Mortality Table

In Detail

Mortality tables are statistical tools that actuaries use to project how long pension plan participants will live and therefore how long the plan must pay benefits. These tables show the probability of death at each age for a given population. As life expectancy has increased, pension obligations have grown because benefits must be paid for longer periods. The most commonly used mortality tables for pension plans are published by the Society of Actuaries (SOA), including the RP-2014 table and its successor, the Pri-2012 table, along with mortality improvement scales (MP series) that project future increases in life expectancy.

The choice of mortality table has a direct financial impact on pension plans. Adopting an updated table that reflects longer life expectancy can increase a plan's reported liabilities by 5-10% overnight, even though nothing about the plan's actual operations has changed. This is because longer life expectancies mean more years of benefit payments. The IRS requires private-sector plans to use specific mortality tables for funding calculations, while public plans have more discretion.

Some plans have been criticized for using outdated mortality tables that understate liabilities by assuming participants will die sooner than current data suggests. Generational mortality tables, which project improving mortality for each birth cohort, are now considered best practice.