Recordkeeping: Balance Forward vs. Daily Val.

TSC can handle any investment environment. However, swings in the stock market, especially when it drops in value, always prompt questions to us about "Daily Valuation."

WHAT'S THE ISSUE?

Plan assets were held almost exclusively in trustee-directed pools until the increased popularity of 401(k) plans in the early 1990's began to change this way of thinking. So-called "daily valuation" systems began to come on the scene, primarily for plans of large corporations. Small Plan Sponsors faced prohibitive recordkeeping costs if they used a daily valuation program.

As an alternative, a quarterly "balance forward" recordkeeping program allowed small Plan Sponsors a more palatable cost and a menu of fund choices. A disadvantage of a balance forward quarterly approach is that the assets are valued only quarterly and investment changes may be made by participants only once each quarter. When the market drops subsequent to the valuation date, investment losses from asset liquidations to make benefit distributions are absorbed by the remaining participants. A clear advantage of "daily valuation" recordkeeping is that each participant has his/her own individual account. Often, this gives the Participant daily access to his/her specific account value, and enables the Participant to make changes in investments and allocations among different funds through the use of a toll-free number or the internet. Any distribution of an account has no effect on the value of any other participant's account regardless of swings in the market.

TSC CAN HELP WITH "DAILY VALUATION" PROGRAMS

The popularity of 401(k) plans has dramatically increased, in part because of frequent reference in the news media to the importance of saving for the future and the realization that Social Security alone will not be enough to maintain a retired person's lifestyle. A number of "daily valuation" programs and products have come into existence in response to this demand, because Participants are especially sensitive to how their own contributions are invested. Small plans can now take advantage of these products for reasonable fees.

We want you to be aware that we at TSC can provide information about these daily valuation programs. Our business is plan design and administration. We are not investment advisers, nor do we sell investment products. However, we are pleased to provide information to you and your investment advisor about these programs so you can decide whether such programs are suitable to your situation.

Contact TSC

If you are considering a "daily" recordkeeping investment product for your plan, please remember that TSC can continue to provide valuable compliance and administrative services for your plan. We value your business no matter how you choose to invest your trust assets. We work with you and the Investment Professional of your choice to find what's best for you and your employees.

Call or email us with questions or inquiries: tsc401k@tsc401k.com