Saturday’s post, Balance Forward 401(k) Plans: Someone’s Gotta Win, Someone’s Gotta Lose, generated several emails to me on the topic. The comments involved frequency of the valuation and whether interim valuations could or should be done. Let me see if I can respond to all of them at one time.
First, some additional background. Balance forward recordkeeping was the traditional method of accounting when only contributions were made by the employer and deposited once a year. As 401(k) features were added to existing profit sharing plans and daily valuation technology available to even the smaller plans, employers increased the valuation frequency, e.g., quarterly or monthly, or simply changed to a daily valuation system.
So it seems to me that the real issue is: Should balance forward plans provide for interim valuations, and if so, how? And like all matters ERISA, there are both tax and fiduciary issues to consider. Here’s Sungard Relius discussing, Interim Valuations: The Right Thing to Do?, in more detail.
So no easy answer here. But definitely one of those matter to discuss with ERISA counsel.