DOL Moves to Ease ESOP Scrutiny, Citing Fairness Concerns

The Employee Benefits Security Administration (EBSA), under Assistant Secretary Daniel Aronowitz, will be shifting enforcement focus away from Employee Stock Ownership Plan (ESOP) valuation investigations.

Aronowitz declared during congressional testimony Thursday, that “we are going to treat ESOPs fairly like all other retirement plans. We are ending the war on ESOPs.” EBSA also announced in January that it is removing ESOPs from its national enforcement project list.

EBSA also explained in Field Assistance Bulletin (FAB) 2026-01, an enforcement announcement from April 14, that “until EBSA complies with the Congressional directive to provide ‘acceptable standards and procedures to establish good faith fair market value for shares of a business to be acquired by an employee stock ownership plan,’ all pending and proposed ESOP valuation investigations must be reviewed against this guiding principle of fairness.”

The regulator has not yet finalized a regulation on “adequate consideration,” or how ESOP fiduciaries should appraise shares in the company sponsoring the ESOP. Legislation passed the Senate in October which would allow ESOP fiduciaries to apply valuation practices outlined by the IRS in Revenue Ruling 59-60.

The ESOP Association (TEA), which has long argued that ESOPs have been treated unfairly by regulators, welcomed both developments. In a statement, TEA praised EBSA’s commitment to reduce the timeframe of investigations (limiting less complicated investigations to 18 months) and prioritizing egregious misconduct.

“This is a major step in the right direction toward level-setting a fair regulatory environment for employee owners and plan providers,” said James Bonham, President and CEO of The ESOP Association, in a statement.

 “The new EBSA enforcement guidelines will help ease the regulatory burden, eliminate never-ending investigations, and provide the transparency that employee owners and their fiduciaries deserve. Most importantly, as the chilling effect of regulatory overreach begins to thaw, the new guidance will help more Americans reap the benefits of employee ownership as the volume of new plan formation continues to increase,” Bonham added.