Companies received more guidance recently on how to implement the Pension Protection Act when the Treasury Department and the Internal Revenue Service issued proposed mortality tables and regulations on mortality tables used to measure pension liabilities.
The proposed regulations include rules on the substitute mortality tables that the PPA authorized companies to construct using data on their own workforces.
Jay Rosenberg, a director in the retirement practice of Buck Consultants, said the proposed regulations cleared up one concern of plan sponsors by saying that companies with a number of pension plans of varying sizes can use plan-specific tables for plans big enough to have sufficient data and rely on the tables the government provides for the smaller plans.
“Our clients have been very interested in being able to describe to their employees what they can expect in the amount of lump sums if they retire in 2008 versus 2007, or 2009 versus 2008, so that people can make appropriate plans,” he explained. “Hopefully we’ll get some guidance soon. There’s a very pressing need for the government to issue guidance in this area so that employers can notify their employees.”
If companies want to build their own mortality tables, the proposed regulations require that they have “credible data.” The regulations define the amount of information that would be sufficient as data on 1,000 deaths of workers of the same gender.
The regulations also say that companies must notify the government seven months in advance of a new plan year that they are going to use a plan-specific table, but add that companies have until October 1 to notify the government about 2008 plans.
Filed by Susan Kelly of Financial Week, a sister publication of Workforce Management. To comment, e-mail firstname.lastname@example.org.