October 8, 2015
- Society of Actuaries Revises Mortality Table Improvement Scale
- Senate Legislation Would Empower Participants in Multiemployer Pension Plans
- High Court Declines to Review ERISA Case
Society of Actuaries Revises Mortality Table Improvement Scale
The Society of Actuaries (SOA), a professional organization serving 24,000 actuarial members, released a modified mortality improvement scale, the MP-2015 Mortality Improvement Scale, on October 8.This updated improvement scale can be used to update the RP-2014 base mortality table.
As we noted when similar scales were issued in 2014 (see the October 27 Benefits Byte), the federal government typically considers SOA’s calculations in formulating mortality assumptions with respect to pension funding, benefit restrictions, PensionBenefit Guaranty Corporation(PBGC) premiums and lump sum valuations. However, when the Treasury Department and Internal Revenue Service (IRS) issued Notice 2015-53 on July 31, specifying the updated mortality tables to be used for these purposes, they clarified that the official tables do not reflect the SOA’s calculations and will not apply until 2017.
The 2014 SOA reports are controversial and many Council members believe they overstate mortality improvement, and would thus inflate funding liabilities, lump sums, and PBGC premiums. The Council had requested in a March 23, 2015, letter that Treasury and the IRS note and address the problems and inaccuracies in the SOA’s methodology, identifying the failure to adequately reflect Social Security Administration (SSA) data for 2007 through 2010. In a follow-up letter, the Council and urged the consideration of new 2011 data.
Most notably, the SOA’s new report is positive step because it updates the mortality improvement scale to reflect the recent SSA data, just as the Council had suggested to Treasury and the IRS.
For more information, contact Lynn Dudley, senior vice president, global retirement and compensation policy. All can be reached at (202) 289-6700.
Senate Legislation Would Empower Participants in Multiemployer Pension Plans
Senator Rob Portman (R-OH) has introduced a measure that would give multiemployer pension plan participants a greater voice in determining whether benefits will be cut. The Pension Accountability Act (PAA), introduced on October 7, would amend current law as implemented by the Multiemployer Pension Reform Act (MPRA) in 2014.
Under the MPRA, once an application to reduce benefits has been approved (by the Treasury Department, in consultation with the Pension Benefit Guaranty Corporation (PBGC) and the Department of Labor), plan participants and beneficiaries have the right to vote on the proposed benefit changes before they can occur.
The PAA would make the participant vote binding in all situations and change the tabulation of the vote to disregard unreturned ballots.
The introduction of this legislation reflects ongoing concerns with the MPRA and continued attention to multiemployer pension plan issues in the U.S. Senate and House of Representatives. As we reported in the April 30 Benefits Byte, the U.S. House of Representatives Education and the Workforce Subcommittee on Health, Employment, Labor and Pensions heard testimony from employers and union groups in an April 29 hearing to discuss what reforms were still necessary in the wake of enactment of the MPRA.
High Court Declines to Review ERISA Case
The U.S. Supreme Court has announced that it will not hear the case United Refining Company v. Cottillion, in which a plan sponsor attempted to recover pension plan distributions erroneously paid through a misinterpretation of plan documents that was subsequently corrected.
The Council had filed an amicus (“friend of the court”) brief in August urging the high court to grant United Refining’s petition to hear the case in the upcoming term. The request results from the March 18 U.S. Appeals Court for the Third Circuit ruling, which will now stand. (See the March 19 Benefits Byte for more details on the Third Circuit ruling. The Council also filed an amicus brief with the Third Circuit in June2014.)
According to the facts of the case, when the plan sponsor attempted to recover overpayments – to maintain qualified status after a Voluntary Correction Program (VCP) filing with the Internal Revenue Service – the plaintiffs sued, alleging the company violated ERISA's anti-cutback provisions by seeking to retroactively reduce accrued early retirement benefits. The earlier Third Circuit court decision declined to weigh in on the matter of the legal deference which should be provided to the plan administrator, concluding that “no amount of deference” could overcome the facts of the case and that the reinterpretation of the plan document was actually a plan amendment that violated the anti-cutback rules.
The Council’s brief to the Supreme Court noted that under the law of the Second, Seventh, Ninth and D.C. Circuits, employers may offer their employees retirement benefits without assuming the risk that mistakes by the plan administrator will be irreversible. In the Third and Sixth Circuits, however, an employer who chooses to offer retirement benefits can become bound—in perpetuity—to a plan administrator’s mistaken interpretation. Employers offering retirement programs extending across multiple circuits continue to face substantial uncertainty as to the governing law.
Making the administrator’s interpretive mistakes irreversible not only imposes a wholly unpredictable risk on employers, but constrains the administrator’s ability to make routine financial management decisions and limits the ability to act in the best interests of plan beneficiaries. Furthermore, if offering voluntary benefits such as retirement plans exposes an employer to such uncertainty and unpredictable liability, it may decide to cease offering such benefits, or may opt not to implement new programs in the future.
For more information on this issue or the Council's amicus brief program, contact Jan Jacobson, senior counsel, retirement policy, or Lynn Dudley, senior vice president, global retirement and compensation policy. Both can be reached at (202) 289-6700.