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Interim Valuations: The Right Thing to Do? discusses the issues that a plan should consider when contemplating an interim valuation. This question is applicable for ESOPs, especially for companies that have experienced a significant change in valuation or for those with a more significant repurchase obligation.

Does the plan document allow for an interim valuation? If so, there should not be a lot of fiduciary concerns, as "the valuation date under a plan is not a protected benefit":

Assuming the plan does permit interim valuations, is the fiduciary in the clear? Although it is not free from doubt, the fiduciary ordering an interim valuation should be in pretty good shape. Under ERISA, the fiduciary must operate the plan in the best interest of the participants and beneficiaries. This means all of the participants. Sometimes, as in the case of a big market swing, the interest of the departed participants will be diametrically opposed to that of the remaining participants. The fiduciary is faced with the choice of whose ox to gore; of course, if the fiduciary revalues the assets, the outgoing participants will share the loss with those who remain behind. No doubt, the outgoing participants who are fixated on their most recent account statement will be upset.

The article also suggests considering prior plan practice during times of fluctuation.

If the plan does not provide for interim valuations, the plan will need to be amended and you will need to consider the potential impact on terminated participants to ensure that an interim valuation will not violate the anti-cutback provisions under IRC Section 411(d)(6)(C) - Minimum vesting standards - Special rules - Accrued benefit not to be decreased by amendment.

The article also discusses other considerations:

In addition to the above considerations, a plan fiduciary might also consider: 1) amending the plan (avoiding any cut-backs) to provide for more frequent mandatory valuations, balancing any increase in cost associated therewith; or 2) adopting a reasonable policy which calls for interim valuations where there has been a more than x% market swing up or down (using the S&P 500 or some other index) since the last valuation. Such a policy may go some ways toward defeating a fiduciary breach claim related to an exercise of discretion in a particular case.

Finally, those charged with communication to participants about their account balance should use caution. Distribution notices and other communications reflecting account balances should be clear that any balance shown is only as of the date indicated and that this balance may not be what a participant will receive. Plan officials should use similar care in verbal communications with participants regarding their account balance.

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