Defined Benefit Plan Sponsors: 2017 is a Critical Year! Action is Needed!

At Markley Actuarial, we can help you understand the impact of Pension Plan decisions. We have successfully implemented several strategies described in this article.

New Mortality Tables

For several years, Markley Actuarial has been encouraging our clients to act before updated mortality tables increase the liability of their Pension Plan. The IRS has now issued proposed regulations for the new mortality tables in 2018, so 2017 is the time to act! For an ongoing Plan, a lump sum window can be offered to terminated vested participants. Some or all of the terminated vested participants can be offered a lump sum distribution in exchange for their future monthly benefits. For lump sum distributions paid in 2017, the new mortality rates will not apply.

If a small Pension Plan is close to termination, 2017 offers an opportunity to terminate before the new mortality rates apply. The Plan termination process takes a year or more (the larger the plan, the longer the termination process), so the process must begin in the near future.

Corporate Tax Rates

Each new President brings his agenda for future prosperity. Tax reform proposals of the new administration will reduce taxes on the individual and corporate level. For C Corporations, the tax rate could change from 35% for 2016 to 15% for 2017. A Pension Plan contribution made by the 2016 tax due date of September 15, 2017 can be deducted at the 2016 tax rate of 35%. This is an opportunity to make a substantial Pension contribution to reduce the unfunded liability of your Pension Plan!

Pension Risk Reduction

If a substantial contribution to your Pension Plan is made, your Plan will be much better funded. What steps can be taken to maintain the improved funded status of your Pension Plan? Markley Actuarial has been working with clients for over a decade on asset liability matching strategies. As your actuary, we can determine expected benefit payment flows of your Plan. With investments in bonds that match the expected flows, the funded status of the Plan can be stabilized. If interest rates go down, the liability of the Plan will increase, but so will the investments in bonds. If interest rates go up, the investment in bonds will decrease in value, but so will the liability.

Call to Action

Is your actuary reviewing these options with you? If not, we can help! May you have a successful and risk averse 2017!


Written By John R. Markley (ASA, FCA, MAAA, FSPA, CPC)

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