President Signs ESOP Valuation Bill into Law
After the House of Representatives approved the measure in mid-September by an overwhelming vote of 401-14, President Trump on Oct. 15 signed the Retire Through Ownership Act (S. 2403) into law, providing much-needed clarity on ESOP stock valuations.
S. 2403 was introduced in July 2025 by Sens. Tim Kaine (D-Va.) and Roger Marshall (R-Kan.) and passed the Senate in October 2025 by unanimous consent (a fast-track process to approve legislation where no senator objects to a bill’s consideration and approval).
“ESOPs are a tried-and-true method for ensuring more Americans can enjoy a secure retirement, and by eliminating the regulatory ambiguity these plans often face, more employees will now share in the success they have helped deliver. I was proud to champion this bill during the 119th Congress and thank President Trump for signing it into law,” stated Rep. Rick Allen (R-Ga.), who sponsored the House version of the legislation.
The new law allows fiduciaries of Employee Stock Ownership Plans (ESOP) to rely on IRS valuation guidelines when appraising the value of the shares in an ESOP.
More specifically, it amends ERISA to provide a clear definition of “adequate consideration” for certain closely held stock by applying IRS valuation law to ESOPs. As such, it will now allow an ESOP plan fiduciary to rely in good faith on an independent professional expert business appraiser who utilizes the valuation practices as described in IRS Revenue Ruling 59-60.
“The fate of the 1988 version of regulations left many ESOPs flying blind, so-to-speak, complicating the path to compliance. For a long time, ambiguities around adequate consideration have meant that EBSA’s work on ESOP compliance has been accomplished through audits, enforcement actions, and court settlements. Hopefully, any clarity found in the new law will diminish risks for plans and fiduciaries,” noted Allison Wielobob, General Counsel, American Retirement Association.
Revenue Ruling 59-60 was designed to provide a methodology for “valuing shares of the capital stock of closely held corporations for estate tax and gift tax purposes.” Closely held corporations often have low trading volume, making it difficult to use market quotes to price the stock.
The guidance lists several factors for appraisers to consider: nature of the business and its history; the general outlook for the economy, and the industry; stock book value and the condition of the business; earning capacity; dividend paying capacity; intangible value; volume of outstanding shares; and the stock value of comparators, among other factors.
The new law also permits the Department of Labor (DOL) to implement additional guidance but stipulates that the legislation does not expand the regulatory authority with respect to the term “adequate consideration” beyond such authority available before enactment of the Retire Through Ownership Act or modify a fiduciary's obligations under ERISA Section 404.
Adequate consideration, or the process of appraising shares in an ESOP, and the legal liability that stems from it, has been cited as the biggest hindrance to ESOP adoption. Because the DOL has never finalized regulations[1] defining “adequate consideration” for privately held ESOP stock, fiduciaries have faced uncertainty and potential liability even when they acted prudently and retained qualified, independent valuation professionals, according to The ESOP Association.
“The Retire Through Ownership Act strengthens confidence in the valuation process for millions of employee owners and gives business owners a clearer path to an ESOP transition,” the organization’s President and CEO James Bonham said in a statement. “Combined with the Trump administration’s pro-ESOP direction at the Department of Labor, it creates a historic opportunity to expand employee ownership in America.”
An enrolled version of the Retire Through Ownership Act can be found here.
As seen in National Association of Plan Advisors.