Pensioners Are Not Expected to Live as Long as Previously Assumed

The IRS announced the cost of living adjustments for 2018. This affects donation limits for pension plans and other retirement-related items.

Nov 06, 2017

On October 20, 2017, the Society of Actuaries (SOA) released MP-2017, an updated Mortality Improvement Scale for pension plans. The annually updated scale reflects age adjusted US mortality rates, which increased 1.2 percent between 2014 and 2015, making it the first year-over-year increase in mortality rates since 2005. MP-2017 incorporates the latest publicly available data from the Social Security Administration through 2013, as well as preliminary data developed by the SOA for 2014 and 2015.

What Changed?

The updated scale suggests the life expectancies have slightly declined, which can be attributed to the increase in mortality for eight of the ten leading causes of death in the US. This decrease in life expectancies could reduce 2017 pension plan liabilities by approximately 0.7 -1.0 percent when calculated using a 4 percent interest rate.

Impact on Your Plan

Accounting firms will likely expect Scale MP-2017 to be immediately considered in setting assumptions for both corporate and plan financial statements. Plan sponsors can expect the SOA to provide updates to the mortality improvement scale on an annual basis in order to best reflect the most recent trends.

BPAS Actuarial & Pension Services can review the effect that the updated mortality assumption may have on your plan. If you would like to discuss the potential impact on your plan or would like us to move forward with a review, please contact your BPAS APS representative.