What value should be used for non-publicly traded trust investments?
Fair market value. For investments not traded on the open market, such as closely held employer stock, real estate, and limited partnerships, establishing the fair market value may require a qualified appraisal. Because amounts allocated or distributed to participants in defined contribution plans (and required contributions and PBGC premiums in defined benefit pension plans) are based on the fair market value of plan assets, fair market value must be established at least once a year as of the plan’s valuation date. In addition, employer securities must be valued whenever they are acquired or sold. The IRS monitors compliance with asset valuation standards on Form 5500, which requires a statement of plan assets valued at fair market value. A valuation problem may become apparent if, for example, a plan reports assets with level values in successive years or there is a sudden jump in plan asset values in the same year a large distribution is made to a highly compensated employee.
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