On October 15, 2026, The Retire Through Ownership Act (S. 2403) was signed into law with bipartisan support. The Act was passed by the Senate and House of Representatives with the intention to promote and protect Employee Stock Ownership Plans (ESOPs) by providing greater clarity for valuing privately held company stock within an ESOP.
The Act amends the Employee Retirement Income Security Act of 1974 (ERISA) to clarify that ESOP fiduciaries may rely in good faith on valuations prepared by an independent valuation expert or business appraiser using the principles outlined in IRS Revenue Ruling 59-60, the long-standing framework used to value closely held businesses.
Specifically, the Retire Through Ownership Act:
- Establishes a clearer “adequate consideration” standard for ESOP transactions involving privately held stock;
- Confirms that fiduciaries may rely on independent professional appraisals when determining fair market value;
- Reduces uncertainty and potential liability for fiduciaries that follow established valuation methodologies; and
- Preserves fiduciary duties under ERISA and does not eliminate oversight or prudent decision-making responsibilities.
It is important to note that the Act does not change how companies are valued. Rather, it reinforces existing valuation practices used by qualified appraisers and clarifies the circumstances under which ESOP fiduciaries may rely on those valuations.
Since proposing regulations in 1988, the Department of Labor has not formally issued language or regulations defining “adequate consideration” in the context of ESOP stock transactions. This lack of guidance has resulted in all parties involved operating in an environment of regulatory uncertainty, litigation risk, and increased transaction costs.
By providing a clearer framework, the Act will help reduce transaction uncertainty and protect the interests of ESOP participants and beneficiaries. As a result, many practitioners expect the Act to increase confidence in ESOP valuations and make ESOP transactions a more attractive succession planning strategy for business owners.
GYF’s Business Valuation Services Group works with many ESOP companies, and their advisors and fiduciaries. Please contact us at 412-338-9300 to discuss your specific situation.
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