HR5169-119

What This Bill Does

This bill amends the Employee Retirement Income Security Act definition of adequate consideration for employee stock ownership plans. It says an ESOP fiduciary may in good faith rely on a valuation from an independent valuation expert or business appraiser if the expert used the principles and methodologies in IRS Revenue Ruling 59-60, as updated over time, to determine fair market value.

The reported text clarifies that this reliance rule does not bar the Labor Secretary from issuing regulations through notice-and-comment rulemaking, does not expand the Secretary's regulatory authority beyond the authority that existed before enactment, and does not modify fiduciary obligations under ERISA section 404. The amendments apply to covered determinations made on or after enactment.

Who Benefits and How

ESOP fiduciaries benefit from a clearer good-faith reliance path when using independent valuations. Employee stock ownership plan sponsors benefit because valuation disputes may be less uncertain when an appraiser follows Revenue Ruling 59-60 principles. Business owners selling companies to ESOPs benefit from more predictable adequate-consideration determinations. Independent valuation professionals benefit because their Revenue Ruling 59-60 work becomes more central to ESOP transactions. Employee-owners may benefit if clearer valuation rules support more ESOP formation and transaction certainty.

Who Bears the Burden and How

Department of Labor enforcement staff must apply the new reliance language while preserving existing regulatory authority and ERISA fiduciary-duty standards. ESOP fiduciaries still must comply with ERISA section 404 and cannot treat the bill as a fiduciary-duty waiver. Independent valuation professionals must document methodologies carefully because reliance depends on their use of Revenue Ruling 59-60 principles. Employee-owners bear valuation risk if an independent valuation overstates or understates fair market value.

Key Provisions

• Amends ERISA's adequate-consideration definition for employee stock ownership plans.
• Provides good-faith reliance on independent valuation experts or business appraisers using IRS Revenue Ruling 59-60 principles.
• Preserves Labor Department rulemaking authority through notice-and-comment regulation.
• Provides that the bill does not expand Labor Department authority or modify ERISA fiduciary duties.
• Applies the amendments to adequate-consideration determinations made on or after enactment.