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Switching to asset smoothing (avg.)

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Hi,

2017-56 states that one of the three asset valuation method changes  automatedly approved is:

(2) A change in asset valuation method to a method that determines the value of plan assets as the average of the fair market value on the valuation date and the adjusted fair market value of assets determined for one or more earlier determination dates, as described in § 430(g)(3)(B) and the regulations and other published guidance thereunder.  (See § 1.430(g)1(c)(2) and Notice 2009-22, 2009-14 I.R.B. 741.)  The asset value determined under the method must be restricted so that it is not greater than 110% and not less than 90% of the fair market value, as described in § 1.430(g)-1(c)(2)(iii). 

Based on the above, a change to using a 3 year average as the value of the assets for the val (ie a 3 year average calculated  based on the fair market value of the assets as of the current val date plus the prior two years fair value of the assets)  would be automatically approved?  Thank you.

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The asset valuation method described in the paragraph you quoted is not simply the average of the FMV for the last 3 valuation dates. If you want to proceed, I suggest that you read Notice 2009-22 very carefully first.

Assuming that you are using the method correctly, then yes, there would be automatic approval for the change under RP 2017-56 provided that the asset valuation method was not changed in any of the four preceding plan years and that none of the restrictions in Section 6 apply.

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C.B. Zeller, thank you very much and thank you for the heads up regarding 2009-22. This plan does not make contributions and the average will not need to take into account the contributions. Thank you. Your time and insight is much appreciated.

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