What the Enrolled Actuary signs, and what the administrator does instead.

Owners are introduced to a pension as if it were one professional relationship. Someone "does the plan." The work is several relationships, and the statute is particular about one of them. The funding numbers of a defined benefit plan, including a cash balance plan, are certified by an Enrolled Actuary. The certification is Schedule SB, attached to the Form 5500 series. The person who signs it is enrolled with the Joint Board for the Enrollment of Actuaries. A consultant, a third-party administrator, a CPA, or a financial adviser does not become that person by preparing careful spreadsheets. Sterling Pension Group does not sign Schedule SB. We are a third-party administrator in West Hartford. We coordinate independent Enrolled Actuaries. We are not an actuarial firm. The point of this briefing is to make that sentence operational, so you know who to call when the question is a certification and who to call when the question is the census, the document, or the filing.

The signature on Schedule SB

Schedule SB reports the actuarial information for a defined benefit plan: the target normal cost, the funding shortfall, the minimum required contribution, the assets, the assumptions, and the actuary's certification that the numbers were determined under the law. The Enrolled Actuary signs it. The signature is not a courtesy at the end of a report the administrator wrote. The assumptions, the asset value, the census, and the formula all have to be the actuary's work product, or work the actuary has accepted responsibility for, before that signature goes on the schedule.

For a calendar-year plan, the 2024 Schedule SB travels with the Form 5500 series that is due July 31, 2025, or October 15, 2025 if Form 5558 was filed on time. The filing mechanics are on the IRS Form 5500 corner and the Department of Labor's Form 5500 page. The May briefing on that season is the calendar. This one is the signature. If the actuary has not certified, the return is not done, even when every other schedule is typed.

The same professional is who tells you the contribution range for the year. The minimum required contribution is a funding obligation. For a calendar-year defined benefit plan it is generally due by September 15 of the following year, with quarterly installments for some plans. Miss it, and the excise tax is 10 percent of the unpaid minimum, reported on Form 5330, with an additional tax if the failure is not corrected. The maximum deductible contribution is a tax figure, computed under section 404, and your CPA owns the deduction on the return. In practice the Enrolled Actuary calculates the deductible maximum because it is inseparable from the valuation. The CPA decides whether and how to take it. Treating those as one "number the pension person gave me" is how a deposit, a deduction, and a minimum get confused with each other.

Benefit restrictions under section 436, where they apply, also depend on an actuarial certification of the plan's adjusted funding target attainment percentage. Many small plans are well funded enough that the restrictions never bite. The certification can still be required so that everyone knows they do not bite. That is actuarial work. It is not a percentage the administrator estimates from last year's statement.

The dollar limits the actuary applies in 2025 are the limits in IR-2024-285, collected on the IRS COLA page. The defined benefit dollar limit is an annual benefit of $280,000, not a contribution. The compensation cap is $350,000. How those limits reduce for age or for years of participation is part of the valuation. The IRS describes the benefit limit on its benefit limits page. An illustration that quotes a contribution without an actuary behind it is a sketch. It can be a responsible sketch. It is not Schedule SB.

What a third-party administrator does instead

Administration is the work that makes a certification possible and the work that continues after it. The document has to say what the actuary is valuing. If the pay credit, the interest crediting rate, the eligibility, or the definition of compensation changed, the amendment has to be adopted, and the actuary has to value the plan that exists, not the plan that was discussed. We prepare and coordinate that document work. We do not certify the result.

The census has to be a census. Names, dates of birth, dates of hire, hours, compensation that matches the document, ownership, and related employers are the inputs. A valuation on a guessed census is a valuation the actuary should refuse. Collecting those facts, comparing them to payroll, and sending a file the actuary can rely on is administration. So is telling you that a spouse, a new hire, or a second company has to be in the file before the numbers are meaningful.

The Form 5500 series, other than the actuarial signature, is administration. Participant notices, the summary plan description when it is due, the summary annual report when the plan must provide one, distribution paperwork, loan procedures if the plan allows loans, and the calendar that keeps July 31, September 15, and October 15 from being the same task are administration. The administration service is that list, done every year, not a binder handed to you at adoption. The life of the plan after it exists is mostly the list repeating.

We also translate. Owners should be able to read a hypothetical account statement without pretending it is a brokerage account. They should be able to see that a fixed interest credit and the trust's investment return can differ, and that the difference is a funding item the actuary will recognize next year. Translation is not a certification. If we say a range is illustrative, it is illustrative. When the Enrolled Actuary signs, the range has become a certified minimum and a certified maximum for that valuation. Until then, defined benefit figures in a conversation are planning figures.

Investment selection is not administration and not actuarial certification. The trustee and the investment adviser are responsible for how the trust is invested, within the document. The crediting rate is whatever the document says. A portfolio that does not match the rate is a legitimate design, and it is a funding risk the actuary measures. It is not fixed by asking the administrator to change last year's return.

Why the independence matters

An Enrolled Actuary is enrolled as an individual. The enrollment is the qualification. The actuary may work at an actuarial firm, or in a practice that does nothing else. The actuary should not be asked to certify numbers because a distribution goal, a tax estimate, or a sales illustration needs them to come out a certain way. Independence is what the signature is for. When we coordinate an actuary, we are arranging that professional's work, not employing it as a rubber stamp and not performing it ourselves.

This division also explains the invoices. You should expect an actuarial fee and an administration fee, and they are not substitutes. A year with an amendment, a new participant, or a troubled census is more of both, not a reason to skip one of them. The fees briefing goes through the categories without inventing a price list. Quotes vary because the work varies. A one-participant cash balance plan and a twenty-person combined plan do not ask the same hours of the actuary or of the administrator.

Owners sometimes want a single firm so that the calls are simpler. Simpler calls are a fair wish. They do not collapse the signature. If a firm offers to "handle the actuarial" and cannot name the Enrolled Actuary who will sign Schedule SB, you do not yet have an actuarial relationship. If a firm is an actuarial firm and also administers, you still want to know which person signs and which person runs the census. The labels on the proposal are less important than the name on Schedule SB.

Publication 560 tells a small employer that a defined benefit plan requires an actuary. It does not tell you how to supervise one. Supervision, in a small practice, means giving the actuary true data, reading the cover letter that states the minimum and the maximum, depositing at least the minimum by the funding deadline, and not editing the certified number because the estimated tax payment was built on a different guess.

What this means for a plan you already have

If your 2024 valuation is not finished, the constraint is the actuary's file, not the printer. Final assets, final compensation, and a formula that matches the signed document are the usual missing pieces. Asking the administrator to "just file something" on July 31 does not produce a Schedule SB. Asking the actuary to certify from an incomplete census produces a refusal, or a certification you should not want.

If you are thinking about a new plan for 2025, the Enrolled Actuary should be in the design while it is still a design. A document adopted without a valuation range is a promise without a price. We can coordinate that introduction. We cannot occupy the actuary's seat while we do it. The CPA should be in the same conversation, because a certified maximum that the return cannot deduct is not a result you can use. Section 404(a)(6) timing, reasonable compensation, and the entity type are CPA questions. We will not answer them by enlarging an illustration.

This briefing is not tax, legal, or actuarial advice. It is a description of the seats. If a sentence here conflicts with a certification you have already received, the certification governs that plan year, and the actuary who signed it is the person to ask.

What to do in the next two weeks

Find last year's Schedule SB and read the signature block. Write down the name of the Enrolled Actuary. If you cannot find the schedule, that is the fact to repair first. The Form 5500 for 2024 is due July 31, 2025.

Ask two questions in writing. Ask the actuary whether the 2024 valuation has final assets and a final census. Ask the administrator whether the document the actuary is valuing is the document you signed, including every amendment. If either answer is no, do not spend the next two weeks on investment performance. Spend them on the missing fact.

If you do not have an Enrolled Actuary because you do not yet have a defined benefit plan, do not adopt one on the strength of a contribution sketch with no name attached. Ask us who will certify before you ask anyone what the deduction might be. We will tell you what we do, what the independent actuary does, and what we will not sign.