Sponsors (5)
The bill gives ESOP fiduciaries clearer valuation guidance that reduces litigation risk and transaction costs for companies, but raises the risk that valuations favor sellers and weaken oversight, potentially increasing costs and eroding protections for plan participants.
ESOP sponsors, trustees, and small-business owners can rely on IRS Rev. Rul. 59-60 guidance when valuing company stock, reducing litigation risk and lowering transaction costs when setting ESOP stock prices.
Plan participants and taxpayers retain the existing fiduciary duties under ERISA §404 in form, because the bill expressly preserves fiduciary obligations while allowing reliance on the valuation guidance.
Employees and ESOP participants may face valuation outcomes that favor sellers because reliance on IRS 59-60 can justify higher or more subjective valuations, increasing the risk that participants pay inflated prices for stock.
ESOP plans and their participants could incur higher costs or see plan assets depleted if seller-favorable valuations increase the purchase price the plan must pay to acquire company stock.
Participants and taxpayers may have reduced ability to challenge unfair valuations because courts may defer to a fiduciary's good-faith reliance on the specified valuation guidance, potentially limiting Department of Labor oversight and enforcement.
Based on analysis of 2 sections of legislative text.
Permits ESOP fiduciaries to rely in good faith on independent valuations using IRS Revenue Ruling 59-60 methods when determining fair market value.
Official title: To amend the Employee Retirement Income Security Act of 1974 to provide a clear definition of adequate consideration for certain closely held stock, and for other purposes.
Introduced September 8, 2025 by Rick W. Allen · Last progress September 8, 2025
Allows fiduciaries of employee stock ownership plans (ESOPs) to rely in good faith on independent valuation experts or business appraisers who use the valuation principles and methods described in IRS Revenue Ruling 59-60 when determining fair market value for plan transactions. The change reorganizes the ERISA definition of "adequate consideration," preserves the Department of Labor's rulemaking authority, and says it does not change fiduciary duties under ERISA § 404; it applies to determinations made on or after enactment.