SECTION 12. BASE TABLE

CONSTRUCTION – ALTERNATE METHOD

.01 General Rule . A Base Table for a population may be created by applying a fixed percentage (the “Fixed Percentage”) to the mortality rates in the Projected Applicable Standard Mortality Table only if the requirements of subsections .02 and .03 of this section are satisfied and the Service determines that the resulting Base Table sufficiently reflects the mortality experience of the applicable plan population. For this purpose the Projected Applicable Standard Mortality Table is the applicable Standard Mortality Table, projected to the 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 paragraph (1) or paragraph (3) of subsection 11.06, 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.

2008–42 I.R.B. 942 October 20, 2008

Table (Year 2000), projected to the Base Year, and the ratios of such rates are as follows:

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%

(2) For all Base Tables with the exception of nonannuitant Base Tables, immediate annuity factors at quinquennial ages from 50 to 90.

.04 Graphical Displays . A comparison in the form of graphs with the X-axis representing age and the Y-axis representing the mortality rate, for each of the following pairs of mortality rates, for each population for which the use of substitute mortality tables is requested:

(1) The mortality rates from the Base Unadjusted Mortality Table and the mortality rates from the proposed Base Table; and

(2) The mortality rates from the proposed Base Table and from the applicable Standard Mortality Table (as described in subsection 11.06 of this revenue procedure), projected to the Base Year.