Daily Valuation-What is it?

[Guest TORTORA]

Help settle an office discussion. If a 401(k) plan invests in a group annuity contract with participant direction (eg. Manulife, Nationwide, etc.) is it a daily valuation plan for purposes of the plan document? If a 401(k) plan has segregated accounts with a broker that produces monthly brokerage statement, is that a monthly valuation plan for purposes of the plan document? Our TPA firm does annual administration and prepares an annual valuation report, but some in our office believe that these are daily or monthly valued plans.

[MWeddell]

I'd say a plan is daily valued if it regularly can determine the amount in a participant's account as of any business day, not just as of the amount of a pre-determined period of time. The fact that participants have investment direction doesn't tell one whether the plan is daily valued or not.

[Guest ERead]

For purposes of technicalities ManuLife, Nationwide and the brokerage situations where each participant has an account would be considered Daily Val plans. However - for terms of the document - it will depend on how often your TPA firm or administrator issues "Plan Statements". In otherwords - you may have a daily val plan, with quarterly statements, where the TPA will send each participant a detailed statement showing vesting percentages 4 times a year. The daily part comes in with the fact that the participant can call these firms basically 24 hours a day and get a valuation of their holdings.

When a mutual fund company sells a plan as "Daily Valued" - they not only report the value of the participants account on a daily basis, but will also tell them their vested balances on that day. Their in lies the difference between the "Daily" world and "Traditional" worlds of Plan administration.

[Guest pforde]

Does any one out there have a description of the pro's and con's of daily versus balance forward accounting. Also does anyone have a step by step description of procedures in handling a balance forward plan. I know the details of both but was hoping to see if there was something already published from a third party source.

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[Guest [Pat M]]

Way back before the internet when I did recordkeeping / interest allocation on monthly, quarterly and annual vals, there was a good process that was followed by accounting firms and may still be in the 401(k) auditing manual. You may be able to get one from your ERISA auditors. Each process will vary depending on the plan's provisions for allocation bases, timing of transactions, etc.