SECTION 11. BASE TABLE

CONSTRUCTION – GENERAL METHOD

.01 In General . Except as otherwise provided in Section 12 of this revenue procedure, a Base Table for a population must be created from the Unadjusted Base Table for the population through the application of a graduation method generally used by the actuarial profession in the United States ( e.g., Whittaker-Henderson Type B, Karup-King). Section 12 of this revenue procedure provides for an alternate method of constructing a Base Table through the application of a fixed percentage to the mortality rates of a Standard Mortality Table, projected to the Base Year.

.02 Information Regarding Graduation Methods . The graduation method must be identified and the parameters of the graduation method used must be specified ( e.g., for Whittaker-Henderson Type B, the number of differences and the “h” value must be specified). If more than one graduation is performed, then the parameters must be specified for each such graduation.

.03 Intermediate Values . If more than one graduation is performed in the process of adjusting an Unadjusted Base Table to a Base Table, then a copy of each intermediate table so created must be provided.

.04 Rationale . The rationale for the selection of each particular graduation method used must be provided along with the rationale for the selection of the particular parameters used as part of the method.

.05 Extension to Extreme Ages . At extreme ages for which insufficient data exists, the Base Tables must be extended to blend into the applicable Standard Mortality Table, provided in subsection .06 of this section, projected to the Base Year using Projection Scale AA, as set forth in the proposed regulations. In such cases, the

June 18, 2007 1437 2007–25 I.R.B.

Standard Mortality Table of each of the five-year age groups from the 45–49 age group to the 80–84 age group, inclusive, unless the applicant can demonstrate that a different set of five-year age groups (consisting of no less than eight such groups) is more appropriate for this purpose.

.03 Consistency Requirement . The consistency requirement of this subsection .03 is satisfied only if each of the applicable ratios described in subsection .02 of this section is within 10 percentage points of the Fixed Percentage.

.04 Terminal Age . Notwithstanding subsection .01 of this section, the mortality rate for the terminal age in any Base Table created by applying a Level Percentage to a Standard Mortality Table shall be 1.000. .05 Other Mortality Tables . The Service will consider requests for the approval of Base Tables constructed through the application of a fixed percentage to the mortality rates of other published generally accepted mortality tables ( e.g., the 1983 Group Annuity Mortality Table) using standards similar to those provided in subsections .01 through .04 of this section.

.06 Example . The age group rates from the Male Unadjusted Base Table (determined in accordance with section 10 of this revenue procedure), the central age rates from the Male Base Combined Mortality Table (Year 2000), projected to the Base Year, and the ratios of such rates are as follows:

Base Year using Projection Scale AA, as set forth in § 1.430(h)(3)–1. See subsection .05 of this section with regard to the possible use of other mortality tables for this purpose.

Under this section 12, the Unadjusted Base Mortality Tables must be constructed using five-year age groups. For each Base Table constructed using the alternate method described in this section, the Fixed Percentage and the mortality table to which such percentage is to be applied must be identified. In addition, for each so constructed Base Table, the ratios of the mortality rates from the Unadjusted Base Mortality Table for the population to the central age mortality rates ( i.e., the mortality rates for the ages that are the midpoints of the age ranges) from the Projected Applicable Standard Mortality Table must be provided, in tabular form, for all five-year age groups for which mortality experience is available.

.02 Selection of the Fixed Percentage . (1) If the applicable Standard Mortality Table for a population is the table provided in either section 11.06(1) or section 11.06(3) of this revenue procedure, then the Fixed Percentage must be within two percentage points of the arithmetic average of the ratios of the mortality rates from the Unadjusted Base Mortality Table for the population to the central age mortality rates from the Projected Applicable

Standard Mortality Table of each of the five-year age groups from the 35–39 age group to the 60–64 age group, inclusive, unless the applicant can demonstrate that a different set of five-year age groups (consisting of no less than six such groups) is more appropriate for this purpose.

(2) If the applicable Standard Mortality Table for a population is the table provided in either section 11.06(2) or section 11.06(4) of this revenue procedure, then the Fixed Percentage must be within two percentage points of the arithmetic average of the ratios of the mortality rates from the Unadjusted Base Mortality Table for the population to the central age mortality rates from the Projected Applicable Standard Mortality Table of each of the five-year age groups from the 55–59 age group to the 80–84 age group, inclusive, unless the applicant can demonstrate that a different set of five-year age groups (consisting of no less than six such groups) is more appropriate for this purpose.

(3) If the applicable Standard Mortality Table for a population is the table provided in either section 11.06(5) or section 11.06(6) of this revenue procedure, then the Fixed Percentage must be within two percentage points of the arithmetic average of the ratios of the mortality rates from the Unadjusted Base Mortality Table for the population to the central age mortality rates from the Projected Applicable

A B C

Ratio of Mortality

Rate from Unadjusted Mortality

Table to Base Mortality Rate

(Year 2000)

Base Combined Mortality Table

(Year 2000), Projected to the Base

Year, Age Group

Mortality Rate

Age Group

Mortality Rate from

Unadjusted Base

Mortality Table

45 to 49 0.00163 0.00165 98.79%

50 to 54 0.00211 0.00241 87.55%

55 to 59 0.00376 0.00431 87.24%

60 to 64 0.00765 0.00812 94.21%

65 to 69 0.01569 0.01506 104.18%

70 to 74 0.02439 0.02502 97.48%

75 to 79 0.03768 0.04387 85.89%

80 to 84 0.07948 0.07732 102.79%

Arithmetic Average Percentage 94.77%

2007–25 I.R.B. 1438 June 18, 2007