Retire through Ownership Act
The Retire through Ownership Act would revise how “adequate consideration” is defined under ERISA for closely held stock in employee stock ownership plans (ESOPs). The core change creates a safe harbor: ESOP fiduciaries may rely in good faith on a valuation prepared by an independent valuation expert or business appraiser that uses the principles and methodologies from IRS Revenue Ruling 59-60 to determine the fair market value of closely held assets described in the ESOP context. The act clarifies that this reliance does not expand the Department of Labor’s regulatory authority beyond what exists today, nor does it alter fiduciary duties under ERISA. The provision takes effect for determinations made on or after the date of enactment. In short, the bill provides a clear, IRS-59-60-based pathway for valuing closely held stock in ESOP transactions, aiming to reduce fiduciary risk and increase predictability for ESOP valuations.
Key Points
- 1Creates a safe harbor under ERISA 3(18) allowing an ESOP fiduciary to rely on a valuation from an independent valuation expert or business appraiser that follows IRS Revenue Ruling 59-60 to determine fair market value of ESOP assets.
- 2The safe harbor is limited to the valuation methods described in Rev. 59-60 and is intended to apply to the “adequate consideration” determination for ESOP assets; it does not broaden the Secretary’s regulatory authority beyond pre-enactment limits.
- 3The bill preserves fiduciary obligations under ERISA section 404; reliance on Rev. 59-60-based valuations does not modify those duties.
- 4Effective date: applies to determinations described in ERISA 3(18)(B) that are made on or after enactment.
- 5The amendment uses a formal, codified structure (re-designating and clarifying subparts of the ERISA definition of adequate consideration) to insert the Rev. 59-60-based safe harbor.