The IRS recently released Notice 2024-42 to update the static mortality tables used for defined benefit pension plans under Internal Revenue Code (Code) Section 430(h)(3)(A) and Section 303(h)(3)(A) of the Employee Retirement Income Security Act of 1974, Pub. L. No. 93-406 (ERISA).
The updated static mortality tables apply for purposes of calculating the funding target and other items for valuation dates occurring during the 2024 calendar year. The mortality rates in the updated tables have been developed from the methodology and base mortality rates set forth in Section 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 Notice also includes a modified unisex version of the mortality tables for use in determining minimum present value under Section 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.
Notice 2024-42 follows the release of final regulations (RIN 1545-BQ14) under Section 430, which took effect on Oct. 20, 2023. Notably, the final regulations adopted a proposed provision for the elimination of the use of static mortality tables outside of small plans. This change was proposed because the IRS believed that there is no longer a need to allow the use of static mortality tables for larger plans (as most actuarial firms have the capability to use generational mortality tables) and to minimize anti-selection by plan sponsors who determine that the use of static mortality tables results in lower minimum funding requirements.
Click here to view the Grant Thornton’s discussion of the final regulations.
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