Schedule SB in plain English

Two weeks ago the subject was the signature on the 2025 Form 5500. The page owners actually fear is the one they did not sign. Schedule SB is the actuarial information schedule for a defined benefit plan. A cash balance plan is a defined benefit plan, so if you sponsor one, this schedule is attached. An independent Enrolled Actuary signs it. You do not. You are still supposed to understand the few lines that change what you must wire, what you may not pay out, and what the return is claiming. This is that reading, in plain English, without pretending a briefing can replace the certification.

Sterling Pension Group LLC in West Hartford is the third-party administrator. We are not an actuarial firm. We do not certify Schedule SB. The enrolled actuary does. This briefing is not tax, legal, or actuarial advice. If a line on your draft disagrees with this explanation, the draft and the actuary win. Send the question back before you treat a general description as your result.

Why this page exists

Defined benefit plans promise a benefit. The promise has to be funded on a statutory method. Schedule SB is how that funding is reported to the government each year. The IRS describes the annual-report system in its Form 5500 corner. The Department of Labor describes the filing from the employer side on its Form 5500 page. Neither page translates your schedule. Both pages are why "we keep the valuation in the office and skip the attachment" is not a method.

The cash balance statement participants receive is a different document. It shows a hypothetical account. The account went up by a pay credit and an interest credit, and it went down by any distribution. That statement is a communication of the benefit. Schedule SB is a measurement of the plan's funding target and of the contribution the law requires. The interest rate in the document, which grows the hypothetical account, is not the same object as the interest rates the actuary uses to discount liabilities for minimum funding. If the two pages showed the same dollar, something would be simplified to the point of being wrong. The defined benefit overview is the structural reason. The cash balance overview is the communication reason. Keep both in your head while you read, and do not force them to match.

The lines that decide the wire

The funding target is the present value of benefits the plan has already promised, measured under the statutory rules. Target normal cost is the present value of the benefits the plan is promising to add this year. Assets are what the trust holds, sometimes averaged or otherwise smoothed if the law and the method allow it, and sometimes marked closer to market. The difference between the funding target and the actuarial assets, handled through the shortfall rules, drives much of the minimum required contribution. You can hear all of that as: what we already owe, what we are adding, what we have, and what we still have to put in.

The line to find with your finger is the minimum required contribution. That is the plan-year number the enrolled actuary is certifying. It is not an illustrative cash balance deposit from a sales page. Those sketches are labeled illustrations because there is no flat IRS cash-balance contribution cap. The certified minimum is a different object, produced from this plan's data. For a calendar-year plan, the 2025 minimum is generally due September 15, 2026, which is eight and a half months after the plan year. If the plan carries a funding shortfall, quarterly installments may have been due earlier, often April 15, July 15, October 15, and January 15. Quarterlies are plan-specific. A well-funded small plan may not owe them. A plan that owed them and missed them has a funding problem that is already in the past by the time you read a May draft. Ask, in one sentence, whether quarterlies applied to 2025 and whether they were paid.

The deduction is a different clock. Employers often deduct a contribution for the tax year if it is deposited by the due date of that year's return, including extensions. Your CPA applies that rule to your entity. A partnership, an S corporation, and a C corporation do not share one extended due date. September 15, 2026 can be both the minimum-funding date and, for some entities, an extended return date. The coincidence does not make them the same rule. A deposit on September 14 can satisfy funding and still be in the wrong tax year if the return was not extended and the CPA cannot place it in 2025. A deposit the CPA likes for the deduction can still be late for funding if it arrives after the minimum-funding date. Publication 560 separates plan types and deduction concepts for small businesses. It does not compute your Schedule SB.

Contributions get credited to a plan year. A wire in February 2026 might belong to 2025. A wire in November 2025 might have been the last piece of 2024. The schedule's contribution lines should agree with the trust report by date and by the year the actuary was told to credit. This is the reconciliation the owner can actually do. You know when you authorized the transfer. The actuary knows which year the law allows it to count toward. If those stories diverge, the schedule is not finished.

The funded percentage and the restrictions you can feel

The adjusted funding target attainment percentage, usually called AFTAP, is the certified ratio that can restrict the plan under section 436. You do not need the algebra. You need the thresholds the statute actually uses. If the certified percentage is under 80 percent, lump-sum payments and certain benefit increases are restricted. If it is under 60 percent, benefit accruals generally freeze. There is a band between those figures with partial limits on lump sums. The exact operation depends on the certification, on any prior-year carryover the law allows, and on whether the actuary has certified in time. A late certification can itself restrict the plan. That is a reason to answer the actuary's census questions in May rather than in August.

Restrictions are not a suggestion that you invest more aggressively so the percentage looks better. Assets are measured by rules, and liabilities move with interest rates you do not set. Writing a larger check is the funding answer. Changing the portfolio in a panic is a different subject, and it can make next year's percentage worse. The investing briefing belongs with the trustee. The schedule belongs with the actuary.

If the draft shows a percentage comfortably above 80 percent, say so out loud and file the sentence. If it does not, do not promise lump sums in a sale, a retirement, or a layoff until the actuary says the restriction allows them. The plan lifecycle after the plan exists includes these constraints. They are not only a termination-year problem.

What the actuary is using, and what you do not get to edit

You will see interest rates and a mortality table. Minimum funding uses a yield-curve structure set out in the statute and in IRS guidance, sometimes with smoothing and corridors the plan has elected. Those elections are document and funding-method choices, made within ranges the law permits, and they are sticky. You do not change the discount rate on the signature page because this year's contribution feels high. An owner who wants a different method is asking for a plan-level decision with the actuary, effective when the law allows a change, not for a pen amendment on a filed form.

Cash balance interest credits are still the document's rate. A 4 percent credit, or a credit tied to a Treasury rate, grows the hypothetical account all year whether the funding segment rates are higher or lower. That is why a year can feel "overfunded" on the statement and still show a required contribution, or the reverse. Neither feeling is the schedule. The $290,000 defined benefit limit for 2026, and the $280,000 limit that applied in 2025, cap the annual benefit the formula may promise. They are described on the IRS benefit limits page. Schedule SB for the 2025 year is about 2025's promise and 2025's assets. Do not "update" it to the 2026 dollar limit to make the narrative sound current. The 2026 limits, including the $24,500 deferral and the $72,000 additions cap announced in IR-2025-111 and Notice 2025-67, govern a different year. The cost-of-living table keeps the years from blurring.

At-risk rules can force a more expensive measurement. They generally involve large underfunded plans, not a four-person professional practice. If a preparer mentions at-risk status, ask why. If they do not, do not go looking for it as a hobby. Shortfall amortization bases, on the other hand, are common. They are the installments that pay down an unfunded target over a statutory period. A loss, a new benefit, or a change in rates can add a base. A gain can reduce future ones. You will see them as a series of charges rather than as one intuitive number. The question to ask is whether this year's minimum includes a sizable installment from an old loss, because that installment will not vanish just because 2026's practice income is softer.

Your half of the certification

The actuary certifies that the methods and assumptions satisfy the law and that the figures are consistent with the data received. The data are yours. Dates of birth, dates of hire, hours, compensation, ownership, and the assets are not actuarial judgments. A wrong date of birth is not a conservative assumption. It is a wrong date. Owners reviewing Schedule SB sometimes focus on the interest rate and ignore the census attachment. Reverse that. Confirm the people and the pay. Let the actuary own the discount rate.

Compensation on the schedule should follow the document and the statutory cap that applied for that year. For 2025 the cap was $350,000. For 2026 it is $360,000. An owner who took a distribution from an S corporation instead of wages cannot repair the schedule by asking the actuary to use the K-1. The wage briefing is the longer version. Schedule SB will not see a distribution the plan is not allowed to count.

The actuary's signature block shows the enrollment number. That number is the point of the independence. A third-party administrator can coordinate the data, the document, and the filing. We cannot rent the signature. If a draft arrives with the schedule unsigned, it is a draft. The fees page describes who does which piece so the invoice and the signature are not a surprise in the same week.

PBGC coverage does not change how Schedule SB is computed, but it changes what else is due. Coverage is plan-specific. Many small professional-service plans are exempt. Not all. Premiums, if they apply, are not reported into existence by Schedule SB and are not satisfied by paying the minimum contribution. The PBGC's coverage page is the starting reference if you have never been told, in writing, which side of the line you are on.

What to do in the next two weeks

Get the draft Schedule SB and the participant data the actuary used. Check every date of birth and every compensation figure against payroll. Check the asset value against the December 31, 2025 trust statement. Write down the minimum required contribution and the date it is due.

Ask one funded-percentage question: is the certified AFTAP at least 80 percent, and do any benefit restrictions apply. Ask one timing question: were quarterly contributions required for 2025, and were they made. Ask the CPA, not the actuary, which tax year is supposed to receive the deduction if you fund by September 15, 2026.

Then send the exceptions, not a reread of the whole schedule. The items that matter are a person missing from the data, a deposit credited to the wrong year, a minimum you cannot pay, or a restriction nobody mentioned. The rest of the page is the actuary's work, and it is supposed to stay that way.