determination of land value for land owned by plan

[cpc0506]

We just took over a 401(k) plan that we found out had land as part of its assets. Client has provided the county assessed value as a determination of the land value as of 12/31/15. The land is parcel of a mountain.

Is assessed value a reasonable value for the land? If not, what should be used to determine the value of the land for plan asset reporting purposes?

Thanks for your input in advance.

[Lou S.]

A fair market appraisal of the the property should be used.

[My 2 cents]

Under what fiduciary process did they decide to invest plan assets in a mountain? Ick.

Is this some random mountain with no significant economic potential or is it a mountain with an established hiking or skiing business?

So I can sleep better, someone please tell me that the mountain was not purchased to further the economic interests of a party in interest!

[ESOP Guy]

The trustee has a fiduciary duty to determine the FMV. I doubt the county's appraisal meets that standard. They need to come up with a method that can be defended from a fiduciary's duties perspective.

I would add getting this right is a more important issue if this is more then an owner plan. If there are employees in the company that aren't owners of the company and part of the value of their benefit is this land. Obviously when they get paid a distribution the right FMV is important. The last thing you want to see is at some point in the future after the rank and file have been paid the land is sold for 2x or 3x of what it had been recorded at and the owner of the company gets 100% of the wind fall.

I once saw a version of that in a doctor plan.