Society of Actuaries Updates Mortality Table
Written by David Davala, EA, MAAA
On October 20, 2016, the Society of Actuaries released their annual update to the RPEC_2014 mortality table model and improvement scale. The new model incorporates three additional years of U.S. mortality data (2012-2014). The model's year–over-year stability was also enhanced by modifying two input variables. The updated improvement scale based on this version is named MP-2016.
The age-adjusted mortality improvement rates in the United States for those between the ages of 50 and 95 decreased for periods ending in 2009 and 2014. Based on the declining improvement in mortality, the rates in scale MP-2016 are lower than those in MP-2015.
What does this mean for plan sponsors? The adoption of MP-2016 (and a 4.0% discount rate) would likely decrease the Projected Benefit Obligation (liability) of plans for accounting purposes by around 1.5% to 2.0% from measurements using MP-2015.
It is unknown if and/or how the IRS will incorporate these changes into the mortality tables used for pension valuations, lump sum calculations and other purposes.
Our best guess is that the IRS will not incorporate annual improvement to the projection scale since they are already in the process of creating tables for use in 2018. See Findley Davies' September 8, 2016 Mortality Table Update.
The Society of Actuaries conducted the analysis with cooperation from the Social Security Administration, the Centers for Disease Control and Prevention, and the Centers for Medicare and Medicaid Services.