The week of Christmas is a bad time to invent a contribution

The week of Christmas feels like a deadline because offices close, payroll freezes, and the year is visibly ending. For a cash balance contribution, that feeling is mostly false. The legal clocks that matter for a 2024 defined benefit deposit sit in 2025. The number that matters is not a round figure you can choose between holiday gatherings. It is the number an independent enrolled actuary can support, which your CPA can then test against the deduction rules. Inventing the number this week creates cleanup that costs more than the feeling of being done was worth.

Sterling Pension Group LLC in West Hartford administers plans and coordinates those independent actuaries. We are not an actuarial firm. We do not certify Schedule SB, and we will not bless a wire that exists only because the calendar page is red. This briefing is education, not tax, legal, or actuarial advice. It is written for an owner, a physician, a dentist, an attorney, or a consultant who has been told to "just fund something before year-end." The December map of the three real clocks is /insights/december-timing.

What is actually due this week

Almost certainly not the pension contribution.

If you sponsor a calendar-year cash balance or traditional defined benefit plan for 2024, the minimum funding contribution is generally due 8.5 months after year-end. That date is September 15, 2025. Missing it can produce a 10% excise tax, reported on Form 5330, on the unpaid minimum. September 15 is a real deadline. December 26 is not a substitute for it, and paying early is not the same act as paying a guess.

The deduction often travels on a different schedule. IRC 404(a)(6) generally allows a contribution to be treated as if it were made on the last day of the taxable year when it is paid by the due date of the return for that year, including extensions. Your CPA has to apply that sentence to your entity. A calendar-year corporation and a sole proprietor do not automatically share one day. Extending the return moves the deduction window. It does not move the minimum-funding date. Anyone who tells you to wire the contribution "so it counts for 2024" without naming which of those two rules they mean is mixing a tax-return rule with a funding rule, and is probably also implying that December 31 is the only day either rule cares about. It is not.

Employee deferrals are the piece that can truly die this week, and they die because payroll closes, not because a pension trust is unfunded. The 2024 deferral limit is $23,000. The age-50 catch-up is $7,500. If the last 2024 paycheck has already been processed, that deferral is over. You cannot repair it with an employer wire into a cash balance trust. You also cannot use the 2025 limits on a 2024 check. IR-2024-285 published the 2025 table: deferral $23,500, age-50 catch-up still $7,500, ages 60–63 catch-up $11,250, annual additions $70,000, compensation cap $350,000, defined benefit limit $280,000, IRA still $7,000. None of those 2025 figures is in force until January 1, 2025. The announcement is IR-2024-285. The table it updates is the COLA page.

Notice 2023-62 delayed the Roth catch-up mandate through 2025. It is not in force this week. Do not recode a holiday bonus as a required Roth catch-up. The mandate, when it becomes operational beginning January 1, 2026, will apply to catch-up deferrals of participants whose prior-year FICA wages exceeded $150,000. It changes the 401(k), not the cash balance formula. A Christmas wire does not anticipate it.

Why a round number causes damage

An invented contribution has three failure modes, and they can stack.

The plan may not exist yet. Moving cash into a brokerage account titled in the sponsor's name, or into a trust that has no executed document, is not a pension contribution. It is a transfer with a story attached. The SECURE Act generally permits adoption of a new plan as late as the filing deadline, including extensions. That permission is about the document's effective timing. It is not permission to choose a deposit before the document, the census, and the formula exist. Funding first and designing second produces a number the formula then has to be bent around. Competent actuaries will not bend a formula around a wire that already left the bank.

The number may not be deductible, or may not be the minimum, or may be both too large and still short of a later minimum once the valuation is real. A cash balance credit is actuarial. The $275,000 defined benefit limit for 2024 is a limit on the annual benefit, not a deposit cap and not a deposit target. The IRS states the benefit-limit idea here: defined benefit plan benefit limits. Any owner-level dollar figure in a slide or a calculator is illustrative. Wiring an illustrative figure because it was the only figure on the slide converts a teaching tool into an operational error. The illustrations and the calculator on this site are teaching tools of exactly that kind. They are not instructions for this week.

The census may make the number discriminatory or simply unaffordable once staff credits are included. A deposit sized for the owner alone, in a practice that employs hygienists, associates, or nurses, is not "mostly right." Coverage and nondiscrimination are not corrected by a journal entry in January. If you do not have the census, you do not have a contribution. You have a hope. Read /insights/census-first before you read another funding email. If the staff cost is a cost you will not pay, the plan is not a fit, and the correct Christmas decision is to fund nothing.

There is a fourth, quieter failure. Trust assets have to be invested under fiduciary rules, in a trust that is actually the plan's. A hurried account opening, with the owner's personal risk preferences typed in as the plan's investment policy, is a poor introduction to a multi-year pension. You can open the administrative conversation in January. You cannot un-invest a careless December.

What an actuary's range is, and what it is not

When the facts are ready, the enrolled actuary can often provide a range: a minimum-funding figure, a recommended deposit, and a maximum deductible figure, which are not three names for one number. Your CPA decides what the return can use. You decide what the business can pay without pretending next year will cooperate. Sterling can coordinate the data the actuary needs: census, compensation, entity identification, and asset statements if a trust already exists. Coordination is not certification. If a message this week offers you a "final maximum" without a signed engagement and a census, it is not final.

Do not fill the silence with a placeholder wire "to be trued up later." True-up language is how nondeductible contributions and excise-tax conversations begin. It is better for the trust to receive nothing in December than to receive a placeholder. Nothing can be followed by a correct deposit inside the deduction window and inside the minimum-funding window. A placeholder has to be reversed, recharacterized, or explained, often after the return has already reflected it.

If a plan already exists and the actuary's current valuation already specifies quarterly or other scheduled amounts, pay the scheduled amount. That is not invention. That is compliance with a number you already have. The temptation this week is to add a second, sentimental amount on top "for 2024 taxes." Do not add it unless the actuary and the CPA have both seen it. Extra money in a defined benefit trust is not stored the way extra money in a savings account is stored. It changes the next valuation.

The limits that still govern a 2024 deposit

Say them once, slowly, because holiday email shortens them.

For 2024: deferral $23,000, catch-up $7,500, defined contribution additions $69,000, compensation cap $345,000, defined benefit annual benefit $275,000, IRA $7,000. The cash balance deposit is none of these. It is illustrative until certified, and even then it is a valuation output, not a line from Notice 2023-75.

For 2025, not yet in force: deferral $23,500, age-50 catch-up $7,500, ages 60–63 catch-up $11,250, additions $70,000, compensation cap $350,000, defined benefit annual benefit $280,000, IRA $7,000. Using the 2025 benefit limit to justify a larger 2024 wire is a straightforward mistake. The January note that turns the new column on is /insights/limits-in-force. It is not a permission slip for this week.

Publication 560 describes the employer plans a small business can sponsor. It does not contain a Christmas exception. Form 5500 season for a calendar-year 2024 plan is next summer: generally due July 31, 2025, extendable to October 15, 2025 with Form 5558, filed on EFAST2. Starting January 1, 2025, Form 5558 can be e-filed. None of that filing work is a reason to fund an unknown amount before New Year's Day. The Department of Labor's companion page is Form 5500 filing. Administration of a real plan, after a real document, is the plan lifecycle. Professional fees for a rushed false start are still fees; see fees.

PBGC, staff, and other questions that do not get answered by a wire

Coverage by the Pension Benefit Guaranty Corporation is plan-specific. Many small professional-service employers are exempt when they meet the statutory tests. Many other small sponsors are covered. Wiring a contribution does not create an exemption, and refusing to wire one does not create coverage. If someone is using PBGC as the reason to move money before the office closes, ask them to point to the determination for this employer. The starting page is PBGC coverage guidance. Counsel finishes the analysis. You do not finish it from a bank lobby.

A spouse on payroll, a related billing company, and a hygienist who crossed a thousand hours are also not answered by a wire. They are census facts. If they are unknown on December 22, they will still be unknown on December 26, and the contribution you invent in between will be built on the unknown. Practices that need the longer version of that warning can read /insights/physicians and /insights/dentists in January with a clear head. They should not "get a placeholder in" so that January's reading has something to justify.

Owners who are truly solo, with no employees and no related payroll, still do not get to invent the credit. Age, the interest crediting rate, and the $345,000 compensation cap change an illustrative result. A solo traditional formula and a solo cash balance formula do not produce the same deposit just because both are defined benefit plans. That comparison is /insights/db-versus-cash-balance. It is a January conversation if it has not already happened carefully. It is not a December 23 toggle.

What you may do while the offices are quiet

You may gather documents that do not require anyone to be inventive. The year-to-date payroll registers. The list of entities and their tax classifications. The expected W-2, marked as an estimate. The prior plan documents, if a 401(k) or a SEP already exists. The name and email of the CPA who will sign the return. A sentence about whether profit next year can support a required contribution if this year is not repeated.

You may tell a salesperson, a banker, or a relative that you will not fund a pension on an illustrative number. That sentence is complete. You do not owe them a substitute number.

You may schedule the real meeting for the first half of January, with the actuary's data request as the agenda. You may decline a meeting whose agenda is "pick a number before the 31st." The spring funding briefing, /insights/spring-funding-2024, is where a 2024 deposit belongs once the facts exist. Waiting until spring, inside the dates your CPA confirms, is often exactly right. Waiting is not neglect when the alternative is fiction.

If a check for deferrals is somehow still open, deal with that check and only that check, inside $23,000 and the applicable $7,500. Then stop. Do not let a successful deferral become an excuse to "match it" with an uncertified employer pension deposit in the same sitting.

What to do in the next two weeks

The next two weeks include Christmas and New Year's. The work is restraint, plus a packet.

• Do not wire a pension contribution unless an enrolled actuary has already given you a figure for this plan and your CPA agrees it should move now. A range labeled illustrative is not that figure.
• If payroll is finished, accept that 2024 deferrals are finished. Do not reclassify an owner draw as a deferral in a personal spreadsheet.
• Assemble the census, the entity list, and the compensation estimate. Leave them in a folder for the first January week. Include every related employer and every W-2, even the ones that complicate the story.
• Write two dates at the top of the folder: minimum funding generally September 15, 2025, and the deduction date as your CPA names it under IRC 404(a)(6). If the CPA has not named it, the folder is not ready for a transfer.
• If someone pressures you to fund $275,000, or $280,000, or $69,000 plus either of those, decline. Those are limits of different kinds, and none of them is your deposit.

When the offices reopen, contact Sterling Pension Group with the folder if you want a 2024 design coordinated properly. If you already know the folder would embarrass you, do not fund your way past the embarrassment. The week of Christmas is a good week to leave an invented contribution uninvented.