Court OKs Plan Valuation Date Change Post 9/11

October 20, 2004 ( - A US District Court has ruled that a profit-sharing plan administrator did not act unreasonably in altering the plan's valuation date in order to protect all of the participant's benefits following the September 11, 2001 terrorist attacks.

>US District Court Judge Stephen Limbaugh of the Eastern District of Missouri dismissed a plan participant’s assertion that the plan administer abused his discretion by changing the plan’s valuation date, usually set on March 31 of each year. Limbaugh ruled that the plan gave the administrator the right to alter the valuation date if needed to protect participant benefits.

>The suit was brought by Barry Jasper, who held 93% of the assets in the retirement plan of his former dental practice. Jasper’s account balance as of March 31, 2001 was $2,228,500. On June 12 of that year, he resigned from the practice and sold his interest in the firm to another dentist. In August of 2001, Jasper sent the dental practice a benefit distribution election form seeking to cash out his profit-sharing plan account. Although the valuation date had been March 31 for 20 years, the plan administrator, due to the terrorist attacks, changed the valuation date to October 1.

>Because the valuation date was changed, Jasper received only $2,058,502 in benefit payouts. He subsequently sued the plan administrator, saying that altering the valuation date prejudiced him and thus violated the Employee Retirement Income Security Act (ERISA). However, Limbaugh ruled that although Jasper owned a large majority of the plan, other participants were involved, and thus their interests were properly taken into account by the plan administrator.

“In order to avoid wiping out all of the other participants’ accounts because of the Plan’s assets that were diminished on September 11th, the Plan Administrator decided to choose a special valuation date to ‘avoid prejudice to any participant of the Plan,’ namely all of the other participants,” Limbaugh stated in his ruling. “It did not mean that only Jasper would suffer the repercussions of September 11, but rather that all Plan participants would suffer their pro rata share, and the other participants would not be completely wiped out of their assets under the Plan or prejudiced by the fact that the assets had not been liquidated for distribution.”

>The case, heard in the US District Court for the Eastern District of Missouri, is Jasper v. M.H. & B.L. Jasper D.D.S., P.C. Profit Sharing Plan, E.D. Mo., No. 4:02cv00570 SNL, 9/30/04.