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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
The IRS has released final regulations that provide mortality tables used to determine current liability for defined benefit pension plans. The regulations, which generally relate to the minimum funding requirements of Code Sec. 412 prior to enactment of the Pension Protection Act (PPA; P.L. 109-280), apply to plan years beginning on or after January 1, 2007. For most single-employer plans, these regulations will be effective only for the plan year beginning in 2007 because changes made to Code Sec. 412 by the PPA will eliminate the need for single-employer plans to calculate current liability for plan years beginning on or after January 1, 2008. Later effective dates apply to certain other plans, in which case these regulations would continue to be used to determine current liability for 2008 plan years.
Code Sec. 412(l) provides additional funding requirements for certain defined benefit pension plans, based in part on a plan's unfunded current liability. If the otherwise applicable minimum funding requirement exceeds the plan's full funding limitation, the minimum funding requirement for the year is reduced by that excess. Under Code Sec. 412(c)(7)(E), the full funding limitation cannot be less than the excess of 90 percent of the plan's current liability over the value of the plan's assets. The plan's current liability includes the expected increase in current liability from benefits accruing during the plan year.
The Secretary of the Treasury is required to review the mortality tables promulgated under Code Sec. 412(l)(7)(C)(ii)(III) at least every five years and update the tables by regulation to reflect the actual experience of pension plans and projected trends in experience. As part of this process, two reviews of mortality experience undertaken by the Retirement Plans Experience Committee of the Society of Actuaries (the UP-94 Study and the RP-2000 Mortality Tables Report) were considered. In addition, the existing mortality table for determining current liability (1983 GAM) was revisited. It was determined that the use of the 1983 GAM is no longer appropriate. Subsequently, the IRS chose to use the experience in RP-2000 Mortality Tables Report to determine current liability for participants and beneficiaries, other than disabled participants.
Accordingly, the IRS issued proposed regulations under Code Sec. 412(l)(7) in December 2005, which set forth mortality tables to be used for non-disabled participants, proposed to be effective for plan years beginning on or after January 1, 2007 (see CCH Pension Plan Guide ¶20,261V).
In a change from the proposed regulations, the IRS will permit all plans to use a blended table for 2007 rather than the use of separate annuitant and non-annuitant tables. Moreover, it was determined that all plans should be permitted to use the combined mortality tables for the 2007 plan year, rather than limit their use to plans with fewer than 500 participants. Unlike the RP-2000 Mortality Tables Report that does not provide weighting factors prior to age 50 or after age 70, the IRS extended the nonannuitant/annuitant weighting factors to include weighting factors for ages 41 to 50 (ages 45-50 for females) and ages 70 to 79 in order to develop the blended table. The regulations containing the final mortality tables for use in 2007 plan years continue to be gender-distinct due to significant differences between expected male and expected female mortality.
For more information on this and related topics, consult the CCH Pension Plan Guide.
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