ESOP valuation bill reaches the president with a good-faith defense

The House cleared the Retire Through Ownership Act on Wednesday evening by a 401-14 vote, hours before adjourning earlier than expected for its midterm recess, and the ESOP valuation bill now waits on President Donald Trump's desk to be signed or vetoed after a unanimous Senate pass in October 2025. A bill that moves by those margins is not one whose contested ground is the principle; this text's contested ground sits inside a single word, and the word is "independent."

The reliance standard that plan advisers and sponsors will actually use is narrower than the summary suggests: under the act, an ESOP fiduciary may rely in good faith on a valuation provided by an independent professional valuation expert or business appraiser who uses the principles in IRS Revenue Ruling 59-60, the widely recognized framework that identifies the factors a qualified appraiser should consider in determining the fair market value of a closely held business. The bill's stated purpose is to swap valuation ambiguity, which its supporters tie to litigation risk for companies, for a standardized process, but reliance attaches to a valuation from an appraiser who is independent and who works from 59-60, and it does not certify the number that comes out.

The ESOP Association spent years arguing that the missing piece was never the method. "This bill … points to the way that the IRS values—or the process the IRS will use in valuing privately held stock—and that's IRS Revenue Ruling 59-60," says Jim Bonham, the association's president and CEO, whose larger claim is about which agency was supposed to move first. "As a fiduciary for the ESOP plan, which is a retirement plan under [ERISA], part of their largest responsibility is on an annual basis to set the share price, the valuation, of the company that is owned by the ESOP," Bonham says. "The Department of Labor that was responsible for establishing this regulation has not done so. So we have been seeking to get this regulation done for over five decades."

The legislative record matches the length of that campaign: Senators Roger Marshall, R-Kansas, and Tim Kaine, D-Virginia, introduced the bill in July 2025; the Senate passed it unanimously that October; the House took it up this week. Representative Tim Walberg, R-Missouri, who chairs the House Committee on Education and the Workforce, said the legislation creates clear, consistent rules for valuing ESOP stock, which he argued protects workers' retirement savings, reduces legal risk and expands opportunities for employee ownership. "ESOPs provide employees with a meaningful foothold in capital ownership—allowing them to share in the success they've helped create," Walberg said in a statement. "Unfortunately, lack of clarity in the law has brought uncertainty and created legal grey areas. S. 2403 fixes this problem by providing clear guidance."

Reliance keyed to independence and method is a narrower shelter than it first reads, and it relocates the argument: when the House voted, the process question is settled for ESOP fiduciaries, and the litigation moves toward appraiser independence. Where a dispute once turned on the defensibility of the number, the first line of defense now runs through the engagement instead—who retained the appraiser, what the scope letter covered, and whether the fiduciary's file shows any scrutiny beyond accepting a signed opinion. That reading is inference, and it follows directly from a good-faith standard conditioned on the appraiser's independence and use of 59-60.

The standard Congress now points fiduciaries toward is an IRS revenue ruling, and the agency Bonham identifies as the intended author of the rule has watched the House and Senate write it instead. The coverage of the act describes a reliance provision and nothing beyond it: no change to ERISA's prohibited transaction rules, no new remedy for a fiduciary who cannot show good faith. Sponsors weighing a first ESOP, or reworking the repurchase obligation that comes with one, should read the act as lowering the cost and legal exposure of the annual repricing cycle, not as permission to shorten the trustee's own work on that cycle. Companies that priced transactions expecting a future fight over the number should now expect that fight to be about the appraiser, which favors sellers and trustees whose valuation files can survive that scrutiny.

The larger precedent here is legislative. Congress has now written a valuation standard that, on the ESOP Association's account, the Department of Labor left unwritten for more than five decades, and it did so by importing a tax-administration framework into an area the agency that polices plan fiduciaries had treated as its own. Lawmakers who watched this bill move unanimously in one chamber and 401-14 in the other may conclude that ERISA's silences are theirs to fill when an agency will not—if so, the next fights over fiduciary conduct could arrive as statutes rather than as guidance, a slower, blunter channel that plan sponsors will have to price into their compliance calendars.

The concrete next turns are the president's signature or veto, then whether the department issues sub-regulatory guidance on what good-faith reliance looks like in practice—the difference between a defense that reads well in a motion to dismiss and one that holds up once the engagement letter is in the record. The first post-enactment valuation suits will show which one it is, and their discovery will run through the appraiser's engagement before it runs through the model.