New Mortality Rates Trigger a Leap in Pension Liabilities

The Society of Actuaries (SOA) recently released exposure drafts of new mortality tables that are likely to be used in defined benefit (DB) plan valuations and other pension liability calculations within the next few years. These new tables extend the expected life spans of plan participants and therefore increase DB plan liabilities, leading to increased contribution requirements as well as other pension liability–related costs (e.g., lump sum payouts, payments of PBGC variable rate premiums, and so on). Moreover, liability durations will likely increase, which could lead to revisions in liability-driven investing (LDI) strategies. In addition, glide path de-risking schedules may require updates.