The Society of Actuaries Publishes Annual Mortality Improvement Scale Update, MP-2018
MP-2018 projects lower future rates of mortality improvement compared to MP-2017, which slightly decrease pension plan obligations
SCHAUMBURG, Ill., Oct. 23, 2018 – The Society of Actuaries (SOA) released its annually-updated mortality improvement scale for pension plans, MP-2018, which projects lower future rates of mortality improvement and lower pension plan obligations compared to the previous scale, MP-2017. The SOA’s preliminary estimates suggest that implementing the MP-2018 improvement scale could reduce a plan’s pension obligations by 0.2 percent–0.4 percent for females and 0.3 percent–0.6 percent for males, when calculated using a four percent discount rate.
MP-2018 reflects a slight decline in life expectancy, stemming from higher mortality rates for three of the leading ten causes of death in the U.S., as reported by the Centers for Disease Control and prevention (CDC): unintentional injuries (9.7 percent increase), Alzheimer’s disease (3.1 percent increase) and suicide (1.5 percent increase). The SOA’s analysis suggests that life expectancy for 65 year-old private pension participants decreased slightly less than one month for females and slightly more than one month for males, compared to MP-2017. For example, the new life expectancy under MP-2018 for a 65-year-old male pension plan participant is 20.6 or 85.6 total. Female life expectancy for this group is now 22.61 years, or 87.61 total.
The SOA updates its mortality improvement scale on an annual basis to incorporate the latest available data. The MP-2018 update includes Social Security Administration (SSA) mortality rates through 2014 (as published in the 2018 SSA Trustees Report), as well as 2015 and preliminary 2016 mortality rates developed by the SOA and based on data obtained from the SSA, CDC, Centers for Medicare and Medicaid Services (CMS), and the U.S. Census Bureau.
“In MP-2018, we see continued reduction of overall U.S. mortality improvement trends that we started seeing in 2010,” said R. Dale Hall, FSA, MAAA,CERA, CFA, managing director of research for the SOA. “However, because we are also continuing to see varied mortality improvement across the age groups, it’s imperative for industry professionals to perform their own calculations, using the demographics of their pension population to determine the impact of implementing MP-2018 on their individual plan.”
For additional information, you can read the full Mortality Improvement Scale MP-2018 report.
About the Society of Actuaries
With roots dating back to 1889, the Society of Actuaries (SOA) is the world’s largest actuarial professional organization with more than 30,000 actuaries as members. Through research and education, the SOA's mission is to advance actuarial knowledge and to enhance the ability of actuaries to provide expert advice and relevant solutions for financial, business and societal challenges. The SOA's vision is for actuaries to be the leading professionals in the measurement and management of risk. www.SOA.org.