Changing Mortality Rates Will Hurt Pension Funding Ratios

If you’ve read that corporate pension funds are extremely well-funded right now, that may be partially because they are using outdated mortality tables, which are used to estimate how much a defined benefit pension plan or annuity will need to pay out, because they are the best tools available. But new mortality tables are being developed by the Society of Actuaries (SOA), and when pension funds make the switch they will see their expected liabilities rise by as much as 7%.

Current tables use decades old assumptions

“The mortality assumptions currently used to value most retirement programs in North America were developed from data that are more than 20 years old,” says an SOA report explaining why the new tables are...