Balance Forward PS Plan and Interim Valuation

[Susan S.]

I'm working on a calendar year balance forward profit sharing plan with pooled investments. An interim valuation was done as of 9/30/12 on behalf of one terminated participant (physician) because he had a very large balance. This was in accordance with the plan's written policy. He received a distribution in October 2012 based on the 9/30 valuation. The other plan participants are unaware of the interim valuation and were not given statements reflecting their balance as of 9/30. The physician will be receiving an additional PS contribution for 2012 due to retirement.

I assume the physician does not deserve any additional gain for 2012. Naturally, most aspects of the report (i.e. testing, Form 5500, etc.) will need to reflect the full year. Should the valuation reflect the period 1/1/12 - 12/31/12 with an override of the physician's gain? Or is it more appropriate to split into two parts and have an allocation report from 1/1 - 9/30 and a second portion from 10/1 - 12/31? I have never done an interim valuation like this and I guess I am uncomfortable overriding the gain.

[Lou S.]

He has a zero balance after payout. I assume the current year contribution get's no weighting in earnings so no earnings on the current year contribution, just pay him out after it hits the account. You can get a new distribution form for the residual payment if you need one.

You did a valauation as of 9/30 right to get the payout? Why not just do an additional allocation from 10/1 - 12/31?

Alternatively allocate the g/l for the whole year carving out what was already allocated to the physician.

But if the plan terms already indicate that an interirm valuation is done for "large distributions" then it may also tell you how to allocate fo the year.

[Bird]

We would do two separate allocations of the gain/loss (thru 9/30 and after 9/30), but maybe/probably just show the net total on a yearly statement, especially if no one else got a 9/30 statement. I do not believe it would be appropriate to allocate the remaining gain for the full year, carving out the physician. A val date is a val date and once it is passed that's your new beginning balance for the next period.