Share Price in Statement Different

[Guest JetService]

I received a quarterly statement for my Schwab 401(k) and notice that the share price listed on the 'Snapshot' for a particular part of the plan is considerably lower than the actual price of the stock. It is listed at $13 per share on the document when the NASDAQ price (as of today) is $48. This statement was for the end of the year and the share price has been no where near that low for a long time.

What I'm trying to do is calculate my plan value as the stock price rises and falls. I'm guessing its not that simple. Can someone please explain what this significantly lower share price applies to? Thank you!

[Demosthenes]

It may be that the plan is using an accounting method sometimes known as unitized or equivalent share accounting. If that's the case, the fund is actually a mix of shares and cash which buys and sells units based on a unit value that fluctuates based on the change in share price and value of any uninvested cash. The nuts and bolts of unitized accounting are too long for a message board but your Plan Administrator or Schwab should be able to provide explanations and illustrations.

Although this method of accounting has become less common as recordkeeping and trading systems have become more sophisticated, it is still used and can have the advantage of lower administrative costs. The most visible disadvantage is the one your already seeing, the unit value and share price are not equal to one another and it's difficult for participants to track changes in value.

[Guest JetService]

FWIW, this was not a mutual fund but rather a single stock listed on NASDAQ. The statement share price is showing almost exactly one-third of the market price. I can call Schwab, but I didn't know if this a typical thing. Thanks for your reply!

[Guest bostonborn]

it definitely sounds like someone is unitizing. We have plenty of these, for instance, an employer stock in one of our plans. The stock is somewhere around $20 per share on the market, but in the plan, we unitized. We started out with a share price of $10 (could have used anything, really).

Participants call me about this all the time, it is a definite disadvantage of unitizing...but a necessary design.

Does your plan offer rates of return on the web for your account?

[Guest JetService]

Yes it does

[RCK]

If the rates of return are about what you'd expect, and your account moves on a daily basis in lockstep with the underlying stock, then you are certainly looking at unit accounting. We do that with most of our plans to allow a low (2-3%) cash position for liquidity purposes, but also to allow for the payment of expenses.