How do year-end valuations work?

Every defined benefit plan or cash balance plan requires annual valuations of plan assets. This is easy for stocks, bonds and mutual funds. But there are no fixed and determinable market prices for real estate and other non-qualifying assets.

Since these plans require annual actuarial calculations, the administrator will need to have the fair market value of all plan assets. This is because the actuary needs to make sure the plan has enough assets pay future benefits. Determining the annual valuation of plan assets at year-end is a critical step in the compliance process. You should consider employing an independent, outside appraiser if determining valuations is challenging.