What Is Required for Schedule SB of Form 5500?

Schedule SB is an actuarial information schedule attached to the Form 5500 series of returns. Its primary function is to report detailed actuarial data for specific types of pension plans to government agencies like the Internal Revenue Service (IRS) and the Department of Labor (DOL). This reporting is mandated by the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code. The schedule is used to demonstrate that a plan complies with the minimum funding requirements established by the Pension Protection Act of 2006.

The information presented on Schedule SB provides a snapshot of the plan’s financial health. It is a technical document that must be completed and certified by an enrolled actuary, who attests to the accuracy of the calculations and the reasonableness of the assumptions used. This certification ensures the data is reliable for regulators monitoring the plan’s ability to meet its future obligations to participants.

Determining if Schedule SB is Required

The requirement to file Schedule SB applies specifically to single-employer and multiple-employer defined benefit pension plans that are subject to the minimum funding standards of the Internal Revenue Code. These are plans where an employer commits to providing a specific retirement benefit to employees, calculated based on factors like salary and years of service.

Certain types of plans are exempt from this filing requirement. Governmental plans and church plans that have not elected to be covered by the provisions of ERISA are not required to file Schedule SB. Plans that are fully funded exclusively through insurance contracts, often referred to as 412(e)(3) plans, are also exempt.

One-participant defined benefit plans, while still needing to have the schedule prepared and certified by an actuary, may not need to attach it to their Form 5500-EZ filing. Instead, the plan administrator is required to maintain the completed and signed Schedule SB in their records.

Information and Calculations Needed for Completion

To complete Schedule SB, an enrolled actuary must gather detailed plan and participant information. This involves compiling a census of all plan participants, categorized into active employees, retired individuals receiving benefits, and former employees who are entitled to future benefits. For each participant, the actuary needs data points such as date of birth, date of hire, years of service, and compensation history. The actuary also requires detailed asset statements to determine the fair market value and the actuarial value of plan assets as of the valuation date.

With the necessary data, the enrolled actuary performs several calculations that form the core of Schedule SB.

• The “Funding Target” is the present value of all benefits accrued by participants as of the beginning of the plan year.
• The “Target Normal Cost” is the value of benefits expected to be earned by participants during the current year. These figures are central to assessing the plan’s liabilities.
• The “Minimum Required Contribution” is the amount the employer must contribute for the plan year. This is determined by a formula that includes the Target Normal Cost and any shortfall amortization installments, which are payments required to fund any gap between the plan’s assets and its Funding Target over a seven-year period. The calculation also considers any funding waivers granted by the IRS.
• The “Adjusted Funding Target Attainment Percentage” (AFTAP) is the ratio of the plan’s assets to its Funding Target, with both figures adjusted for any existing credit balances. This percentage is significant because it can trigger restrictions on the plan’s ability to pay lump-sum distributions or adopt amendments that would increase benefits if the AFTAP falls below certain thresholds, such as 80% or 60%.
• The plan’s credit balances, known as the “Prefunding Balance” and “Funding Standard Carryover Balance,” are also tracked. These balances represent contributions made by the employer in prior years that exceeded the minimum requirements. The employer can elect to use these balances to offset the current year’s minimum required contribution.

Completing the Schedule SB Form

After the actuary performs all necessary calculations, the results are entered onto the Schedule SB form. The process begins with basic identifying information at the top of the form, including the plan name, employer identification number, and the plan year.

Part I of the form is where the actuary reports the summary of the plan’s funding status. This includes entering the market value and the actuarial value of the plan’s assets. This section also requires the disclosure of participant counts, broken down by category, such as active, retired, and terminated vested participants.

Part II focuses on the reconciliation of the plan’s credit balances. The actuary enters the beginning-of-year balances for the Funding Standard Carryover Balance and the Prefunding Balance. Any elections by the plan sponsor to use these balances to offset the minimum funding requirement are recorded here.

The core liability and contribution figures are entered in subsequent parts. Part III is where the actuary inputs the calculated Funding Target and Target Normal Cost. Part IV is dedicated to the Minimum Required Contribution, where the Target Normal Cost and any shortfall amortization charges are detailed.

Part V requires the disclosure of the actuarial assumptions used to determine the Funding Target and Target Normal Cost, including the specific interest rates and mortality tables. The final section is the “Statement by Enrolled Actuary,” where the actuary must sign and date the schedule, provide their enrollment number, and certify that the information is complete and accurate.

Filing and Post-Filing Procedures

The completed and certified Schedule SB is not filed as a standalone document but must be attached to the plan’s annual Form 5500 or Form 5500-SF. The entire package is then submitted electronically through the Department of Labor’s EFAST2 (ERISA Filing Acceptance System).

The deadline for filing the Form 5500 and its attached schedules is the last day of the seventh month following the end of the plan year. For a plan operating on a calendar year, this deadline is July 31st. Plan sponsors can obtain an automatic two-and-a-half-month extension by filing Form 5558 on or before the original due date, which pushes the final deadline to October 15th for a calendar-year plan.

The enrolled actuary’s certification of the plan’s AFTAP must be provided to the plan administrator. If the AFTAP triggers benefit restrictions, the plan sponsor must notify participants of this status. Once the Form 5500 package is submitted, the filer receives an electronic status update confirming its acceptance. The information on Schedule SB may then be reviewed by the DOL, IRS, or the Pension Benefit Guaranty Corporation (PBGC) to monitor the plan’s funding status and ensure compliance.