Pension Actuarial Services
Every number that matters in a defined benefit plan (the contribution, the deduction, the testing result, the rescue plan) comes from actuarial work. This page covers what the firm's actuarial desk does each year, what it does when circumstances change, and why keeping it in-house matters.
Reviewed by Alexander Tecle, MBA, MS Taxation
President & Founder · Verify on SEC IAPD (opens in a new tab)
Reviewed
A clear path to review
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Bring your plan document, valuation and recent filings.
Review
Identify the work, deadlines and questions that need attention.
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A defined benefit plan is a set of promises priced by mathematics, and the actuary is the professional the law charges with pricing them. Every year the actuary values the plan's obligations, certifies the contribution range, checks the IRS maximums, and signs the numbers your deduction stands on. When something changes (profits, census, markets, goals), the actuary re-runs the projection.
Most firms rent this function from a subcontractor their TPA emails twice a year. We run it through our own actuarial desk: the same team that designs a plan values it, tests it, restructures it when it overfunds, and settles it at termination.
On this page
The annual work
Each year the desk runs the valuation cycle. The output is the number your CPA books and the certification your plan files on.
Measure plan liabilities against assets.
Certify the minimum-to-maximum contribution range.
Compute each owner's maximum deductible amount against the 415(b) and 401(a)(17) limits.
Run the nondiscrimination testing that proves the owner-favorable allocation is legal.
Measure funding
The actuary measures plan liabilities against the assets held for participants.
Certify the range
The funding result produces the certified minimum-to-maximum contribution range.
Apply tax limits
Benefit and compensation limits determine each owner's maximum deductible amount.
Complete testing
Nondiscrimination testing confirms that the owner-favorable allocation remains compliant.
The design and event work
Beyond the annual cycle, actuarial work is event-driven. Each item below is the same discipline pointed at a different decision.
Modeling a new plan's contribution ceiling before adoption.
Re-projecting when compensation or census changes.
Amendment math when benefits are raised to absorb surplus or trimmed to ease funding.
Rescue analyses for overfunded plans, including 412(e)(3) restructuring.
Termination calculations: final benefits, surplus strategies, and matching assets to liabilities at the end.
Why in-house changes the experience
Speed and accountability. When your profits shift in June, an in-house desk re-runs the funding range that week rather than at a subcontractor's next batch cycle. When a valuation surfaces a problem, the people who found it are the people who fix it. Because design and valuation share a desk, the plan you were sold and the plan you're administered are the same plan. Our actuary-vs-CPA guide draws the boundary with your tax preparer's role.
Related articles
Employer Requirements and Benefits CalculationAn in-depth look at the requirements for employers offering cash balance pension plans, how benefits are calculated, and who benefits from these plans.
Requirements of 401(k) and Cash Balance Pension PlansUnderstand the specific funding requirements for 401(k) plans and Cash Balance Pension Plans to ensure compliance and maximize benefits for your staff.
Frequently asked questions
Does my cash balance plan legally require an actuary?
Market-invested defined benefit plans require an enrolled actuary's annual valuation and certification. The fully insured 412(e)(3) design is the exception (its guarantees exempt it from the funding certification), though actuarial modeling still drives its design.
My CPA is excellent — why isn't that enough?
Different license, different job. The CPA books the deduction; the actuary produces and certifies it. Neither can do the other's work, and the plans that get in trouble are usually the ones where everyone assumed someone else was watching the pension math.
When should I get an actuarial review outside the annual cycle?
Whenever the ground shifts: profits meaningfully up or down, partners or key staff arriving or leaving, a contribution recommendation that suddenly dropped, a business sale on the horizon, or any plan you've been told is 'overfunded.'
What is a rescue analysis?
A re-projection of an overfunded plan under alternative structures (benefit increases, added participants, or 412(e)(3) restructuring), quantifying how much deductible contribution room each option restores. It is the analysis behind our Pension Rescue service.
Sources
- IRC §430 — minimum required contributions for single-employer plans (opens in a new tab)
- IRC §6059 — periodic actuarial report (Schedule SB) (opens in a new tab)
- IRC §412 — minimum funding standards and 412(e)(3) fully insured plans (opens in a new tab)
- IRC §436 — funding-based benefit restrictions (AFTAP) (opens in a new tab)
Continue reading
Talk with the administration desk
Bring the plan document, the latest Form 5500 and the current valuation. We will tell you what is due, what is late, and what it takes to fix.
This guide is educational and is not individualized tax, legal, or investment advice. Contribution limits and tax rules change annually and depend on your specific situation; figures are illustrative. Consult a qualified professional before acting.