New Retirement Bill Eases Rules for ESOP Valuations: Fiduciaries Can Now Rely on IRS-Approved Expert Appraisals

When you’re saving for retirement through an Employee Stock Ownership Plan (ESOP), the value of the company stock or other assets in that plan matters—a lot. The Retire through Ownership Act is making a very specific, but important, change to how those values are determined, particularly for the people managing the money.

The Core Change: A Valuation Shortcut

This bill focuses on redefining “adequate consideration” under the Employee Retirement Income Security Act of 1974 (ERISA). If that sounds like bureaucratic soup, think of it this way: when an ESOP buys or sells assets, the fiduciary (the person managing the plan) has to prove they paid or received a fair price—the “adequate consideration.” If they mess this up, they face serious legal liability.

Under this new Act, fiduciaries get a clear path forward. They can now rely in good faith on a valuation of an asset if that valuation was done by an independent expert or appraiser. But there’s a critical caveat: that expert must have used the specific methods laid out in Internal Revenue Service Revenue Ruling 59-60 when determining the fair market value. This ruling provides a detailed framework for valuing stock in closely held corporations, which is often the trickiest part of ESOP management.

What This Means for Your Retirement

For the average person with an ESOP account, this change is about predictability and speed. Right now, determining the fair value of assets—especially private company stock—can be a contentious, time-consuming process that leaves fiduciaries exposed to lawsuits if the valuation is later challenged. By explicitly allowing reliance on a valuation performed by an independent expert using a specific, recognized IRS methodology (Rev. Rul. 59-60), the bill creates a kind of safe harbor for fiduciaries. This should streamline transactions within the ESOP, potentially making it easier and faster for the plan to acquire or divest assets.

Imagine you work for a company that’s 100% employee-owned through an ESOP. When the plan needs to buy more shares from a departing owner, the price has to be right. This bill makes the process of setting that “right price” much clearer for the plan managers, which theoretically reduces administrative costs and legal risk associated with managing your retirement funds.

The Fine Print: What Doesn't Change

Crucially, the bill makes it clear that this procedural update doesn't let fiduciaries off the hook entirely. The change does not alter the existing duties that a fiduciary already has under section 404 of ERISA. This means plan managers still have to act solely in the interest of the participants (you). If the expert valuation is clearly flawed or the fiduciary knows the appraiser isn't truly independent, they can't hide behind this new rule. It also explicitly states that this change doesn't give the Secretary of Labor any new power to regulate what “adequate consideration” means, maintaining the existing balance of regulatory authority.

This new rule applies to any determination of “adequate consideration” made on or after the date the Act becomes law, making the impact immediate for ESOPs looking to conduct transactions.