Distribution from pooled 401k

[Guest Bagwhan]

Hello, I am new to this board and am not a benefits professional, but this seems like a good source of information on a topic that is as clear as mud to an outsider. I hope I'm not breaking any rules with this post.

I left my employment in Sept 2013; this employer had a pooled 401k. The year end statement for 12/31/2013 was provided to me in May 2014, and they distributed my balance (~$130k) to a rollover IRA on June 1. The amount distributed was the amount on the year end statement.

In other words, any gains that my $130k portion of the pooled fund may have made between January 1 and May 31 of this year accrued to them, not me. Is that legal? Or should they have performed another valuation of my account prior to distribution?

[Kevin C]

What you are describing sounds like a plan valued annually as of the last day of the plan year. If that is the case, your distribution amount would be your vested account balance as of 12/31/2013. That's how an annually valued plan works. In the old days, almost all plans were valued that way. Daily valuation is the most common now, but there are still some annually valued plans.

Do you have a copy of the SPD for the plan? It should say how often the plan is valued. Our SPD's have it in the Plan Investments and Fees section.

[John Feldt ERPA CPC QPA]

Agree with Kevin C. Also, if on the other hand, the plan had investment losses after December 31, 2013, those losses will be attributed to the others, not to your account.

That said, many plans are written such that the fiduciary can perform an "interim" valuation if they believe it would be prudent and/or necessary to do so. Your plan might or might not have that flexibility. This option can be very important in the situation where large investment losses occur and the prior year-end balances being paid now exceed the current market value of all the assets in the plan (October 1987?). The plan language could allow the fiduciary to value the plan during any interim date other than the last day of the plan year.

In one such plan I recently came across, a fairly small plan, the plan fidcuiary does an interim valution every time a vested participant is paid out. The plan only has a handful of participants, so these interim valuations only occur once every few years. Very unusual, but seems okay.

[ESOP Guy]

It is legal and normal. And as people said if the market had gone down you would have still gotten the 12/31/2013 balance.

The other thing to realize is that is how they treated everyone else. So in past years people got paid out their prior 12/31 balance and your balance got the income/loss on their funds from the 12/31 to payment date.

My guess is in the long run it was a wash.

[Guest Bagwhan]

Thanks for the great responses! Not what I wanted to hear of course, but good to know.