Rev. Rul. 96-7
1996-1 C.B. 59, 1996-3 I.R.B. 12

INTERNAL REVENUE SERVICE
Revenue Ruling

DISABILITY MORTALITY TABLES

Revision Release: January 3, 1996
Released: December 28, 1995
Published: January 16, 1996

Section 412. - Minimum Funding Standards
Disability mortality tables. This ruling provides mortality tables for use under section 412(1) for plan years after 1995 to calculate current liability for individuals entitled to benefits on account of disability.

ISSUE

What alternative mortality tables may be used to calculate a plan's current liability under § 412(l) of the Internal Revenue Code for individuals who are entitled to benefits under the plan on account of disability?

LAW AND ANALYSIS

Section 412(l) provides additional funding requirements for certain underfunded defined benefit pension plans that have more than 100 participants and that are not multiemployer plans. In general, the additional funding requirements are determined based on a plan's unfunded current liability.

Section 751(a) of the Retirement Protection Act of 1994 added § 412(l)(7)(C)(ii) to the Code, effective for plan years beginning after December 31, 1994. Section 412(l)(7)(C)(ii) provides that, for purposes of determining current liability, the mortality table used shall be the table prescribed by the Secretary, and sets forth the basis for establishing a table. For plan years beginning before the effective date of the first tables prescribed under § 412(l)(7)(C)(ii)(II), the table must be based on the prevailing commissioners' standard table (described in § 807(d)(5)(A)) used to determine reserves for group annuity contracts issued on January 1, 1993. Rev. Rul. 95- 28, 1995-1 C.B. 74, sets forth this mortality table.

Section 412(l)(7)(C)(iii)(I) provides that, for plan years beginning after December 31, 1995, the Secretary shall establish mortality tables that may be used, in lieu of the tables under § 412(l)(7)(C)(ii), to determine current liability under § 412(l) for individuals who are entitled to benefits under the plan on account of disability. The Secretary must 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 § 412(l)(7)(C)(iii)(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.

The alternative mortality tables provided for under § 412(l)(7)(C)(iii) are permitted to be used in the specified circumstances, but are not required to be used. For any individual for whom these alternative mortality tables are not used, the mortality table prescribed under § 412(l)(7)(C)(ii) must be used.

The alternative mortality tables provided under § 412(l)(7)(C)(iii) may be used only for individuals who are entitled to benefits under the plan on account of disability. For this purpose, an individual is entitled to benefits under a plan on account of disability if, because of the occurrence of a disability, the individual is entitled to receive a benefit to which the individual would not be entitled in the absence of the disability. For example, an individual is entitled to benefits under a plan on account of disability if, upon the occurrence of a disability at a time before the individual would have been entitled to receive an unreduced normal retirement benefit upon retirement, the individual is entitled to receive the same annuity that would have been payable to the individual upon retirement at normal retirement age. As a further example, an individual is entitled to benefits under a plan on account of disability if the individual, who would not otherwise be earning service credits, is credited with years of service for the period of disability. On the other hand, an individual is not entitled to benefits on account of disability if the individual separates from the service of the employer because of a disability, but merely receives the same benefit that would have been payable if the individual had separated from service without the occurrence of the disability.

For purposes of § 412(l)(7)(C)(iii), any individual who has become entitled to benefits under a plan on account of disability continues to be considered entitled to benefits under the plan on account of disability until the individual recovers from ability and becomes entitled to different benefits under the plan than the individual would have been entitled to if the individual had not recovered.

Under § 412(l), nothing prohibits the use of an additional actuarial assumption that meets the requirements of § 412(c) regarding the probability of recovery from disability.

HOLDING

The mortality tables provided below, as applicable, may be used for plan years beginning after December 31, 1995, in lieu of the mortality table required to be used under § 412(l)(7)(C)(ii), for purposes of determining current liability. The first mortality table provided below may be used for plan years beginning after December 31, 1995, in lieu of the mortality table required to be used under § 412(l)(7)(C)(ii), for purposes of determining current liability for individuals entitled to benefits under the plan on account of disability, whose disabilities occurred in plan years beginning before January 1, 1995. The second mortality table provided below may be used for plan years beginning after December 31, 1995, in lieu of the mortality table required to be used under § 412(l)(7)(C)(ii), for purposes of determining current liability for individuals entitled to benefits under the plan on account of disability, whose disabilities occur in plan years beginning after December 31, 1994. This second mortality table may be used only for individuals who are disabled within the meaning of title II of the Social Security Act and the regulations thereunder. The mortality table required to be used under § 412(l)(7)(C)(ii) must be used for individuals whose disabilities occur in plan years beginning after December 31, 1994, but who are not disabled within the meaning of title II of the Social Security Act and the regulations thereunder.

MORTALITY TABLE FOR DISABILITIES OCCURRING IN PLAN YEARS BEGINNING BEFORE JANUARY 1, 1995

The following mortality table is the mortality table that is permitted to be used for individuals entitled to benefits under the plan on account of disability, whose disabilities occurred in plan years beginning before January 1, 1995. The table sets forth the number living based upon a starting population of one million lives at age 15 (l subx ), and the annual rate of mortality (q subx ), to be used for each age and each gender.

MORTALITY TABLE FOR DISABILITIES OCCURRING IN PLAN YEARS BEGINNING AFTER DECEMBER 31, 1994

The following mortality table is the mortality table that is permitted to be used for individuals entitled to benefits under the plan on account of disability, whose disabilities occur in plan years beginning after December 31, 1994. This mortality table may be used only for individuals who are disabled within the meaning of title II of the Social Security Act and the regulations thereunder. The table sets forth the number living based upon a starting population of one million lives at age 15 (l subx ), and the annual rate of mortality (q subx ), to be used for each age and each gender.

EFFECTIVE DATE

This revenue ruling is effective for plan years beginning after December 31, 1995.

DRAFTING INFORMATION

The principal author of this revenue ruling is Edward Sypher of the Employee Plans Division. For further information regarding this revenue ruling, please contact the Employee Plans Division's taxpayer assistance telephone service at (202) 622-6076 between 2:30 and 4:00 Eastern time (not a toll-free number) Monday through Thursday. Mr. Sypher's number is (202) 622-6245 (also not a toll-free number).

Rev. Rul. 96-7, 1996-1 C.B. 59, 1996-3 I.R.B. 12