Sch. A - Fair value or Contract Value

[austin3515]

On schedule H, is the value of "benefits responsive" insurance contracts reported at fair market value or contract value?

The instructions to Schedule H say use the same basis as line 3 or line 6 on schedule a, but the instructions in those line items don't tell you what basis to use?

Is anyone inquiring regarding Fair Market value? Is there anything published which explicity states contract vs. fair value?

[JanetM]

AICPA bulletin

EBPAQC_Stable_Value_Primer.pdf

[austin3515]

That was a nice write up of fair vs. contract value, but did not indicate which one should be reported on 5500 (at least not that I could see)?

[Belgarath]

FWIW - I would use cash surrender value.

[JanetM]

I use FMV on H line 14 since all assets are reported a market.

[austin3515]

How do you get the information? Are the insurance companies providing this on request? Is it in the standard reports you are getting?

I've just never seen fair value reported.

[Peter Gulia]

If the Form 5500 instructions are ambiguous and there’s a choice about which value to report, one practical approach (for a plan administrator that hasn’t already decided which of the many valuation and accounting methods is most informative for the purposes of the report) might be to ask its auditor which value the auditor would prefer to support a professional opinion that the plan’s financial statements “fairly present” the plan’s net assets available to pay plan benefits. In theory, the plan administrator should select (if Form 5500 instructions don’t control the point) the method that it, as a prudent-expert fiduciary, finds is most informative to readers of the Form 5500. But often a real-world path of least resistance is for a plan administrator to say that it reasonably relied on an accounting expert’s professional opinion.

The accounting guidance suggests that a CPA shouldn’t go along with a fully-benefit-responsive book-value position unless, along with other conditions, an “event” that would limit the plan’s right to transact at book value was not “probable of occurring”. For many a plan’s report, there might be about nine months between the financial-statements date and the fieldwork-close date; and some auditors might feel that the occurrence or non-occurrence of an event during that time is partial evidence that might help one judge whether the event was or wasn’t “probable” as at the financial-statements date.

[JanetM]

Insurance company must give you schedule A data. You may have to ask, all of mine send it automatically.

[austin3515]

Insurance companies must give scheduel a data, I agree. However, what they give is contract value, not fair value.

Forgive me, but perhaps you're reporting contract value but which you think is fair value? For example, are you reporting the value of insurance included in people's accounts? I mean, does the amount you're reporting match the total of participant accounts as reported (within that investment)? If it does, then you are reporting contract value.

[JanetM]

Our contracts are in DB plans - no participant accounts. One show staight contract value. The rest show and estimated market value - a different amount from book value.