n-08-29.pdf

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Part III. --- Administrative, Procedural and Miscellaneous

Alternative Disability Mortality Tables – Continued Reliance on Revenue
Ruling 96-7

Notice 2008-29

This notice provides guidance regarding the mortality tables that are permitted to
be used to determine present values with respect to individuals who are entitled
to benefits under a qualified defined benefit pension plan on account of disability.
This notice reflects changes to the minimum funding requirements made by the
Pension Protection Act of 2006, Pub. L. 109-280 (PPA ’06).

Background

Pursuant to changes made by PPA ’06, § 412 of the Internal Revenue Code
provides minimum funding requirements for qualified defined benefit pension
plans that generally apply for plan years beginning on or after January 1, 2008.
Section 430 specifies the minimum required contribution that must be made for a
single employer defined benefit plan under § 412 as modified by PPA ’06.
Section 431 specifies the amount that must be contributed under § 412 to a
multiemployer defined benefit plan to avoid an accumulated funding deficiency in
order to satisfy the requirements of § 412 as modified by PPA ’06. Prior to these
changes, the minimum funding requirements for qualified pension plans were set
forth in § 412.

Prior to amendment by PPA ’06, § 412(l)(7)(C)(ii) required the use of certain
mortality tables to determine a plan’s current liability, effective for plan years
beginning after December 31, 1994. Section 412(l)(7)(C)(iii)(I) provided that, for
purposes of determining current liability for plan years beginning after December
31, 1995, the Secretary was required to establish mortality tables that were
permitted to be used, in lieu of the tables under § 412(l)(7)(C)(ii), to determine
current liability under § 412(l) for individuals who were entitled to benefits under
the plan on account of disability. The Secretary was required to establish
separate tables for individuals whose disabilities occurred in plan years
beginning before January 1, 1995, and for individuals whose disabilities occurred
in plan years beginning after December 31, 1994. Under § 412(l)(7)(C)(iii)(II), the
mortality table for individuals whose disabilities occurred in plan years beginning
after December 31, 1994, applied only with respect to individuals who were
disabled within the meaning of title II of the Social Security Act and the
regulations thereunder.

Rev. Rul. 96-7, 1996-1 C.B. 59, which was effective for plan years beginning
after December 31, 1995, set forth the mortality tables that were permitted to be
used pursuant to § 412(l)(7)(C)(iii)(I) for disabilities occurring in plan years
beginning before January 1, 1995, and for disabilities occurring in plan years
beginning after December 31, 1994.

Section 430(h)(3) provides rules regarding the mortality tables to be used in
determining present values and making other computations under § 430.
Section 430(h)(3)(D) provides that, for purposes of determining any present
value or making any computation under § 430 for plan years beginning after
December 31, 2007, the Secretary is to establish mortality tables that may be
used, in lieu of the tables under § 430(h)(3)(A), for individuals who are entitled to
benefits under the plan on account of disability. The Secretary is to establish
separate tables for individuals whose disabilities occurred in plan years
beginning before January 1, 1995, and for individuals whose disabilities occur in
plan years beginning after December 31, 1994. Under § 430(h)(3)(D)(ii), the
mortality table for individuals whose disabilities occur in plan years beginning
after December 31, 1994, applies only with respect to individuals who are
disabled within the meaning of title II of the Social Security Act and the
regulations thereunder. Thus, the standard for the establishment of mortality
tables that are permitted to be used with respect to individuals who are entitled to
benefits under the plan on account of disability is the same under § 430(h)(3)(D)
as the standard that previously applied under § 412(l)(7)(C)(iii).

Section 431 specifies the minimum funding requirements that apply to
multiemployer plans. Under § 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), (v), and (vi) provide rules regarding the mortality tables to be
used in determining a plan’s current liability for this purpose. Section
431(c)(6)(D)(v)(I) provides that, for purposes of determining a plan’s current
liability, the Secretary is to establish mortality tables that may be used, in lieu of
the tables that apply generally under § 431(c)(6)(D)(iv), for individuals who are
entitled to benefits under the plan on account of disability. The Secretary is to
establish separate tables for individuals whose disabilities occurred in plan years
beginning before January 1, 1995, and for individuals whose disabilities occur in
plan years beginning after December 31, 1994. Under § 431(c)(6)(D)(v)(II), the
mortality table for individuals whose disabilities occur in plan years beginning
after December 31, 1994, applies only with respect to individuals who are
disabled within the meaning of title II of the Social Security Act and the
regulations thereunder. Thus, like the standard for the establishment of mortality
tables with respect to disabled participants under § 430(h)(3)(D), the standard for
the establishment of mortality tables that are permitted to be used with respect to
individuals who are entitled to benefits under a plan on account of disability under

§ 431(c)(6)(D)(v) is the same as the standard that previously applied under
§ 412(l)(7)(C)(iii).

Continued Use of Revenue Ruling 96-7 Disabled Mortality Tables

Until further guidance is issued, the rules of Rev. Rul. 96-7 (including the
mortality tables set forth in Rev. Rul. 96-7 as well as the rules regarding the
determination of whether a benefit is payable on account of disability) apply
under §§ 430(h)(3)(D) and 431(c)(6)(D)(v). As provided in § 1.430(h)(3)-
2(c)(1)(iv) of the proposed Income Tax Regulations, the alternative mortality
tables in Rev. Rul. 96-7 are permitted to be applied where employer-specific
substitute mortality tables are used for nondisabled participants, but only if
mortality experience with respect to disabled individuals for which those tables
are used has been excluded in developing mortality rates for the substitute
mortality tables.

Comments Requested

The Service is considering issuing updated mortality tables under
§§ 430(h)(3)(D) and 431(c)(6)(D)(v) that could be used with respect to individuals
who are entitled to pension plan benefits on account of disability. Comments are
requested regarding the construction of these updated mortality tables, including
suggestions for sources of updated data regarding mortality experience with
respect to disabled pension plan participants. In addition, comments are
requested concerning the use of select and ultimate mortality tables under which
mortality rates vary depending on the individual’s age and the number of years
that the individual has been disabled. Written comments should be submitted by
June 23, 2008. Send submissions to CC:PA:LPD:DRU (Notice 2008-29), Room
5203, Internal Revenue Service, POB 7604 Ben Franklin Station, Washington,
D.C. 20044. Comments may be hand delivered between the hours of 8 a.m.
and 4 p.m., Monday through Friday, to CC:PA:LPD:DRU (Notice 2008-29),
Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW.,
Washington, DC, or sent electronically via the Federal eRulemaking portal at
http://www.regulations.gov (Notice 2008-29). All comments will be available for
public inspection.

Drafting Information

The principal author of this notice is David Ziegler of the Tax Exempt and
Government Entities Division, Employee Plans. For further information regarding
this notice, please contact the Employee Plans taxpayer assistance telephone
service at 1-877-829-5500 (a toll free number) between the hours of 8:00 a.m.
and 4:30 p.m. Eastern Time, Monday through Friday. Mr. Ziegler can be
contacted via e-mail at RetirementPlanQuestions@irs.gov.