The House just wrote the ESOP valuation rule the DOL never issued

The House passed the Retire Through Ownership Act by a 401-14 vote on Wednesday, sending to President Trump's desk a defined process for valuing the privately held stock that employee stock ownership plans hold and filling a gap the Labor Department left open for decades. The Senate cleared the same bill unanimously last October, and fourteen votes against in a chamber of 415 suggests the argument over ESOP valuation was settled well before the roll call.

Under the bill, an ESOP fiduciary may rely in good faith on a valuation prepared by an independent professional appraiser who applies the methodology laid out in IRS Revenue Ruling 59-60, the longstanding framework for valuing closely held businesses. Reliance is the operative word, because the Labor Department has never issued a formal rule defining adequate consideration for privately held ESOP stock, the ESOP Association notes, even though the concept sits at the center of ERISA's fiduciary duties and has generated litigation and uncertainty for decades. "At its core, the Retire Through Ownership Act is about protecting employee owners and their retirement security," said James Bonham, the association's president and CEO.

Congress has now written the rule the agency left open, and the safe harbor it constructed is procedural: an independent appraiser applying a recognized methodology, documented before the transaction rather than reconstructed after it. ESOP disputes will still turn on price, but the defense becomes the appraisal file, and the argument shifts to whether the appraiser was independent in fact and whether Revenue Ruling 59-60 was applied rather than merely cited. Appraisal practices, not deal counsel, are likely to feel that first.

The population the bill reaches is narrower than the vote suggests: the Aspen Institute, citing 2022 survey data, counts roughly 18% of US employees, about 25 million workers, as holding some form of ownership stake in an employer, with roughly 11 million participating in a formal ESOP. The safe harbor runs to ESOP fiduciaries only, leaving the equity plans proliferating elsewhere in the advisory industry outside it.

That distinction matters because the industry's employee-ownership push is not, mostly, an ESOP story. Berger Financial Group used an ESOP to remain roughly 35% employee-owned following an outside investment, while Creative Planning opened direct equity stakes to about 10% of its workforce, Edelman Financial Engines granted equity to more than 360 planners, and Mercer was more than 50% employee-owned as of last year; CEO Dave Mercer told InvestmentNews that "you have employees that are acting like owners because they are." None of those arrangements draws anything from the valuation standard now headed to signature.

The next fight is unglamorous and specific: a challenge over what "independent" means for an appraiser paid by the plan will set the safe harbor's price of admission, and the Labor Department's next move will show whether it treats the statute as the last word on adequate consideration or a floor beneath it. Fiduciaries who have been treating valuation as a closing formality now have a reason to read Revenue Ruling 59-60 closely.