Should employer revalue?

[John A]

A defined contribution plan defines Valuation Date as "the last day of the Plan Year or such other date as agreed to by the Employer and the Trustee on which Participant accounts are revalued ...". The Employer has always paid distributions based on the last day of the preceding plan year. A participant with a very large balance (much larger than most other participants) is threatening to sue the Employer if the Employer does not revalue his account shortly before making his distribution. What are other TPA's advising their clients in this situation? Is anyone aware of actual court cases similar to this? (Note: I posted this same question on the Retirement Plans in General message board - I wasn't sure which place was more appropriate).

[Guest]

what is he threatening to sue the employer for-

following the terms of the document?!

if this employee was an HCE and you revalue the assets, you are going to have a discrimination issue, since NHCEs never had similar treatment.

yes, it could be revalued, but again, according to the document, doesn't have to be.

Maybe the participant could be charged for an additional val done???

[John A]

Thanks, Tom. I appreciate the answer. However, if the employer decides to revalue anyway (despite being advised against it), what steps do you think should be taken? Would all participants need to be notified that the plan had been revalued? Should the employer have some type of written policy drafted about why the decision was made to revalue and/or under what circumstances they might revalue in the future? Could the participant actually be charged for any or all of the costs associated with the revaluation? How could the Employer best protect themselves against nondiscrimination issues?

[Guest Dook]

All indicators are negative on an interim valuation of the plan, unless it can be shown that to do so would be to the benefit of the majority of remaining participants, in particular the NHCEs. This was the reasoning that some periodically valued plans used following the crash of '87. Many large balance participants called for a distribution following the crash, based on pre-crash valuations. NOT to re-value would have been to the significant detriment of the remaining participants. Not that that was the greatest argument either, but it's a whoile lot better than the argument to re-value now in this situation.

Obviously, anything put into writing is subject to greatest scrutiny and interpretation. I vote "bad idea".

Any written request by the Trustee or Administrator should be non-specific. Charging that participant is risky as it fingers who wanted the re-valuation, and there is really no basis for passing a general plan expense to one participant.

Sorry I don't have a whole lot of answers or specific direction, but that's what happens when you try to apply "fair" rules to an unfair game.