Prefunded PS

[PFranckowiak]

I have a client with a last day 1000 hour requirment.

He wants to prefund his PS - say $50,000

At year end we would allocate the $50,000

What about the earnings or loss on the $50,000

Who would that go to ?

Thanks

Pat

[rcline46]

It seems no one remembers balance forward accounting. If this is a daily val plan, the client just cannot do what you ask.

If this is a balance forward plan, then you allocate $50,000. Any gain or loss is in the plan g/l. If there is a potential for a loss, this is a VERY BAD IDEA. Money should be put into a corp money market until the end of the year.

[PFranckowiak]

That is what I have been telling the advisor. So I thank you for confirming what I had been telling him. It's participant directed daily account. They wanted to set up a separate account just for the PS contribution and then allocate the PS contribution as deducted and any g/l would be to those participants that got the Contribution. Would have had to change the document etc. I have told the advisor that I think the better approach is the Corporate Account.

Thanks for a prompt response.

Pat

[Bill Presson]

We do this all the time for our daily clients. They put the money in a money market account and we allocate the the participants after the close of the plan year. With MM earnings down, there isn't a lot to allocate, but we just allocate it as a gain across all sources, all funds.

Pretty simple.