starting date) on that date. Such a reference will mean the 2008 Applicable Mortality Table for annuity starting dates to which that mortality table applies, and each Subsequent Applicable Mortality Table for annuity starting dates to which the Subsequent Applicable Mortality Table applies. Such a reference would not have to be amended each year to reflect changes in the applicable mortality table. By contrast, a plan provision that specifically refers to an annual applicable mortality table (such as the 2008 Applicable Mortality Table) would have to be amended each year to reflect Subsequent Applicable Mortality Tables, and such amendments would have to satisfy § 411(d)(6).

Issue 3

Pursuant to section 1107 of PPA '06, an amendment to determine the applicable interest rate under the § 417(e)(3) rules in effect for plan years beginning on or after January 1, 2008, will not violate § 411(d)(6) of the Code or the corresponding provision of ERISA solely because of a reduction in accrued benefits or a reduction in the amount of any distribution with an annuity starting date occurring during a plan year beginning in 2008 or in a subsequent year if the cause of such reduction is the substitution of the modified segment rates for the 30-year Treasury rate for the same period. However, if the amendment changes the time for determining the interest rate, the requirements of § 1.417(e)-1(d)(10)(ii) must be satisfied. In addition, if the cause of the reduction is an amendment to substitute the modified segment rates for a rate that is not the 30-year Treasury rate, the amendment must satisfy § 411(d)(6).

Pursuant to section 1107 of PPA '06, a plan amendment to incorporate by reference the applicable mortality table under § 417(e)(3) that is prescribed by this revenue ruling and by subsequent guidance issued by the Commissioner will not violate § 411(d)(6) of the Code or the corresponding provision of ERISA solely because of a reduction in accrued benefits or a reduction in the amount of any distribution with an annuity starting date occurring during a plan year beginning in 2008 or in a subsequent year if the cause of such reduction is the substitution of the applicable § 417(e)(3) mortality table for the prior applicable mortality table under § 417(e)(3).

EFFECTIVE DATE

This revenue ruling is effective for plan years that begin on or after January 1, 2008.

EFFECT ON OTHER DOCUMENTS

Rev. Rul. 2001-62 is modified.

DRAFTING INFORMATION

The principal author of this revenue ruling is Lawrence Isaacs of the Employee Plans, Tax Exempt and Government Entities Division. However, other personnel from the Service and the Treasury Department participated in preparing this revenue ruling. For further information regarding this revenue ruling, please contact the Employee Plans' taxpayer assistance telephone service at 1-877-829-5500 between the hours of 8:30 a.m. and 4:30 p.m. Eastern time, Monday through Friday (a toll-free number). Mr. Isaacs may be e-mailed at RetirementPlanQuestions@irs.gov.

APPENDIX

 2008 Applicable Mortality Table

 

 

 Age           (l)x          (q)x

 

   1    1,000,000.00      0.000380

 

   2      999,620.00      0.000252

 

   3      999,368.10      0.000200

 

   4      999,168.23      0.000153

 

   5      999,015.36      0.000139

 

   6      998,876.50      0.000132

 

   7      998,744.65      0.000126

 

   8      998,618.81      0.000114

 

   9      998,504.97      0.000110

 

  10      998,395.13      0.000111

 

  11      998,284.31      0.000114

 

  12      998,170.51      0.000118

 

  13      998,052.73      0.000124

 

  14      997,928.97      0.000135

 

  15      997,794.25      0.000145

 

  16      997,649.57      0.000154

 

  17      997,495.93      0.000164

 

  18      997,332.34      0.000170

 

  19      997,162.79      0.000174

 

  20      996,989.28      0.000177

 

  21      996,812.81      0.000182

 

  22      996,631.39      0.000189

 

  23      996,443.03      0.000200

 

  24      996,243.74      0.000210

 

  25      996,034.53      0.000224

 

  26      995,811.42      0.000246

 

  27      995,566.45      0.000255

 

  28      995,312.58      0.000264

 

  29      995,049.82      0.000278

 

  30      994,773.20      0.000303

 

  31      994,471.78      0.000350

 

  32      994,123.71      0.000396

 

  33      993,730.04      0.000441

 

  34      993,291.81      0.000486

 

  35      992,809.07      0.000529

 

  36      992,283.87      0.000569

 

  37      991,719.26      0.000608

 

  38      991,116.29      0.000636

 

  39      990,485.94      0.000664

 

  40      989,828.26      0.000698

 

  41      989,137.36      0.000738

 

  42      988,407.38      0.000784

 

  43      987,632.47      0.000836

 

  44      986,806.81      0.000897

 

  45      985,921.64      0.000954

 

  46      984,981.07      0.001010

 

  47      983,986.24      0.001072

 

  48      982,931.41      0.001150

 

  49      981,801.04      0.001237

 

  50      980,586.55      0.001347

 

  51      979,265.70      0.001449

 

  52      977,846.74      0.001597

 

  53      976,285.12      0.001793

 

  54      974,534.64      0.002020

 

  55      972,566.08      0.002378

 

  56      970,253.32      0.002853

 

  57      967,485.19      0.003279

 

  58      964,312.81      0.003746

 

  59      960,700.49      0.004251

 

  60      956,616.55      0.004856

 

  61      951,971.22      0.005634

 

  62      946,607.81      0.006471

 

  63      940,482.31      0.007518

 

  64      933,411.76      0.008493

 

  65      925,484.29      0.009602

 

  66      916,597.79      0.010968

 

  67      906,544.55      0.012222

 

  68      895,464.76      0.013448

 

  69      883,422.55      0.014889

 

  70      870,269.27      0.016329

 

  71      856,058.64      0.017998

 

  72      840,651.30      0.020050

 

  73      823,796.24      0.022220

 

  74      805,491.49      0.024781

 

  75      785,530.61      0.027627

 

  76      763,828.76      0.030695

 

  77      740,383.04      0.034561

 

  78      714,794.66      0.038635

 

  79      687,178.57      0.043206

 

  80      657,488.33      0.048326

 

  81      625,714.55      0.054304

 

  82      591,735.75      0.061007

 

  83      555,635.73      0.067895

 

  84      517,910.84      0.076183

 

  85      478,454.84      0.085221

 

  86      437,680.44      0.095318

 

  87      395,961.62      0.107508

 

  88      353,392.58      0.120363

 

  89      310,857.19      0.134135

 

  90      269,160.36      0.149293

 

  91      228,976.60      0.163173

 

  92      191,613.80      0.178866

 

  93      157,340.61      0.194378

 

 

  94      126,757.06      0.208519

 

  95      100,325.80      0.224167

 

  96       77,836.07      0.237405

 

  97       59,357.40      0.251508

 

  98       44,428.54      0.265606

 

  99       32,628.05      0.276614

 

 100       23,602.67      0.286677

 

 101       16,836.33      0.301731

 

 102       11,756.29      0.313092

 

 103        8,075.49      0.324542

 

 104        5,454.65      0.335529

 

 105        3,624.46      0.345501

 

 106        2,372.21      0.353906

 

 107        1,532.67      0.361363

 

 108          978.82      0.368721

 

 109          617.91      0.375772

 

 110          385.72      0.382309

 

 111          238.26      0.388123

 

 112          145.79      0.393008

 

 113           88.49      0.396754

 

 114           53.38      0.399154

 

 115           32.07      0.400000

 

 116           19.24      0.400000

 

 117           11.54      0.400000

 

 118            6.92      0.400000

 

 119            4.15      0.400000

 

 120            2.49      1.000000

 

FOOTNOTE

 

 

1 Changed to § 412(d)(2) by amendments made by PPA '06.

 

END OF FOOTNOTE
DOCUMENT ATTRIBUTES
  • Institutional Authors
    Internal Revenue Service
  • Cross-Reference
    For Rev. Rul. 2001-62, 2001-2 C.B. 632, see Doc 2001-30966 or

    2001 TNT 242-10.

    Part I

    Section 417. -- Definitions and Special Rules For Purposes of Minimum

    Survivor Annuity Requirements

    26 CFR 1.417(e)-1: Restrictions and valuations of distributions from

    plans subject to sections 401(a)(11) and 417.
  • Code Sections
  • Subject Areas/Tax Topics
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 2007-24764
  • Tax Analysts Electronic Citation
    2007 TNT 216-9
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