United States

Updated mortality improvement scale for pension plans

FINANCIAL REPORTING INSIGHTS  | 

On October 8, 2015, the Society of Actuaries (SOA) released an updated Mortality Improvement Scale MP-2015 for pension plans, which incorporates two additional years of mortality data. The SOA’s preliminary estimates suggest that updating to the MP-2015 scale might reduce a plan’s liabilities by between zero and two percent, depending on each plan’s specific characteristics. The impact could be less for plans that already had been adjusting their mortality improvement scales. 

The effect of an updated mortality improvement scale on a plan’s liabilities should be considered if it becomes available prior to the issuance of the financial statements. Plan sponsors that issue calendar-year-end financial statements should have discussions now with their actuaries about the use of the updated mortality improvement scale so as to reflect the best estimate of the plan’s obligation as of the current measurement date (i.e., the date at which the obligation is presented in the financial statements).