Yes. If you’re setting up a Cash Balance (CB) plan for your business, the first person you need is an enrolled actuary, because the plan can’t legally operate without one.

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A CB plan is a defined benefit plan, and every defined benefit plan needs an enrolled actuary to certify its actuarial valuation and minimum funding requirements every year. That certification is the Schedule SB, part of the plan’s annual Form 5500 reporting, and it tells the IRS and Department of Labor that the plan’s contributions and liabilities were calculated correctly. Without an enrolled actuary’s signature on the Schedule SB, the plan’s annual reporting is incomplete and the plan is out of compliance.

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So what is an enrolled actuary? It’s a federal license issued by the Joint Board for the Enrollment of Actuaries, which was created under ERISA by the Treasury Department and the Department of Labor. The license authorizes an actuary to perform the actuarial work required for U.S. pension plans. To earn it, an actuary has to pass three exams and complete three years of pension actuarial experience.

Here’s what an enrolled actuary does for a small CB plan, from day one until the plan terminates.

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Designing the Plan

Before a CB plan exists, the actuary figures out what’s possible. You share information about the business, the owners, any employees, and what you want the plan to accomplish. The actuary then calculates how much the business can contribute for each owner and confirms those contributions will be deductible. Contribution limits depend mostly on age and wages, and you can see our estimates here: www.corvusactuaries.com/cashbalancelimits

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If the business has employees, the actuary designs a CB/401(k) combo plan. The owner receives the large CB contribution, and employees receive enough across three sources for the plans to pass nondiscrimination testing: a CB contribution of 1.5% to 2.5% of wages, a 3% safe harbor contribution in the 401(k), and a profit sharing contribution of 2% to 4% of wages. Between the three, employees receive 6.5% to 9.5% of wages in employer contributions, well above what most small businesses offer.

 

In the combo plans we design, 85% to 95% of the total employer contribution typically goes to the owner. The alternative is sending 37% to 48% of those profits to federal and state tax agencies. For a highly profitable small business, the math is hard to argue with.

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Once the business decides to move forward, the actuary prepares the plan document, the legal document that establishes the plan and sets out the provisions it must follow. After the business adopts it, the actuary coordinates with the business’s financial advisor to open the account that holds the plan assets.

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Administering the Plan

Every year, the actuary prepares and certifies an actuarial valuation report. The report lays out the plan provisions and actuarial assumptions, lists each participant and their cash balance account, and compares the value of plan assets to the value of plan liabilities. That comparison produces the contribution range for the year: the minimum required contribution and the maximum deductible contribution.

 

Both ends of that range matter. Fund below the minimum and the business owes a 10% excise tax on the shortfall, rising to 100% if it isn’t corrected. Fund above the maximum and the business loses the deduction on the excess.

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For plans with employees, the actuary also runs the nondiscrimination testing that confirms the plan isn’t unfairly favoring the owners. That testing determines how much profit sharing employees need to receive in the 401(k) plan.

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Once the business has made its contributions, the actuary prepares the annual Form 5500, the informational return that reports participant counts and plan financial information to the IRS and DOL. The actuary also prepares and signs the Schedule SB, which reports the valuation results and shows the plan met its minimum funding requirement for the year. Along with the 5500, the actuary prepares the Summary Annual Report for participants and certifies the plan’s AFTAP (adjusted funding target attainment percentage), which measures how well funded the plan is and whether any restrictions on lump sums or benefit increases apply.

 

If the plan is covered by the PBGC, the actuary also prepares the annual PBGC premium filing, which calculates the premium the plan owes, and the Annual Funding Notice that participants receive in place of the Summary Annual Report. Plans that cover only owners, and plans sponsored by professional service firms that have never had more than 25 active participants, are generally exempt from PBGC coverage.

 

When an employee leaves, the actuary calculates their final benefit and prepares the distribution forms, which show the value of each payment option available to them. The participant chooses how to receive the benefit and makes their tax elections, such as rolling it over or taking a taxable distribution.

 

Consulting on the Plan

This is the part that separates a good actuarial firm from a form-filler. Your business will change. Profits swing, employees come and go, and eventually the plan will terminate. Each of those events has consequences inside the plan.

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In my experience, the expensive problems, like a plan that becomes overfunded with no good way to get the money out, almost always trace back to a business owner who didn’t have an actuary actively watching the plan. When Corvus consults on a plan, we’re looking ahead: adjusting contribution credits when income changes, planning distributions, and mapping the exit before you need one.

 

The Takeaway

A CB plan can be one of the most powerful tax and retirement tools available to a profitable small business. But it’s a pension, and pensions run on actuarial math. The enrolled actuary isn’t overhead. They’re the person who keeps the plan legal, keeps your deductions intact, and keeps surprises off your desk.

 

If you're a solopreneur, own a professional services firm, or own a highly profitable closely held business and you're wondering whether a CB plan makes sense, reach out at corvusactuaries.com/contact.

 

Our office never charges for new plan designs or proposals. We'll run the numbers and show you what's possible.

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Last Updated: 10/22/2026