Unit vs. Cash

[Guest Jhagan]

I am trying to decide how to set up our first plan that has more than one investment option. Since our other plans all have one investment option - we have always used the cash basis. This plan has many funds to utilize and we receive individual statements from the investment group showing the share price/value of each transaction for each participant. There is no reports however for the plan as a whole - so we want to utilize Quantech to keep these accounts. Quantech support has said that we can do it either by cash accounts or unit accounts. They say the unit method is more tedious and we would be duplicating the work for no reason. However, under the cash method it seems to me that you have to always back into the earnings posting.

Do most on Quantech utilize the cash method? If so, how do you calcuate the earnings if it is not reported to you by the investment company? When is it appropriate to use the unit method - daily valuations only?

This plan is being used as a "Test pilot" to see if we have the staff to go to a participant directed product - so I am not as interested in what is the best way for this plan, but what is best in general.

[Guest ClovisJayc]

I would qualify this as a non-daily valuation plan - valuation is handled by the investment company. In your case, I would probably utilize a cash fund, lay all the earnings out in a spreadsheet, then import them.

Unitization is more efficient for daily valuation plans, generally.

Be sure to ask the investment company for electronic downloads. Otherwise this type of multi-tasking is very difficult to do across a small number of plans. Quantech's optimum utility is in true daily valuation recordkeeping.

[Guest John McCrary]

I would use the cash approach. We use it for plans similar to what I think you are looking to do. We have had no problems doing it this way on Quantech.

Several things to consider:

You will have to start running splits to send to the funds.

Your accounting time will increase as you will have to spilt out each funds performance (gains/losses).

You will have additional set up time when you orginally set up the particiapnts investment elections and re-align your funds. This will also become a periodic event (depending if your quarterly, semi-annual or annual).

Your labor time and costs will increase with self-directed plans. They are not hard to do, just a little more labor intensive.

There are a lot of things to consider before going to self-directed account.

We do alot of this kind of work (we do alot of outsourcing for banks and investment groups), so if you have anymore questions, please feel free to e-mail me or call me at 904-249-9171.

[This message has been edited by John McCrary (edited 02-21-2000).]

[Guest Jhagan]

When you refer to importing the earnings from a spreadsheet - you have to have the transaction import module right?

We do not have this module. Do I have to figure out the earnings by just taking the ending balance last period + contributions then manually reconciling back to the ending balance (difference being the earings?). This sounds like alot of work to do on the Cash basis - but the unit basis would be even more? Still not sure what to do.

[Guest John McCrary]

Do you have the Census DER option? If so, that is the one you need. They have an import module, but it does things like the Manulife downloads. If you can download census information (and deferrals and match) directly into Quantech from a spreadsheet, you have the options that I think you will need.

I have an Excel spreadsheet that I use to balance the assets, and it will work on a cash basis or a share basis (which ever you choose) if you would like to share it. Cash basis would be easier for you to do than share accounting (just my opinion).

If your coming to the May Users Group meeting in Memphis, I would be glad to sit down with you and go over the asset sheet and see if we have anything that might be of help.