Mortality assumptions in benefit obligations— mortality tables

No. US2014-18
October 21, 2014
Mortality assumptions in benefit obligations—
Society of Actuaries expected to issue new
mortality tables
What’s happening?
At a glance
New mortality tables
could significantly impact
pension and OPEB
obligations for this yearend.
The Society of Actuaries (SOA) is expected to finalize a new set of mortality tables by the
end of October 2014. Because mortality is a key assumption in developing actuarial
estimates, this could significantly impact the valuation of pension and other
postretirement benefit (OPEB) obligations. Companies should consider this new
mortality data at their plans’ next measurement date in relation to their plan participant
population, historical plan-specific mortality experience, and future expectations.
Key assumption
Expected mortality is a key assumption in an employer's measurement of its pension and
OPEB obligations. The accounting guidance does not prescribe the use of a specific
mortality table or mortality improvement scale. As with all actuarial assumptions, the
mortality assumption should represent management's best estimate of the expected
duration of future benefit payments at the measurement date. The estimate should be
based on the specific demographics and other relevant facts and circumstances for each
plan and consider all relevant information available at the measurement date.
Expected new mortality tables and improvement scale
In February 2014, the SOA published exposure drafts of a new set of mortality tables
(RP-2014) and a related, new, two-dimensional mortality improvement scale (MP-2014).
The public comment period on the RP-2014 and MP-2014 exposure drafts ended on May
31, 2014. The SOA anticipates issuing final tables shortly. As currently presented, the
new tables reflect longer life expectancy than projected by past tables, which could result
in higher benefit obligations.
Why is this important?
For companies with significant defined benefit pension and OPEB obligations, longer life
expectances could significantly increase the reported value of those obligations. And, for
companies that immediately recognize the impact of changes in actuarial assumptions at
the measurement date, that improved mortality experience could have a significant
impact on fourth quarter results of operations.
Companies should consider this new mortality data for their plans’ next measurement
date in relation to their plan-specific mortality experience and future expectations. With
regard to internal control over financial reporting, they should document how the new
tables were considered.
National Professional Services Group | CFOdirect Network – www.cfodirect.pwc.com
In brief
1
What's next?
Companies should discuss the new tables and how they compare to their plans’ mortality
experience and future expectations with their actuaries, which can take some time.
Companies should monitor the issuance of the final tables by the Society of Actuaries and
begin determining the implications and working with their actuaries promptly.
Questions?
Authored by:
PwC clients who have questions about this
In brief should contact their engagement
partner. Engagement teams who have
questions should contact the Compensation
team in the National Professional Services
Group (1-973-236-7802).
Jay Seliber
Partner
Phone: 1-973-236-7277
Email: [email protected]
Gina Klein
Director
Phone: 1-973-236-4938
Email: [email protected]
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