Inservice Withdrawal After A Period Certain

A plan with a pooled arrangement allows inservice withdrawals for amounts that have accumulated for at least two years in the plan. What would be the best way to determine the amount for such a withdrawal at this time since account balances are lower now than they were two years ago due to the market's volatility over the last few months?  Since there won't be a 2022 contribution, basing the withdrawal on the balance from two years ago could result with a distribution from a participant's account exceeding their 1/1/22 balance.  Doing an interim val on this sizable plan just because one participant requests an inservice withdrawal seems unreasonable - I'm hoping there's a better solution. 

How about 80% based on most recent valuation, subject to true-up after the next regular valuation, subject to further discretionary reduction (e.g. 75%) in case of a black swan market. Of course, the plan needs this in writing, such as the investment policy or distribution policy, supported by plan terms that provide for such written policies of the fiduciary, or the plan document itself (but good luck unless you you have a custom document).  Probably too late to add for the current transaction at this point.  It should have been part of the plan design whenever the pooled fund began.  This issue has been around forever.  Maybe the plan has some general language built in for fiduciary discretion that can be stretched to fit.

Yes, that may be the way to go.  In your 80% example, when you say 'true-up' are you referring to the distribution of the remaining 20% once the participant's balance recovers? 

Going forward, I like the idea of adding some custom language to docs saying that the PA will limit the amount of such distributions to a reasonable level in order to prevent a negative account balance, but I suppose actual percentages would have to be specified in the added language.  Do you think such a modification would be minor enough for a prototype doc to continue to rely on its opinion letter and not require further IRS approval? 

No.  Distribution is 80% of a wrong number (most recent valuation) but is hoped to be less than 100.01% of the right number (determined at the next valuation).  The true up is the difference between what was distributed and the amount that would have been distributed if the value had been known at the time of distribution, which is what a special valuation provides.

Got it, but it's very unlikely the PA will pay for an interim val just because one participant wants to pull out a small amount.  Appreciate the help.

Whatever happened to just following the plan document? Issue been around for years. Sometimes the plan wins sometimes the plan loses.

Couldn't find anything in the FT William doc that addresses this other than the general option to perform an interim val, which would be impractical.  We discussed the matter with FT Wm & all they could say was that we should seek counsel.  

Ultimately, it is the Plan Administrator's discretion.  If he's uncomfortable making the decision, he should seek legal counsel as suggested.