FAQ 18: ESOP--Cost basis in an ESOP


How does ASC handle cost basis? I have looked through the entire ESOP manual and can't find much of anything. Can you point me to anything specific, or do you have some literature you can email to me? We aren't sure if we are handling it correctly within the system.


Any time that share or dollar account activity results in shares going into or out of a share fund, the corresponding value of that activity is stored on the Account Costs screen for that fund and source. When participant statements or the Summary of Accounts report are printed, the share activity shows on one line and the corresponding value shows on the second line. In the case of the beginning and ending share value, the value is calculated by taking the beginning or ending shares times the beginning or ending share price stored in the fund specs. The corresponding value of all other account activity is pulled from the Account Costs screen.

When you print the Units statement or the Unit 401(k) reports, there will be a checkbox to indicate if you want to print cost values or not. If this box is left unchecked, you will see the two lines mentioned above for each share fund. If you check that box, you will see a third line for each share fund that will show the ending cost value as calculated on the Account Costs screen. The cost line then shows the difference between the ending value of the shares and the cost of those shares. Unless the ESOP has been on the ASC system since its inception, it is likely that this cost value is wrong, since the beginning cost value is likely to have never been populated. If that is the case, you may need to override the beginning cost value on the Account Costs screen so that the ending cost value will be correct going forward. In most cases, users suppress the cost line unless a client specifically asks for it, since it may not be the true cost of the shares and may require manual manipulation for it to be correct.