How often must non-marketable employer securities be valued?

[katieinny]

An employer will be permitting participants to invest in non-marketable employer securities. He will have to get a bond equal to the value of the securities if that investment totals more than 5% of the plan assets.

How frequently must the securities be valued? If there are no transactions in employer securities for an entire year is a new valuation required? Can someone provide a code section?

[Kirk Maldonado]

You are getting into a hornets' nest, raising qualification, prohibited transactions, and securities laws issues.

Unless the client is willing to spend a lot of money on this issue and is willing to accept a level of risk that cannot be eliminated, they shouldn't pursue this issue.

[katieinny]

Yes, we agree (and have disclosed to the employer) that there are risks involved in offering this type of investment in a plan.

I haven't been able to find anything that specifically says how often the asset must be valuated. The issue seems to be based on what would be prudent for this type of investment. I wanted to see if other practitioners are of the same opinion.

[mbozek]

Rev. Rul 80-155 requires annual valuation of assets in a DC plan on a consistent basis order to determine the value of participants accounts. The only exceptions are LI policies and mutual funds.