NU Online News Service, Feb. 27, 2004, 5:57 p.m. EST – An actuarial group says employers would have a hard time using factors such as tobacco use and “collar status” in retirement plan liability calculations.[@@]
The Internal Revenue Service should stick with an official pension calculation mortality table that relies on the workers’ age and gender as the sole variables, according to a comment letter by the American Society of Pension Actuaries, Arlington, Va.
Ed Burrows, co-chair of the society’s actuarial resource group, and 5 other society leaders signed the letter.
The society actuaries were responding to an IRS proposal that calls for the IRS to ask defined benefit plan sponsors to use more sophisticated worker and retiree mortality projections in pension liability calculations.
The IRS could end up requiring sponsors’ actuaries to consider whether workers smoke, whether they have blue-collar or white-collar jobs, and how high their incomes are, on the assumption that low-income, blue-collar smokers will have shorter life expectancies and lower pension needs than high-income, white-collar non-smokers will have.
The IRS also is considering the possibility of asking actuaries to incorporate “generational” mortality factors, or adjustments to account for the possibility that workers born in later years might have longer life expectancies than workers born in earlier years.
The pension actuaries society believes that use of “generational mortality” is too complicated and might not do much to increase the accuracy of actuarial valuations, Burrows and his colleagues write in the society’s letter.
Burrows and his colleagues also argue that the IRS should take a more comprehensive approach to updating pension liability calculation methods.
Focusing solely on mortality tables is a bad idea, because changes in interest rates and other factors tend to have a far bigger effect on pension liabilities, Burrows and his colleagues write.