This can be a very complex issue. I would advise getting better advice then you can get from a chat board.
I work with ESOPs mostly with these kinds of issues. However, I recently worked with a profit sharing plan on this issue.
Only ESOPs are required by law to get an independent stock appraisal from an appraiser.
However, best practice would be for anyone who has non-public traded stock to get an appraisal. The simple reason is you are opening up a lot of possible issues if you don’t. If management sets the value they will have to be able to back up that value if challenge. In years where an HCE, or Key sells stock to the plan, or is paid a benefit if the value is determined to be too high opens one to all kinds of fiduciary issues. You can have Prohibited Transaction problems also.
The firm I work with provides stock appraisals, but there are plenty of people who do that kind of work.
Since you put this topic under the 5500 topic heading if they don’t get an independent appraisal you have to “confess” that fact on the 5500. Seems like an audit flag to me.
