Distributions in a "Standard" Profit Sharing Plan

[Guest jrf1]

I am working on a plan that our firm took over earlier this year. It was a Trustee directed Profit Sharing Plan. It was run on a fiscal year end 11/30. There are several former participants that have requested their benefits, and from anything that I can see, other than the former TPA's distribution forms, these participants are entitled to their vested balance at 11/30/02. Of course the market has dropped since then so the account balances for these individuals is considerably lower than it was at 11/30. What am I missing here? Can I distribute just their current vested account balance or does the plan have to make up for the losses taken to their accounts, which would in turn penalize the pther participants in the plan.

[david rigby]

Not sure I understand your question. Is it possible that you have some typos in your posted facts?

We have not reached 11/30/2002, so no one knows what that balance will be. How do you know there are losses at 11/30/2002?

Probably, the timing of any distribution is based on the terms of the plan. In a DC plan, seems pretty unlikely that the plan will "make up for the losses".

[Guest jrf1]

Yes, I did have a typo, I meant 2001, not 2002.

[JanetM]

Sounds like typical balance forward accounting. Look in the document and see what the valuation cycle is. Annual valuation means they get the balance as of 11/30/01 - the most recent valuation date. Valuations could be quarterly, monthly or daily.

[RTK]

When you look at the document, also look for any language that specifies the valuation date to be used. I have seen some balance forward documents that provide that the distribution is to be made and valued as of the valuation date following the date the participant applies for the distributions.

[Lynn Campbell]

See if the document permits an "interim" valuation. Some documents permit this at the discretion of the Trustee. This may be the fairest way to pay these participants off, due to the market drop since 11/30???