PRACTICE MANAGEMENT
The IRS has updated static mortality tables to be used for defined benefit plans under Internal Revenue Code (IRC) Section 430(h)(3)(A) and Section 303(h)(3)(A) of ERISA. The IRS made the announcement in Notice 2024-42.
These updated tables apply for calculation of the funding target and other items for valuation dates occurring during the 2025 calendar year.
Notice 2024-42 also includes a modified unisex version of the mortality tables for use in determining minimum present value under IRC 417(e)(3) and Section 205(g)(3) of ERISA for distributions with annuity starting dates that occur during stability periods beginning in the 2025 calendar year.
Background
Under IRC Section 412(a)(2), IRC Section 430 sets forth the minimum funding requirements applicable to DB plans that are not multiemployer plans or CSEC plans.
IRC Section 430(a) defines the minimum required contribution for such a plan by reference to the plan’s funding target for the plan year.
IRC Section 430(d)(1) provides that a plan’s funding target for a plan year generally is the present value of all benefits accrued or earned under the plan as of the first day of that plan year.
IRC Section 430(h)(3)(A) says that, except as provided in IRC Section 430(h)(3)(C) or (D), the Secretary of the Treasury is to prescribe by regulation mortality tables to be used in determining any present value or making any computation under IRC Section 430. Those tables are to be based on the actual experience of pension plans and projected trends in that experience.
IRC Section 430(h)(3)(B) requires revisions to any table in effect under IRC Section 430(h)(3)(A) at least every 10 years to reflect the actual experience of pension plans and projected trends in that experience.
Static Mortality Tables for 2025
The static mortality tables for small plans for valuation dates occurring in 2025, which consist of separate mortality rates that apply for each gender, are set forth in Treas. Reg. §1.430(h)(3)-1(e).
The static mortality tables that apply under IRC 430(h)(3)(A) for valuation dates occurring during 2025 are set forth in the appendix to Notice 2024-42. Those mortality rates have been developed from the methodology and base mortality rates set forth in Treas. Reg. §1.430(h)(3)-1(c) and (d), respectively, using the mortality improvement rates set forth in the 2024 Adjusted Scale MP-2021 Rates.
The static mortality table that applies under IRC Section 417(e)(3) for distributions with annuity starting dates occurring during stability periods beginning in 2025 is set forth in the appendix to Notice 2024-42 as well. The mortality rates in this table are derived from the mortality tables specified under IRC Section 430(h)(3)(A) for 2024 in accordance with the procedures set forth in Revenue Ruling (Rev. Rul.) 2007-67.
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