Distribution and stock market issue

[Monica Barnard]

Doctor client brought up an interesting question. Partnership (father and son docs) has had plain vanilla ps plan for years. He has a former employee who has requested distribution by the end of this year (not gonna happen). But he asked if she were to get her money now, what date would we use for value of her account. His plan doc specifies that the "Plan Valuation Date shall be the last day of the Plan Year (Dec 31) and each other date designated by the Plan Administrator which is selected in a uniform and nondiscriminatory manner."

Let's assume value of plan assets as of 12/31/2007 was $1.5 million. Doc's portion was $1.2 million. Current value of plan assets is $850,000. Let's say Doc retired 10/31/08 and wants his money now. Business and plan are continuing. Doc wants his $1.2 million, but he can't have it. If plan is valued as of 10/31 there still is probably not enough money to pay his $1.2 mil. If plan is valued as of today, is that "a uniform and nondiscriminatory manner"?

[Bird]

The more money that is involved, the more likely it is that a special valuation date (other than the last day of the year) is needed. If someone is entitled to $1,000 out of $1.5 million, and the total account goes down to $850K, I wouldn't bother. If someone is entitled to $250,000, I would. You do have to consider the meaning of the "uniform and nondiscriminatory" clause because you might be setting a precedent for large increases in asset values as well as decreases.

[JanetM]

IMHO I'd wait till year end and revalue plan. Pay doc and employee the depreciated amount and spread the pain equally.

[jpod]

I agree with Janet. That's the most defensible course of action (if not the required one).

[Monica Barnard]

I agree as well, and I told the doc that it would be best to wait until year end. Doc isn't actually retiring, but he posed the question.

Thanks!!