On October, 8, 2015, the Society of Actuaries (the “SOA”) released an updated mortality improvement scale for pension programs called Scale MP-2015. Incorporating two additional years of mortality data from the Social Security Administration, Scale MP-2015 supports smaller improvements in longevity than previously estimated under Scale MP-2014. It is expected that updating the mortality improvement scale assumption from Scale MP-2014 to Scale MP-2015 will reduce pension liabilities by between zero and two percent.
What’s the difference from last year to this year’s data?
It is important to note that using the SOA’s latest mortality table and improvement scale will still result in much larger pension liabilities versus those values determined using older mortality studies. However, the new Scale MP-2015 will help alleviate some of the additional burden placed on plan sponsors who were anticipating larger mortality improvements under Scale MP-2014.
Accounting firms will likely expect Scale MP-2015 be immediately considered in setting assumptions for both corporate and plan financial statements. In addition, the IRS and PBGC will likely use these revised rates when updating the mandated mortality assumptions for determining required plan contributions, minimum lump sum values, and PBGC variable-rate premiums.
Review your plan
Harbridge can review the effect that the new mortality assumption may have on your Plan. If you would like to discuss the potential impact or would like us to move forward with a review, please contact your Harbridge representative or David Pazamickas at email@example.com or (315) 703-8940.