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Profit Sharing valuation date


Zimkap

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Looking at a possible takeover plan.... it is a Profit Sharing Plan no deferrals comingled asset account. The plan was always valued on December 31 and document reflects that.

However in early 2020 due to the major decrease in assets, the plan was run quarterly 3/31/2020 so participant distributions would reflect the reduced assets rather than paying out the 12/31/2019 account balances. The prior servicer never ran the rest of the quarters for 2020 and instead ran the 12/31/2020 report for the period 4/1/2020-12/31/2020. Document was never amended to reflect the change to quarterly.

This is the first time I have seen this situation, what are the implications for not valuing the all the quarters for 2020 and going back to annual? and what about the lack of amendment to quarterly?

Any help is appreciated

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If you have a copy of the plan document read it very carefully and see if it authorizes the Plan Administrator to do interim valuations at their discretion. Most plans documents allow for it and it is just for that kind of situation.  

There is a good chance they are all good.   But it is very dependent on how the plan document was written before they did the interim valuation.  

If you search this forum you will find a bunch of threads on this very topic from that time period.  That might help you get more background on the topic and the issues people were talking about back as Covid started to hit the markets. 

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1 hour ago, ESOP Guy said:

read it very carefully

Always the first and best advice - RTFPD! (Would probably significantly reduce the number of questions we see in this forum.)

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services

kprell@bpas.com

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