ROBS Plan needs a valuation

[austin3515]

I have a client who set up a ROBS (don't worry, I have disclaimers all over the place in my engagement letter, and lengthy emails each year about how risky it is) and I need to know the easiest way to get a cheap valuation to enable them to check the box that all assets were determined by an independent third-party appraiser.

I know there are internet services out there for a few hundred dollars. Anyone had any direct experiences on this?

[MoJo]

Uh.... 1) recommending a valuation service itself is fraught with risk; and 2) you get what you pay for....

BTW, have you told how risky a ROBS "scheme" is?

[ESOP Guy]

I understand why you would want to check the box "yes" there has been an appraisal but strictly speaking there is no legal requirement to get one done in a plan like this.

Only ESOPs have a legal requirement to get an appraisal.

In a ROBS the trustee has a fiduciary obligation to make sure the assets are fairly valued when telling people their account balances and making distributions.

I say this not to encourage anyone to not get an appraisal as I think getting one is the best choice by a long shot. However, years ago (2009 or 2010) I worked on a PS plan that had a bunch of employer stock in it. We checked the appraisal box "no". We got a letter from the IRS. WE explained the plan got an appraisal the first year the stock was in the PS plan. Every year after that the trustee used the same discounted cash flow method the original appraisal used to determine the new price. We never heard back from the IRS. At least then that was prudent enough for them to determine a value.

Risky in my mind but it worked back then for what it is worth.