The Actuarial Standards Board (ASB) is proposing new mortality tables be used to calculate pension commuted values for members terminating from DB plans and that could increase commuted values, says an Eckler Special Notice.
It’s expected the new mortality assumption will—depending on the age and gender of a member—increase commuted values by approximately 5% to 7%, the publication notes.
“This increase will not only affect pension commuted value payments, it will also have an impact on valuations and funding costs,” says the Notice.
For valuations conducted after the effective date of the mortality assumption change (Aug. 1, 2015), the cost of funding the portion of benefits assumed to be settled through commuted values will be higher.
“This will reduce a plan’s windup/solvency funded ratio, which will lead to higher cash contribution requirements if the plan is not exempt from solvency funding and is in a deficit position,” the publication says.
The Notice also recommends that those responsible for administering pension plans should prepare to update their systems to reflect the new mortality assumption.
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