When the Society of Actuaries an- nounced it was
updating and improving its
mortality tables to be more
reflective of the American
population, it was as if a tornado blew through the traditional glide path, wreaking
havoc here and there before
lifting off again.
“The good news is plan
participants are living longer,
the bad news is plans sponsors have to put up more
collateral to make good on
their promises,” said Sean
McShea, president of Ryan
Labs Asset Management.
That’s because prior to
its Retirement Plan (RP)—
2014 Mortality Tables update,
the last time the SOA had
updated the tables was 2000.
Life expectancy rates in
2000 for the average American were 74.3 years for men
and 79.7 years for women,
according to the Center for
Disease Control. Fourteen years later, life expectancy rates hit an
all-time high, 76.4 years for men and 81.2 years for women.
But in 2015, U.S. life expectancy rates unexpectedly dipped
slightly for the first time in decades. For example, the SOA
RP-2014 mortality tables report, which doesn’t do overall average
life expectancy rates but shows brackets based on decade aver-
ages, demonstrated that among males age 65, overall longevity
rose 2.0 years from age 84.6
in 2000 to age 86.6 in 2014.
For women age 65, overall
longevity rose 2. 4 years
from age 86.4 in 2000 to age
88.8 in 2014. By compar-
ison, the life expectancy for
a 65-year-old male declined
to 85.8 years under the
MP-2016 scale, compared
to 86.2 years using the
MP-2015 scale. The life
expectancy for a 65-year-old
female is now 87.8 years
under MP-2016, compared
to 88.2 years based on the
previous MP-2015 scale.
“It’s been a stop-start
kind of process,” said Bob
Pension sponsors and their investment staff can expect more of
the same. After a nearly four year delay, the IRS will host a public
hearing on proposed regulations on April 13, 2017, with an expectation that final regulations will be applied beginning January 1, 2018,
according to the International Foundation of Employee Benefit Plans.
Do new mortality tables require updates to LDI strategies?
What CIOs need to consider before 2018
Reported by Dawn Reiss / Art by Suharu Ogawa