Mortality Tables for Determining Present Value, 44632-44648 [E8-17492]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 73, Number 148 (Thursday, July 31, 2008)]
[Rules and Regulations]
[Pages 44632-44648]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-17492]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9419]
RIN 1545-BG30


Mortality Tables for Determining Present Value

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations providing guidance 
regarding the mortality tables to be used in determining present value 
or making any computation for purposes of applying certain pension 
funding requirements. These regulations affect sponsors, 
administrators, participants, and beneficiaries of certain retirement 
plans.

DATES: Effective date: These regulations are effective July 31, 2008.
    Applicability date: Section 1.430(h)(3)-1, which provides generally 
applicable mortality tables for single employer defined benefit pension 
plans, and Sec.  1.431(c)(6)-1, which provides for the use of those 
mortality tables for multiemployer defined benefit pension plans, apply 
to plan years beginning on or after January 1, 2008. Section 
1.430(h)(3)-2, which provides rules regarding the approval and use of 
substitute mortality tables for single employer defined benefit pension 
plans, applies to plan years beginning on or after January 1, 2009.

FOR FURTHER INFORMATION CONTACT: Lauson C. Green or Linda S.F. Marshall 
at (202) 622-6090 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    Section 412 provides minimum funding requirements for defined 
benefit pension plans. The Pension Protection Act of 2006 (PPA), Public 
Law 109-280 (120 Stat. 780), makes extensive changes to those minimum 
funding requirements that generally apply for plan years beginning on 
or after January 1, 2008. Section 430, which was added by PPA, 
specifies the minimum funding requirements that apply to defined 
benefit plans that are not multiemployer plans.\1\ Section 430(a) 
defines the minimum required contribution for a defined benefit plan 
that is not a multiemployer plan by reference to the plan's funding 
target for the plan year. Under section 430(d)(1), 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 beginning of the plan year.
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    \1\ Section 302 of the Employee Retirement Income Security Act 
of 1974, as amended (ERISA) sets forth funding rules that are 
parallel to those in section 412 of the Internal Revenue Code 
(Code), and section 303 of ERISA sets forth additional funding rules 
for defined benefit plans (other than multiemployer plans) that are 
parallel to those in section 430 of the Code. Under section 101 of 
Reorganization Plan No. 4 of 1978 (43 FR 47713) and section 302 of 
ERISA, the Secretary of the Treasury has interpretive jurisdiction 
over the subject matter addressed in these regulations for purposes 
of ERISA, as well as the Code. Thus, these Treasury regulations 
issued under section 430 of the Code apply as well for purposes of 
section 303 of ERISA.
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    Section 430(h)(3) provides rules regarding the mortality tables to 
be used under section 430. Under section 430(h)(3)(A), except as 
provided in section 430(h)(3)(C) or (D), the Secretary is to prescribe 
by regulation mortality tables to be used in determining any present 
value or making any computation under section 430. Those tables are to 
be based on the actual experience of pension plans and projected trends 
in such experience. In prescribing those tables, the Secretary is 
required to take into account results of available independent studies 
of mortality of individuals covered by pension plans. This standard for 
issuing the mortality table under section 430(h)(3)(A) is the same as 
the standard for issuing updated mortality tables pursuant to the 
review under section 412(l)(7)(C)(ii)(III) of the mortality table used 
in determining a plan's current liability pursuant to section 
412(l)(7)(C)(ii)(I) for plan years before the effective date of the PPA 
changes.
    Section 430(h)(3)(C) provides rules for a plan sponsor's use of 
substitute mortality tables. Upon the request of a plan sponsor and 
approval by the Secretary, mortality tables that meet the requirements 
for substitute mortality tables are used in determining present value 
or making any computation under section 430 during the period of 
consecutive plan years (not to exceed 10) specified in the request. 
Substitute mortality tables cease to be in effect as of the earliest of 
the date on which there is a significant change in the participants in 
the plan by reason of a plan spinoff or merger or otherwise, or the 
date on which the plan actuary determines that those tables do not meet 
the requirements for substitute mortality tables. The plan sponsor's 
request to use substitute mortality tables is to be made at least 7 
months before the first day of the first plan year for which substitute 
mortality tables are to apply. A request to use substitute mortality 
tables is deemed approved unless the Secretary denies approval for the 
use of those mortality tables within 180 days of the

[[Page 44633]]

request (subject to extension of this period by mutual agreement).
    Mortality tables meet the requirements for substitute mortality 
tables if the pension plan has a sufficient number of plan participants 
and the plan has been maintained for a sufficient period of time in 
order to have credible mortality experience, and such tables reflect 
the actual experience of the plan and projected trends in general 
mortality experience of participants in pension plans. Except as 
provided by the Secretary, a plan sponsor cannot use substitute 
mortality tables for any plan unless substitute mortality tables are 
established and used for each other plan maintained by the plan sponsor 
and the plan sponsor's controlled group.
    Section 430(h)(3)(D) provides for the use of separate mortality 
tables with respect to certain individuals who are entitled to benefits 
on account of disability. These separate mortality tables are permitted 
to be used with respect to disabled individuals in lieu of the 
generally applicable mortality tables provided pursuant to section 
430(h)(3)(A) or the substitute mortality tables under section 
430(h)(3)(C). The Secretary is to establish separate tables for 
individuals with disabilities occurring in plan years beginning before 
January 1, 1995, and in later plan years, with the mortality tables for 
individuals with disabilities occurring in those later plan years 
applying only to individuals who are disabled within the meaning of 
Title II of the Social Security Act.
    Section 431, which was added by PPA, specifies the minimum funding 
requirements that apply to multiemployer plans. Under section 
431(c)(6)(B), a plan's full funding limitation cannot be less than the 
excess (if any) of 90 percent of the current liability of the plan 
(including the expected increase in current liability due to benefits 
accruing during the plan year) over the value of the plan's assets. 
Section 431(c)(6)(D)(iv)(II) provides that the Secretary may by 
regulation prescribe mortality tables to be used in determining a 
plan's current liability for purposes of section 431(c)(6). The 
standards for these mortality tables are the same as the standards for 
mortality tables to be prescribed under section 430(h)(3)(A). Section 
431(c)(6)(D)(iv)(I) provides that, until mortality tables are 
prescribed under section 431(c)(6)(D)(iv)(II), the mortality table used 
in determining a plan's current liability for purposes of section 
431(c)(6) is the table prescribed by the Secretary that is based on the 
prevailing commissioners' standard table (described in section 
807(d)(5)(A)) used to determine reserves for group annuity contracts 
issued on January 1, 1993.
    On February 2, 2007, the IRS issued final regulations under section 
412(l)(7) (TD 9310, 72 FR 4955) setting forth mortality tables to be 
used in determining a plan's current liability with respect to 
nondisabled pension plan participants during the 2007 plan year. Those 
updated mortality tables were based on the tables contained in the RP-
2000 Mortality Tables Report.\2\ Those regulations permitted plans to 
use separate mortality tables for nonannuitant and annuitant periods, 
with different projection periods for annuitants and nonannuitants 
based on an estimate of the duration of the respective liabilities. 
Alternatively, plans were permitted to use a combined table that 
applied the same mortality rates to both annuitants and nonannuitants.
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    \2\ The RP-2000 Mortality Tables Report was released by the 
Society of Actuaries in July 2000. Society of Actuaries, RP-2000 
Mortality Tables Report, at https://www.soa.org/ccm/content/research-
publications/experience-studies-tools/the-rp-2000-mortality-tables/.
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    On May 29, 2007, the IRS issued proposed regulations under section 
430(h)(3) (72 FR 29456). Those proposed regulations provide guidance 
regarding the mortality tables to be used for purposes of applying 
certain defined benefit plan funding requirements, including Sec.  
1.430(h)(3)-1, which provides generally applicable mortality tables, 
and Sec.  1.430(h)(3)-2, which provides rules regarding the approval 
and use of substitute mortality tables. On May 31, 2007, the IRS issued 
Rev. Proc. 2007-37 (2007-1 CB 1433), which sets forth procedures by 
which a plan sponsor may request approval to use substitute mortality 
tables in accordance with proposed Sec.  1.430(h)(3)-2, including 
guidelines for the construction of substitute mortality tables. See 
Sec.  601.601(d)(2)(ii)(b) of this chapter.
    On January 31, 2008, the IRS issued Notice 2008-21 (2008-7 IRB 
431). See Sec.  601.601(d)(2)(ii)(b) of this chapter. Notice 2008-21 
provides that, when certain pension funding regulations (including the 
Sec.  1.430(h)(3)-2 regulations issued under section 430(h)(3)(C) 
regarding substitute mortality tables) are finalized, those final 
regulations will not apply to plan years beginning before January 1, 
2009. For plan years beginning during 2008, taxpayers must follow 
applicable statutory provisions and can rely on the proposed 
regulations for compliance with those statutory provisions. Under 
Notice 2008-21, the IRS will not challenge a reasonable interpretation 
of section 430 (taking into account the items with respect to which 
guidance is provided in Notice 2008-21) for plan years beginning during 
2008.
    Several comments were received on the proposed regulations, and no 
public hearing was requested or held. After consideration of the 
comments received, the IRS and the Treasury Department are issuing 
these final regulations to adopt the rules set forth in the proposed 
regulations with certain modifications that are noted in this preamble.

Explanation of Provisions

Generally Applicable Mortality Tables

    These regulations adopt the methodology set forth in the proposed 
regulations that the IRS will use to establish mortality tables as 
provided under section 430(h)(3)(A) to be used for participants and 
beneficiaries to determine present value or make any computation under 
section 430. These mortality tables apply as well for purposes of 
determining the current liability of a multiemployer plan pursuant to 
section 431(c)(6)(D)(iv)(II). In addition, pursuant to Sec.  
1.412(l)(7)-1(a), these regulations apply for purposes of determining 
the current liability of a plan for which application of the PPA 
changes to section 412 is delayed (see sections 104 through 106 of 
PPA). Under these regulations, mortality tables to be used with respect 
to disabled individuals will be provided in guidance published in the 
Internal Revenue Bulletin (IRB). This guidance has been issued as 
Notice 2008-29 (2008-12 IRB 637). See Sec.  601.601(d)(2)(ii)(b).
    The new mortality tables under section 430(h)(3)(A) are based on 
the tables contained in the RP-2000 Mortality Tables Report because, as 
with the mortality tables used under section 412(l)(7)(C)(ii), the IRS 
and the Treasury Department have determined that the RP-2000 mortality 
tables form the best available basis for predicting mortality of 
pension plan participants and beneficiaries (other than disabled 
individuals) based on pension plan experience, including expected 
trends. Like the mortality tables provided in the final section 412(l) 
regulations, the mortality tables set forth in these regulations are 
gender-distinct because of significant differences between expected 
male mortality and expected female mortality.
    The mortality tables set forth in these regulations provide 
separate mortality rates for annuitants and nonannuitants. This 
distinction has been made because the RP-2000 Mortality Tables Report 
indicates that these two groups have

[[Page 44634]]

significantly different mortality experience. This is particularly true 
at typical ages for early retirees, where the number of health-induced 
early retirements results in a population that has higher mortality 
rates than the population of currently employed individuals. While the 
use of separate mortality rates for these groups of individuals will 
likely entail changes in programming of actuarial software, the IRS and 
the Treasury Department believe that the improvement in accuracy 
resulting from the use of separate mortality tables for annuitants and 
nonannuitants more than offsets the added complexity.
    Under these regulations, the annuitant mortality tables are applied 
to determine the present value of benefits for annuitants. The 
annuitant mortality tables are also used for nonannuitants (active 
employees and terminated vested participants) for the periods beginning 
when the nonannuitants are projected to commence receiving benefits, 
while the nonannuitant mortality tables are applied for the periods 
before nonannuitants are projected to commence receiving benefits. For 
any period in which an annuitant is projected to be receiving benefits, 
the mortality table applicable to any beneficiary of that annuitant is 
the annuitant mortality table.
    The RP-2000 Mortality Tables Report sets forth mortality tables 
that reflect expected mortality as of 2000, along with projection 
factors that are used to reflect the impact of expected improvements in 
mortality. Similarly, the mortality tables set forth in these 
regulations are based on expected mortality as of 2000 and reflect the 
impact of expected improvements in mortality. The regulations permit 
plan sponsors to apply the projection of mortality improvement in 
either of two ways: Through use of static tables that are updated 
annually to reflect expected improvements in mortality, or through use 
of generational tables.
    The regulations set forth base tables for annuitants and 
nonannuitants, as well as a set of projection factors. The base tables 
set forth in the regulations generally provide the same rates as the 
RP-2000 mortality tables, except that they have been extended so that 
the annuitant and nonannuitant tables have mortality rates available at 
each age. The RP-2000 Mortality Tables Report did not develop annuitant 
rates before age 50 or nonannuitant rates after age 70. The extended 
nonannuitant tables in these regulations were created by (1) using 
nonannuitant rates through age 70, (2) using annuitant rates for ages 
over 80, and (3) blending the rates to produce a smooth transition 
between the two tables, using increasing fractions. The total 
difference between the rates at ages 70 and 80 is divided by 55; the 
rate at age 71 is set equal to the rate at age 70 plus 1/55 of the 
total difference, the age 72 rate is equal to the rate at age 71 plus 
2/55 of the total difference, etc.
    A similar approach was used to develop the base tables for 
annuitants. For male annuitants, annuitant rates from the RP-2000 
Mortality Tables Report were used for ages 50 and over, nonannuitant 
rates from the RP-2000 Mortality Tables Report were used through age 
40, and rates between ages 41 and 49 were smoothed to create a smooth 
transition using the same methodology as was used for the nonannuitant 
tables. For female annuitants, annuitant rates from the RP-2000 
Mortality Tables Report were used for ages 50 and over. However, to 
avoid anomalous results, female nonannuitant rates were used through 
age 46 (rather than age 40) and, accordingly, rates were smoothed 
between ages 47 and 49. The smoothing methodology for the female 
annuitant tables was the same as that used for the male tables but, 
because a shorter transition period was used, the difference between 
the age 46 and the age 50 mortality rates was smoothed using a 
denominator of 10 instead of 55.
    For a plan sponsor that chooses to use the generational mortality 
tables, the mortality rate for each particular age would be projected 
for each individual participant to reflect projected improvement for 
the period of time until the participant reaches the particular age 
using the applicable base table along with the projection factors 
provided under the regulations. These projection factors are from 
Mortality Projection Scale AA, which was recommended for use in the UP-
94 Study \3\ and in the RP-2000 Mortality Tables Report.
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    \3\ The UP-94 Study, prepared by the UP-94 Task Force of the 
Society of Actuaries, was published in the Transactions of the 
Society of Actuaries, Vol. XLVII (1995), p. 819.
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    The static mortality tables that are permitted to be used under the 
regulations are constructed from the base table used for purposes of 
the generational mortality tables. The static mortality tables are 
projected from the base table for the year 2000 through the year of 
valuation with further projection to reflect the approximate expected 
duration of liabilities. The static mortality tables for annuitants 
under the regulations reflect projection through the year of valuation 
with a further projection period of 7 years, and the static mortality 
tables for nonannuitants under the regulations reflect projection 
through the year of valuation with a further projection period of 15 
years. These projection periods were selected as the expected average 
duration of liabilities. To be consistent with the original 
construction of the RP-2000 mortality tables, both the static annuitant 
and nonannuitant tables use the rates from the projected annuitant 
table for ages 80 and over and from the projected nonannuitant table 
for ages 40 and younger (ages 44 and younger for females). For a smooth 
transition between the different projection periods for annuitants 
versus nonannuitants, the nonannuitant rates for ages 71 through 79 and 
the annuitant rates for ages 41 through 49 (ages 45 through 49 for 
females) were smoothed using the same technique as that used in 
constructing the base tables.
    The static mortality tables that apply with respect to valuation 
dates occurring during 2008 are set forth in these regulations, which 
also include an example of how to apply the tables in that year. The 
mortality tables to be used for valuation dates in subsequent years 
will be published in the Internal Revenue Bulletin. See Sec.  
601.601(d)(2)(ii)(b). The IRS intends to publish a notice in the near 
future that provides a series of tables for valuation dates occurring 
during 2009 through 2013.
    These regulations provide an option for smaller plans that choose 
to use static mortality tables to use a single blended static table for 
all participants--in lieu of the separate tables for annuitants and 
nonannuitants--in order to simplify the actuarial valuation for these 
plans. The final regulations provide that the smaller plans to which 
this rule applies are plans where the total of active and inactive 
participants is 500 or fewer, and clarify that this participant count 
is determined as of the plan's valuation date. The blended table is 
constructed from the separate nonannuitant and annuitant tables using 
the nonannuitant/annuitant weighting factors published in the RP-2000 
Mortality Tables Report. However, because the RP-2000 Mortality Tables 
Report does not provide weighting factors before age 51 or after age 
69, the IRS and the Treasury Department have extended the table of 
weighting factors (using straight-line interpolation) for ages 41 
through 50 (ages 45-50 for females) and for ages 70 through 79 in order 
to develop the blended table.
    Since the publication of proposed regulations under sections 430(h) 
and

[[Page 44635]]

430(d), questions have arisen regarding whether small plans are 
required to apply mortality assumptions using the mortality tables 
provided under section 430(h) for the period before a participant is 
projected to commence receiving benefits under the plan. Final 
regulations under section 430(d) are expected to clarify that the 
mortality tables provided under section 430(h) must be used to 
determine present values under section 430 when mortality assumptions 
are applied and that, in appropriate cases, it is permissible to assume 
no mortality for the period before a participant is projected to 
commence receiving benefits under the plan.

Substitute Mortality Tables

    These regulations generally adopt the methodology set forth in the 
proposed regulations for the development and use of substitute 
mortality tables upon written request of the plan sponsor and approval 
of the Commissioner. Pursuant to section 430(h)(3)(C), substitute 
mortality tables apply in lieu of the mortality tables provided under 
section 430(h)(3)(A) and Sec.  1.430(h)(3)-1 for purposes of making 
present value determinations and other computations.
    Substitute mortality tables must reflect the actual mortality 
experience of the pension plan for which the tables are to be used, and 
that mortality experience must be credible. Separate mortality tables 
must be established for each gender under the plan, and a substitute 
mortality table is permitted to be established for a gender only if the 
plan has credible mortality experience with respect to that gender. If 
the mortality experience for one gender is credible but the mortality 
experience for the other gender is not credible, the substitute 
mortality tables are used for the gender that has credible mortality 
experience, and the mortality tables under Sec.  1.430(h)(3)-1 are used 
for the gender that does not have credible mortality experience. If 
separate mortality tables under section 430(h)(3)(D) are used for 
certain disabled individuals under a plan, then those individuals are 
disregarded for all purposes with respect to substitute mortality 
tables under section 430(h)(3)(C). Thus, if the mortality tables under 
section 430(h)(3)(D) are used for certain disabled individuals under a 
plan, mortality experience with respect to those individuals must be 
excluded in determining mortality rates for substitute mortality tables 
with respect to a plan.
    The proposed regulations provided that a substitute mortality table 
would be based on credible mortality experience for a gender within a 
plan if and only if the mortality experience were based on at least 
1,000 deaths within that gender over the period covered by the 
experience study. The proposed regulations required that the experience 
study be based on mortality experience data over a 2, 3, or 4 
consecutive year period, the last day of which must be less than 3 
years before the first day of the first plan year for which the 
substitute mortality tables are to apply.
    Commentators requested an expansion of this rule that would allow 
the plan to demonstrate credibility on the basis of divergence between 
the actual number of deaths and the number of deaths expected under the 
standard mortality tables in Sec.  1.430(h)(3)-1. The IRS and the 
Treasury Department have rejected this suggestion because, although 
such a measure of divergence may show that the standard mortality 
tables are not necessarily the best estimate of future mortality under 
the plan, the existence of this divergence does not demonstrate that a 
particular alternative table reflects the actual experience of the 
pension plans maintained by the sponsor unless the experience study 
data reflects a sufficient number of deaths to support the use of that 
alternative table.
    The 1,000-death threshold in the proposed regulations was set at a 
level so that there is a high degree of confidence that the plan's past 
mortality experience will be predictive of its future mortality, and is 
consistent with relevant actuarial literature (see, for example, Thomas 
N. Herzog, Introduction to Credibility Theory (1999); Stuart A. 
Klugman, et al., Loss Models: From Data to Decisions (2004)). A number 
of commentators requested that substitute mortality tables be made 
available to plans with fewer annual deaths. For example, one 
commentator requested an extension of the 4-year maximum period for the 
mortality experience study in order to allow a smaller plan to satisfy 
the 1,000-death threshold. In response to these comments, these 
regulations lengthen the maximum period for the experience study and 
provide that the experience study for purposes of demonstrating 1,000 
deaths within a gender can be conducted over as long as a 5-year 
period. In addition, in accordance with the delegation of authority set 
forth in the regulations, the Commissioner may, in revenue rulings, 
notices or other guidance published in the Internal Revenue Bulletin 
(see Sec.  601.601(d)(2)(ii)(b)), provide for further extensions of 
this maximum experience study period.
    Development of a substitute mortality table under the regulations 
requires creation of a base table and identification of a base year, 
which are then used to determine a substitute mortality table. The base 
table must be developed from a study of the mortality experience of the 
plan using amounts-weighted data. The regulations set forth rules 
regarding development of amounts-weighted mortality rates for an age. 
The regulations provide that amounts-weighted mortality rates may be 
derived from amounts-weighted mortality rates for age groups. The 
regulations provide for grouping of ages and alternative methods of 
graduation in order to simplify the construction of substitute 
mortality tables. The regulations provide rules for determination of 
the base year for a substitute mortality table. These rules have been 
modified from the rules set forth in the proposed regulations to 
reflect the potential for a longer experience study period than 
permitted under the proposed regulations.
    In general, substitute mortality tables are permitted to be used 
for a plan for a plan year only if, for that plan year, substitute 
mortality tables are also approved and used for each other pension plan 
subject to the requirements of section 430 that is maintained by the 
plan sponsor or by a member of the sponsor's controlled group. The 
final regulations clarify the application of this rule where plans 
maintained within a controlled group have different plan years. In such 
a case, a plan that uses substitute mortality tables for a plan year 
satisfies the requirement that all plans within the controlled group 
use substitute mortality tables for the plan year if all plans within 
the controlled group use substitute mortality tables for at least some 
portion of the plan year. Under the regulations, the use of substitute 
mortality tables for one plan is not prohibited merely because another 
plan subject to section 430 that is maintained by the plan sponsor (or 
by a member of the plan sponsor's controlled group) cannot use 
substitute mortality tables because neither the males nor the females 
under that plan have credible mortality experience for a plan year. 
Thus, if a sponsor's controlled group contains two pension plans that 
are subject to section 430, each of which has credible mortality 
experience for at least one gender, either both plans must obtain 
approval from the Commissioner to use substitute mortality tables or 
neither plan may use substitute mortality tables. By contrast, if for 
one of those plans neither males nor females

[[Page 44636]]

have credible mortality experience, then the plan without credible 
mortality experience will not interfere with the ability of the plan 
with credible mortality experience to use substitute mortality tables.
    Under the regulations, the requirement that the plan sponsor 
demonstrate the lack of credible mortality experience for both the male 
and female populations in other plans maintained by the plan sponsor 
(and by members of the plan sponsor's controlled group) for which 
substitute mortality tables are not used must be satisfied for each 
plan year for which substitute mortality tables are used. This 
demonstration is made for a plan population by showing that the 
population has not experienced at least 1,000 deaths over a time period 
that satisfies the requirements set forth in the regulations. In 
general, for each plan year in which a plan uses substitute mortality 
tables, the demonstration that both genders of another plan maintained 
by the plan sponsor do not have credible mortality experience is made 
by counting the number of deaths for that plan population over a 4-year 
period. However, if the experience study period for the experience 
study on which the substitute mortality tables are based is longer than 
4 years, the demonstration that both genders of another plan maintained 
by the plan sponsor do not have credible mortality experience (that is, 
there are less than 1,000 deaths within each gender) must be made using 
a consecutive period for mortality experience that is the same length 
as the period of the experience study. In either case, the period for 
mortality experience that is used to demonstrate lack of credible 
mortality experience with respect to a plan year must end less than 3 
years before the first day of that plan year.
    For example, a plan sponsor that requests to use substitute 
mortality tables for a plan for the plan year that begins January 1, 
2009, using data obtained over a 4-year experience study period must 
show, as part of its submission to the Commissioner, that both the male 
and female populations in all other defined benefit plans of the plan 
sponsor (and of members of the plan sponsor's controlled group) that 
are subject to section 430 and that do not use substitute mortality 
tables do not have credible mortality experience using a 4-year period 
that ends no earlier than January 2, 2006 (that is, each gender in 
those plans did not experience 1,000 deaths during that 4-year period). 
If the plan sponsor chooses to use the 4-year period from January 1, 
2004, through December 31, 2007, to demonstrate the lack of credible 
mortality experience for the other plans, then the plan can rely on 
this same data to demonstrate the lack of credible mortality experience 
for 2010 as well because the less-than-3-years requirement is still met 
with respect to the 2010 plan year. However, the plan cannot use this 
same data to demonstrate lack of credible mortality experience for the 
2011 plan year because the last day of the experience study used for 
the demonstration (the January 1, 2004-December 31, 2007 period) is too 
distant in time (3 or more years) from the first day of the plan year 
(January 1, 2011).
    Although the regulations permit a plan sponsor to use a single 
experience study to demonstrate a lack of credible mortality experience 
for a plan population for multiple years, plan sponsors are encouraged 
to update experience studies annually as new mortality data become 
available for the plan population. In such a case, if an updated test 
reveals 1,000 or more deaths for the more recent 4-year period (or 5-
year period in the case of a plan using a 5-year experience study 
period), the plan sponsor nonetheless will be able to continue to use 
substitute mortality tables for one plan year by demonstrating that the 
other plans in the controlled group do not have credible mortality 
experience based on the earlier experience study. This will give the 
plan sponsor sufficient time to develop substitute mortality tables for 
the plan population with newly credible mortality experience and to 
obtain the Commissioner's approval to use those tables prior to the 
first year substitute mortality tables are to be used for that 
population.
    Under the regulations, a plan's substitute mortality tables must be 
generational mortality tables. Substitute mortality tables are 
determined using the base mortality tables developed from the 
experience study and the projection factors provided in Projection 
Scale AA, as set forth in Sec.  1.430(h)(3)-1(d). Under the 
generational mortality tables, the probability of an individual's death 
at a particular age is determined as the individual's base mortality 
rate (that is, the applicable base mortality rate from the base 
mortality table for the age for which the probability of death is being 
determined) multiplied by the mortality improvement factor. The 
mortality improvement factor is equal to (1 minus the projection factor 
for that age)\n\, where n is equal to the projection period (that is, 
the number of years between the base year for the base mortality table 
and the year for which the probability of death is being determined).
    The regulations require separate tables to be established for males 
and females under a plan. Under the regulations, separate substitute 
mortality tables are permitted (but not required) to be established for 
separate populations within a gender, such as annuitants and 
nonannuitants or hourly and salaried individuals. The regulations 
provide that separate substitute mortality tables are permitted to be 
used for a separate population within a gender under a plan only if all 
individuals of that gender in the plan are divided into separate 
populations, each separate population has credible mortality experience 
(determined in the same manner as determining whether a gender has 
credible mortality experience), and the separate substitute mortality 
table for each separate population is developed using mortality 
experience data for that population. For example, in the case of a plan 
that has credible mortality experience data for both its male hourly 
and male salaried populations, separate substitute mortality tables 
could be used for those two separate populations. However, if the plan 
does not have credible mortality experience for its male salaried 
population, it is not permissible to use substitute mortality tables 
for its male hourly population and the standard mortality tables 
described in Sec.  1.430(h)(3)-1 for its male salaried population.
    The requirement that each separate population have credible 
mortality experience does not apply in the case of separate mortality 
tables that are developed for annuitant and nonannuitant populations 
within a gender. Thus, the regulations provide that substitute 
mortality tables for separate annuitant and nonannuitant populations 
may be used within a gender even if only one of those separate 
populations has credible mortality experience. Similarly, if separate 
populations with credible mortality experience are established within a 
gender, then any of those populations may be further subdivided into 
separate annuitant and nonannuitant subpopulations, provided that at 
least one of the two resulting subpopulations has credible mortality 
experience. In such a case, the standard mortality tables under Sec.  
1.430(h)(3)-1 must be used for a resulting subpopulation that does not 
have credible mortality experience. For example, in the case of a plan 
that has credible mortality experience for both its male hourly and 
salaried individuals, if the male salaried annuitant population has 
credible mortality

[[Page 44637]]

experience, the plan may use substitute mortality tables with respect 
to that population even if the standard mortality tables under Sec.  
1.430(h)(3)-1 are used for the male salaried nonannuitant population 
(because that nonannuitant population does not have credible mortality 
experience). For purposes of demonstrating that an annuitant or 
nonannuitant population within a gender or within a separate population 
does not have credible mortality experience, the demonstration of lack 
of credible mortality experience is made on the same basis as for 
purposes of demonstrating a lack of credible mortality experience for a 
gender.
    The proposed regulations provide a limited time period during which 
a newly acquired plan that does not use substitute mortality tables 
does not prevent another plan from using substitute mortality tables. 
The proposed regulations implied that this exception applies only where 
a newly acquired plan does not use substitute mortality tables (and not 
to the case where a plan that uses substitute mortality tables is 
acquired by a plan sponsor that maintains other plans for which 
substitute mortality tables are not used). In response to commentator 
concerns, the final regulations replace the term ``newly acquired 
plan'' with the term ``newly affiliated plan.'' Thus, the final 
regulations eliminate the implication that this exception is 
unavailable in situations in which the acquiring plan sponsor does not 
use substitute mortality tables for its other plans but the acquired 
plan uses substitute mortality tables.
    Under the regulations, the use of substitute mortality tables for a 
plan is not prohibited merely because a newly affiliated plan does not 
use substitute mortality tables, but only through the last day of the 
plan year of the plan using substitute mortality tables that contains 
the last day of the transition period described in section 
410(b)(6)(C)(ii) (without regard to any change in coverage during that 
period) for either the newly affiliated plan or the plan using 
substitute mortality tables, whichever is later. For the following plan 
year, the mortality tables prescribed under Sec.  1.430(h)(3)-1 apply 
with respect to the plan (and all other plans within the plan sponsor's 
controlled group, including the newly affiliated plan) unless approval 
to use substitute mortality tables has been obtained with respect to 
the newly affiliated plan, or the newly affiliated plan cannot use 
substitute mortality tables because neither the males nor the females 
under the plan have credible mortality experience. For example, if on 
September 1, 2009, a plan sponsor of a plan that uses substitute 
mortality tables and that has a calendar year plan year acquires a 
business that maintains a plan that does not use substitute mortality 
tables and that has a plan year that ends June 30, the maintenance of 
the latter plan within the controlled group will not impair the 
continued use of substitute mortality tables by the former plan through 
the end of the plan year that ends on December 31, 2011. This is 
because December 31, 2010, is the last day of the period described in 
section 410(b)(6)(C)(ii) for the plan using substitute mortality 
tables, June 30, 2011, is the last day of the period described in 
section 410(b)(6)(C)(ii) for the newly affiliated plan that does not 
use substitute mortality tables, and the last day of the plan year of 
the plan using substitute mortality tables that contains the later of 
those two dates is December 31, 2011. Similarly, if on September 1, 
2009, a plan sponsor of a plan that uses substitute mortality tables 
and that has a calendar year plan year is acquired by an employer that 
maintains a plan that does not use substitute mortality tables and that 
has a plan year that ends June 30, the maintenance of the latter plan 
within the controlled group will not impair the continued use of 
substitute mortality tables by the former plan through the end of the 
plan year that ends on December 31, 2011.
    Under the regulations, a plan is treated as a newly affiliated plan 
if it becomes maintained by the plan sponsor (or by a member of the 
plan sponsor's controlled group) in connection with a merger, 
acquisition, or similar transaction described in Sec.  1.410(b)-2(f). 
The regulations provide that a plan is also treated as a newly 
affiliated plan if it is established in connection with a transfer of 
assets and liabilities from another employer's plan in connection with 
a merger, acquisition, or similar transaction described in Sec.  
1.410(b)-2(f).
    In the case of a newly affiliated plan that does not use substitute 
mortality tables, the demonstration of whether credible mortality 
experience exists for the plan may be made by either including or 
excluding mortality experience data for the period prior to the date 
the plan becomes maintained within the controlled group that includes 
the plan sponsor of the plan that uses substitute mortality tables. If 
a plan sponsor excludes mortality experience data prior to the date the 
plan became maintained within the controlled group that includes the 
plan sponsor of the plan that uses substitute mortality tables, the 
exclusion must apply for all populations within the plan. For example, 
it is impermissible to include the data for hourly individuals for the 
pre-acquisition period but exclude the data for salaried individuals 
for that same period.
    In order to demonstrate a lack of credible mortality experience 
with respect to a gender for a plan year, a special rule applies if the 
plan's mortality experience demonstration for a plan year is made by 
excluding mortality experience for the period prior to the date the 
newly affiliated plan becomes maintained within the new plan sponsor's 
controlled group. In such a case, an employer is permitted to 
demonstrate a plan's lack of credible mortality experience using an 
experience study period of less than four years, provided that the 
experience study period begins with the date the plan becomes 
maintained within the employer's controlled group and ends not more 
than one year and one day before the first day of the plan year with 
respect to which the lack of credible mortality experience 
demonstration is made.
    The regulations provide rules for aggregating plans for purposes of 
using substitute mortality tables. Under the regulations, in order to 
use a set of substitute mortality tables for two or more plans, the 
rules set forth in the regulations are applied by treating those plans 
as a single plan. In such a case, the substitute mortality tables must 
be used for all such plans and must be based on data collected with 
respect to all such plans. Although plans generally are not required to 
be aggregated, the regulations require a plan to be aggregated with any 
plan that was previously spun off from that plan if one purpose of the 
spinoff was to avoid the use of substitute mortality tables for any of 
the plans involved in the spinoff.
    Under the regulations, in order to use substitute mortality tables 
with respect to a plan, a plan sponsor must submit a written request to 
the Commissioner that demonstrates that those substitute mortality 
tables comply with applicable requirements. A request to use substitute 
mortality tables must state the first plan year and the term of years 
(not more than 10) that the tables are requested to be used. In 
general, substitute mortality tables cannot be used for a plan year 
unless the plan sponsor submits the written request to use substitute 
mortality tables at least 7 months prior to the first day of the first 
plan year for which the substitute mortality tables are to apply. 
However, the timing of the written request to use substitute mortality 
tables does not

[[Page 44638]]

prevent a plan from using substitute mortality tables for a plan year 
if the written request is submitted no later than October 1, 2007. This 
special rule, which was provided under the proposed regulations, 
allowed plan sponsors sufficient time to review the proposed 
regulations and other guidance in order to prepare requests to use 
substitute mortality tables for use in 2008. In addition, the timing of 
the written request to use substitute mortality tables does not prevent 
a plan from using substitute mortality tables for a plan year that 
begins during 2009 if the written request is submitted no later than 
October 1, 2008. This special rule allows plan sponsors sufficient time 
to review the final regulations in order to prepare requests to use 
substitute mortality tables for plan years that begin during 2009.
    Under the regulations, experience data cannot be used to develop a 
base table if the number of individuals in the population covered by 
the table (for example, the male annuitants) as of the last day of the 
plan year before the year the request to use substitute mortality 
tables is made (or a reasonable estimate of that number), compared to 
the average number of individuals in that population over the years 
covered by the experience study on which the substitute mortality 
tables are based, reflects a difference of 20 percent or more, unless 
it is demonstrated to the satisfaction of the Commissioner that the 
experience data is accurately predictive of future mortality of that 
plan population (taking into account the effect of the change in 
individuals) after appropriate adjustments to the data are made (for 
example, excluding data from individuals with respect to a spun-off 
portion of the plan).
    Under the regulations, the Commissioner may, in revenue rulings and 
procedures, notices or other guidance published in the IRB (see Sec.  
601.601(d)(2)(ii)(b) of this chapter), provide additional guidance 
regarding the approval and use of substitute mortality tables under 
section 430(h)(3)(C) and related matters. The IRS intends to publish a 
revenue procedure in the near future that updates the requirements set 
forth in Rev. Proc. 2007-37 regarding approval to use substitute 
mortality tables to reflect the provisions of these final regulations.
    In general, the Commissioner has a 180-day period to review a 
request for the use of substitute mortality tables. If the Commissioner 
does not issue a denial within this 180-day period, the request is 
deemed to have been approved unless the Commissioner and the plan 
sponsor have agreed to extend that period. The Commissioner may request 
additional information with respect to a submission. Failure to provide 
that information on a timely basis is grounds for denial of the plan 
sponsor's request. In addition, the Commissioner will deny a request if 
the request fails to meet the requirements to use substitute mortality 
tables or if the Commissioner determines that a substitute mortality 
table does not sufficiently reflect the mortality experience of the 
applicable plan population. One commentator suggested that the 180-day 
period for approval of substitute mortality tables should automatically 
be tolled during any period between the time additional information is 
requested and received, and should resume after that information is 
received. These regulations do not adopt this suggestion. It is 
anticipated that the Commissioner and the taxpayer will establish a 
reasonable period for the taxpayer to collect and submit the requested 
data and extend the 180-day period to the extent necessary.
    The regulations provide rules regarding the duration of use of 
substitute mortality tables. Under the regulations, substitute 
mortality tables generally are used with respect to a plan for the term 
of consecutive plan years specified in the plan sponsor's written 
request to use such tables and approved by the Commissioner, or such 
shorter period prescribed by the Commissioner in the approval to use 
substitute mortality tables. If the term of use of a substitute 
mortality table ends for any reason, the mortality tables specified in 
Sec.  1.430(h)(3)-1 will apply with respect to the plan unless the plan 
sponsor has obtained approval to use substitute mortality tables for a 
further term. The regulations provide that a plan's substitute 
mortality tables cannot be used as of the earliest of the following: 
The second plan year following the plan year in which there is a 
significant change in the population covered by the substitute 
mortality table (generally, a change of at least 20% from the average 
number of individuals included in the experience study); or the plan 
year following the plan year in which a substitute mortality table for 
a plan population is no longer accurately predictive of future 
mortality of that population, as determined by the Commissioner or as 
certified by the plan's actuary to the satisfaction of the 
Commissioner. In addition, the regulations provide that a plan's 
substitute mortality tables cannot be used after the date specified in 
guidance published in the IRB (see Sec.  601.601(d)(2)(ii)(b)) pursuant 
to a replacement of mortality tables specified under section 
430(h)(3)(A) (other than annual updates to the static mortality 
tables).

Effective/Applicability Date

    Section 1.430(h)(3)-1, which provides generally applicable 
mortality tables, applies to plan years beginning on or after January 
1, 2008. Section 1.430(h)(3)-2, which provides rules regarding the 
approval and use of substitute mortality tables, applies to plan years 
beginning on or after January 1, 2009. Taxpayers may rely on the 
provisions of Sec.  1.430(h)(3)-2 for plan years beginning during 2008. 
For example, taxpayers can use the exceptions contained in Sec.  
1.430(h)(3)-2(d)(1) from the general rule that all controlled group 
members must use substitute mortality tables in order for any 
controlled group member to use substitute mortality tables. Because 
section 430(h)(3) provides that substitute mortality tables can be used 
only if the use of those tables is approved by the Secretary, taxpayers 
can use substitute mortality tables for plan years beginning during 
2008 only if those mortality tables were approved by the IRS under the 
procedures set forth in Rev. Proc. 2007-37.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. It is hereby 
certified that the collection of information contained in this 
regulation will not have a significant economic impact on a substantial 
number of small entities. Pension plans of small entities generally are 
precluded from requesting to use substitute mortality tables pursuant 
to Sec.  1.430(h)(3)-2 because they will not have 1,000 deaths for a 
permitted population over a permissible mortality experience study 
period as required under Sec.  1.430(h)(3)-2(c)(1)(ii) and, thus, will 
not have credible mortality experience as required by the regulation. 
Accordingly, a regulatory flexibility analysis is not required. 
Pursuant to section 7805(f) of the Internal Revenue Code, the notice of 
proposed rulemaking preceding these regulations was submitted to the 
Small Business Administration for comment on its impact on small 
business.

Drafting Information

    The principal authors of these regulations are Lauson C. Green and 
Linda S. F. Marshall, Office of Division

[[Page 44639]]

Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). 
However, other personnel from the IRS and the Treasury Department 
participated in the development of these regulations.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Amendments to the Regulations

0
Accordingly, 26 CFR part 1 is amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read, in 
part, as follows:

    Authority: 26 U.S.C. 7805 * * *


0
Par. 2. Section 1.430(h)(3)-1 is added to read as follows:


Sec.  1.430(h)(3)-1  Mortality tables used to determine present value.

    (a) Basis for mortality tables--(1) In general. This section sets 
forth rules for the mortality tables to be used in determining present 
value or making any computation under section 430. Generally applicable 
mortality tables for participants and beneficiaries are set forth in 
this section pursuant to section 430(h)(3)(A). In lieu of using the 
mortality tables provided under this section with respect to 
participants and beneficiaries, plan-specific substitute mortality 
tables are permitted to be used for this purpose pursuant to section 
430(h)(3)(C) provided that the requirements of Sec.  1.430(h)(3)-2 are 
satisfied. Mortality tables that may be used with respect to disabled 
individuals are to be provided in guidance published in the Internal 
Revenue Bulletin. See Sec.  601.601(d)(2)(ii)(b) of this chapter.
    (2) Static tables or generational tables permitted. The generally 
applicable mortality tables provided under section 430(h)(3)(A) are the 
static tables described in paragraph (a)(3) of this section and the 
generational mortality tables described in paragraph (a)(4) of this 
section. A plan is permitted to use either of those sets of mortality 
tables with respect to participants and beneficiaries pursuant to this 
section.
    (3) Static tables. The static mortality tables that are permitted 
to be used pursuant to paragraph (a)(2) of this section are updated 
annually to reflect expected improvements in mortality experience as 
described in paragraph (c)(2) of this section. Static mortality tables 
that are to be used with respect to valuation dates occurring during 
2008 are provided in paragraph (e) of this section. The mortality 
tables to be used with respect to valuation dates occurring in later 
years are to be provided in guidance published in the Internal Revenue 
Bulletin. See Sec.  601.601(d)(2)(ii)(b) of this chapter.
    (4) Generational mortality tables--(i) In general. The generational 
mortality tables that are permitted to be used pursuant to paragraph 
(a)(2) of this section are determined pursuant to this paragraph (a)(4) 
using the base mortality tables and projection factors set forth in 
paragraph (d) of this section. Under the generational mortality tables, 
the probability of an individual's death at a particular age is 
determined as the individual's base mortality rate (that is, the 
applicable mortality rate from the table set forth in paragraph (d) of 
this section for the age for which the probability of death is being 
determined) multiplied by the mortality improvement factor. The 
mortality improvement factor is equal to (1-projection factor for that 
age)\n\, where n is equal to the projection period. For this purpose, 
the projection period is the number of years between 2000 and the year 
for which the probability of death is being determined.
    (ii) Examples of calculation. As an example of the use of 
generational mortality tables under paragraph (a)(4)(i) of this 
section, for purposes of determining the probability of death at age 54 
for a male annuitant born in 1974, the base mortality rate is .005797, 
the projection factor is .020, and the projection period (the period 
from the year 2000 until the year the participant will attain age 54) 
is 28 years, so that the mortality improvement factor is .567976, and 
the probability of death at age 54 is .003293. Similarly, under these 
generational mortality tables, the probability of death at age 55 for 
the same male annuitant would be determined by using the base mortality 
rate and projection factor at age 55, and a projection period of 29 
years (the period from the year 2000 until the year the participant 
will attain age 55). Thus, the base mortality rate is .005905, the 
projection factor is .019, so that the mortality improvement factor is 
.573325 ((1-.019)\29\), and the probability of death at age 55 is 
.003385 (.573325 times .005905). Because these generational mortality 
tables reflect expected improvements in mortality experience, no 
periodic updates are needed.
    (b) Use of the tables--(1) Separate tables for annuitants and 
nonannuitants--(i) In general. Separate tables are provided for use for 
annuitants and nonannuitants. The nonannuitant mortality table is 
applied to determine the probability of survival for a nonannuitant for 
the period before the nonannuitant is projected to commence receiving 
benefits. The annuitant mortality table is applied to determine the 
present value of benefits for each annuitant, and for each nonannuitant 
for the period beginning when the nonannuitant is projected to commence 
receiving benefits. For purposes of this section, an annuitant means a 
plan participant who has commenced receiving benefits and a 
nonannuitant means a plan participant who has not yet commenced 
receiving benefits (for example, an active employee or a terminated 
vested participant). A participant whose benefit has partially 
commenced is treated as an annuitant with respect to the portion of the 
benefit which has commenced and a nonannuitant with respect to the 
balance of the benefit. In addition, for any period in which an 
annuitant is projected to be receiving benefits, any beneficiary with 
respect to that annuitant is also treated as an annuitant for purposes 
of this paragraph (b)(1).
    (ii) Examples of calculation. As an example of the use of separate 
annuitant and nonannuitant tables under paragraph (b)(1)(i) of this 
section, with respect to a 45-year-old active participant who is 
projected to commence receiving an annuity at age 55, the funding 
target would be determined using the nonannuitant mortality table for 
the period before the participant attains age 55 (so that, if the 
static mortality tables are used pursuant to paragraph (a)(3) of this 
section, the probability of an active male participant living from age 
45 to age 55 using the table that applies for a plan year beginning in 
2008 is 98.61%) and the annuitant mortality table for the period ages 
55 and above. Similarly, if a 45-year-old terminated vested participant 
is projected to commence an annuity at age 65, the funding target would 
be determined using the nonannuitant mortality table for the period 
before the participant attains age 65 and the annuitant mortality table 
for ages 65 and above.
    (2) Small plan tables. If static mortality tables are used pursuant 
to paragraph (a)(3) of this section, as an alternative to the separate 
static tables specified for annuitants and nonannuitants pursuant to 
paragraph (b)(1) of this section, a combined static table that applies 
the same mortality rates to both annuitants and nonannuitants is 
permitted to be used for a small plan. For this purpose, a small plan 
is defined as a plan with 500

[[Page 44640]]

or fewer participants (including both active and inactive participants) 
on the valuation date.
    (c) Construction of static tables--(1) Source of basic rates. The 
static mortality tables that are used pursuant to paragraph (a)(3) of 
this section are based on the base mortality tables set forth in 
paragraph (d) of this section.
    (2) Projected mortality improvements. The mortality rates under the 
base mortality tables are projected to improve using the projection 
factors provided in Projection Scale AA, as set forth in paragraph (d) 
of this section. Using these projection factors, the mortality rate for 
an individual at each age is determined as the individual's base 
mortality rate (that is, the applicable base mortality rate from the 
table set forth in paragraph (d) of this section for the individual at 
that age) multiplied by the mortality improvement factor. The mortality 
improvement factor is equal to (1-projection factor for that age)\n\, 
where n is equal to the projection period. The annuitant mortality 
rates for a plan year are determined using a projection period that 
runs from the calendar year 2000 until 7 years after the calendar year 
that contains the valuation date for the plan year. The nonannuitant 
mortality rates for a plan year are determined using a projection 
period that runs from the calendar year 2000 until 15 years after the 
calendar year that contains the valuation date for the plan year. Thus, 
for example, for a plan year with a January 1, 2012, valuation date, 
the annuitant mortality rates are determined using a projection period 
that runs from 2000 until 2019 (19 years) and the nonannuitant 
mortality rates are determined using a projection period that runs from 
2000 until 2027 (27 years).
    (3) Construction of combined tables for small plans. The combined 
mortality tables that are permitted to be used for small plans pursuant 
to paragraph (b)(2) of this section are constructed from the separate 
nonannuitant and annuitant tables using the weighting factors for small 
plans that are set forth in paragraph (d) of this section. The 
weighting factors are applied to develop these mortality tables using 
the following equation: Combined mortality rate = [nonannuitant rate 
\*\ (1-weighting factor)] + [annuitant rate \*\ weighting factor].
    (d) Base mortality tables and projection factors. The following 
base mortality tables and projection factors are used to determine 
generational mortality tables for purposes of determining present value 
or making any computation under section 430 as set forth in paragraph 
(a)(4) of this section. In addition, the following base mortality 
tables and projection factors are used to determine the static 
mortality tables that are used for purposes of determining present 
value or making any computation under section 430 as set forth in 
paragraphs (a)(3) and (c) of this section. See Sec.  1.430(h)(3)-
2(c)(3) for rules regarding the required use of the projection factors 
set forth in this paragraph (d) in connection with a plan-specific 
substitute mortality table.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      Male         Male         Male         Male        Female       Female       Female       Female
                                                 -------------------------------------------------------------------------------------------------------
                                                   Base non-       Base                                Base non-       Base
                       Age                         annuitant    annuitant     Scale AA    Weighting    annuitant    annuitant     Scale AA    Weighting
                                                   mortality    mortality    projection  factors for   mortality    mortality    projection  factors for
                                                     rates     rates (year    factors    small plans     rates     rates (year    factors    small plans
                                                  (year 2000)     2000)                               (year 2000)     2000)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1...............................................     0.000637     0.000637        0.020  ...........     0.000571     0.000571        0.020  ...........
2...............................................     0.000430     0.000430        0.020  ...........     0.000372     0.000372        0.020  ...........
3...............................................     0.000357     0.000357        0.020  ...........     0.000278     0.000278        0.020  ...........
4...............................................     0.000278     0.000278        0.020  ...........     0.000208     0.000208        0.020  ...........
5...............................................     0.000255     0.000255        0.020  ...........     0.000188     0.000188        0.020  ...........
6...............................................     0.000244     0.000244        0.020  ...........