Defined Benefit Actuary & Cash Balance Actuary: Your Guide to Pension Expertise
This article has been updated for 2025.
The Defined Benefit Plan Actuary
If you sponsor a Defined Benefit Plan or a Cash Balance Plan, you’ll need a qualified actuary. A Defined Benefit actuary (sometimes called a pension actuary) ensures your plan is properly designed, funded, and compliant with IRS and Department of Labor rules.
In this guide, we’ll explain:
- What a Defined Benefit Plan actuary does
- How Cash Balance actuaries support plan sponsors
- Why credentials like Enrolled Actuary (EA) matter
- How to choose the right actuary for your retirement plan
Table of Contents
- What Is a Defined Benefit Plan Actuary?
- Defined Benefit Plans Explained
- What Is a Cash Balance Actuary?
- Core Responsibilities of Pension Actuaries
- Actuarial Credentials: EA, ASA, FSA
- Do You Need a Defined Benefit or Cash Balance Plan Actuary?
- FAQs
- How Saber Pension Helps
What Is a Defined Benefit Plan Actuary?
A Defined Benefit Plan actuary is a pension specialist who designs, values, and monitors retirement plans that promise employees a guaranteed benefit at retirement.
Actuaries calculate:
- How much an employer needs to contribute each year
- The long-term liability and funded status of pension benefits
- Whether the minimum funding requirements are satisfied
Put simply, a Defined Benefit actuary ensures your plan is sustainable, tax-efficient, and legally compliant.
Defined Benefit Plans Explained
A Defined Benefit Plan provides employees with a predictable benefit at retirement, often based on pay and years of service.
Example:
If a plan promises 2% of pay per year of service, an employee earning $100,000 annually with 10 years of service could receive $20,000 per year for life.
All Defined Benefit Plans must offer a lifetime annuity; small pension plans usually also allow a lump-sum rollover to an IRA.
What Is a Cash Balance Actuary?
A Cash Balance Plan is a type of Defined Benefit Plan. However, its formula structure differs from a traditional Defined Benefit Plan.
In a Cash Balance Plan:
- Participants receive annual pay credits (e.g., $10,000 per year)
- These balances grow at a stated interest crediting rate (e.g., 5%)
- At retirement, participants may take a lump sum or annuity
Unlike a 401(k), these balances are tracked on paper—the Cash Balance actuary ensures pooled plan assets are sufficient to cover promised benefits.
Core Responsibilities of Pension Actuaries
1. Plan Design
Crafting a plan structure that aligns with the employer’s goals, employee demographics, and tax strategy.
2. Funding Calculations
Determining annual contributions. Defined Benefit and Cash Balance Plans allow a contribution range, giving business owners flexibility.
3. Valuations & Compliance
Certifying plan liabilities, preparing Schedule SB for Form 5500, and issuing participant notices.
4. Risk Management
Modeling different economic, demographic, and investment scenarios to protect long-term sustainability.
5. Regulatory Guidance
Helping employers navigate IRS rules, ERISA regulations, and PBGC requirements (for larger plans).
Actuarial Credentials: EA, ASA, FSA
Not all actuaries are alike. For retirement plans, credentials matter:
- Enrolled Actuary (EA) – Required designation to certify Defined Benefit and Cash Balance Plans.
- Associate of the Society of Actuaries (ASA) – Demonstrates advanced actuarial training.
- Fellow of the Society of Actuaries (FSA) – The highest actuarial credential, covering how finance, economics, investments, and risk management relate to pensions.
Do You Need a Defined Benefit or Cash Balance Plan Actuary?
Yes. Almost every pension plan requires an actuary to:
- Calculate the permissible contribution range and the plan’s funded status
- Ensure compliance with pension law
- Support plan sponsors with IRS and PBGC filings
- Provide strategy to maximize tax deductions and retirement benefits
When selecting an actuary, look for:
- Experience with small business retirement plans
- Ability to communicate clearly without jargon
- Flexibility in plan design to fit your objectives
FAQs
A Defined Benefit Plan is a type of retirement Plan. Defined Benefit Plans allow you to make very large tax-deductible contributions. In fact, you can contribute as much as $100k to $250k+ per year.
You can payout up to $3.6 million at age 62. If your spouse is employed in the business, you may be able to pay out another $3.6 million! An actuary calculates the annual contributions to fund retirement benefits, which may be as high as $100k to $250k+ per year.
An actuary designs your Plan to meet your target retirement benefit and objectives. Each year, the actuary calculates the level of contribution you need to fund the benefits. At retirement, the Plan pays your benefit, which you can rollover to an IRA.
Yes, Defined Benefits can be rolled over to an IRA. This continues the tax-deferred growth of your Defined Benefit.
How Saber Pension Helps
At Saber Pension, we specialize in both Defined Benefit Plans and Cash Balance Plans. We provide:
- Plan design tailored to your retirement and tax objectives
- Annual funding calculations and contribution strategies
- Regulatory compliance and filings
- Ongoing actuarial and TPA services under one roof
Whether you need a Defined Benefit actuary or a Cash Balance actuary, we ensure your plan is designed for maximum tax savings, long-term security, and compliance.
Contact us today to connect with a Defined Benefit Plan actuary and see how much you could save with the right plan design.
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