New Law Provides Clarity on ESOP Valuations

President Trump on Oct. 15 signed the Retire Through Ownership Act into law, creating a new framework under ERISA for how employee stock ownership plan (ESOP) fiduciaries can rely on independent valuations when determining the value of employer stock. It’s legislation that might spur more widespread adoption of ESOPs in the workplace. 

The law allows ESOP fiduciaries to rely in good faith on independent valuations and business appraisers using established IRS Revenue Ruling 59-60 guidelines. It also addresses long-standing regulatory ambiguity surrounding “adequate consideration” for privately held company stock. Because there were no issued regulations previously, fiduciaries have faced uncertainty and potential liability even when they acted prudently and retained qualified, independent valuation professionals. 

The ESOP legislation had passed the U.S. Senate unanimously in October 2025 and the House by a bipartisan vote of 401–14 on Sept. 16. 

The law, and its new clarity, might spur more widespread adoption of ESOPs in the workplace, said Emily Rickard, of counsel at Morgan Lewis at Philadelphia. 

“A lack of clear standards on what constitutes ‘adequate consideration’ has historically stifled ESOP formation,” she said. “The Retire through Ownership Act helps clarify ERISA’s framework for valuing private company stock in ESOP transactions and may empower more private companies to offer ESOPs as part of their retirement platform.” 

James Bonham, president and CEO of The ESOP Association, said the law is the “most important ESOP law enacted in decades.” 

“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. Combined with the Trump administration’s pro-ESOP direction at the DOL, it creates a historic opportunity to expand employee ownership in America.” 

Although the Retire Through Ownership Act provides helpful clarity, Rickard cautioned it should not be viewed as creating a safe harbor from potential ERISA liability for valuation determinations or allowing a fiduciary to substitute an appraisal for fiduciary process.  

“Employers should continue to monitor ESOP litigation and regulatory activity from the Department of Labor,” she said. “The practical impact of the act will depend on how courts and the DOL interpret ‘good faith reliance’ and apply the new provision alongside ERISA’s fiduciary-process requirements.”