H.R. 5169: Retire through Ownership Act

This bill, known as the Retire through Ownership Act, aims to amend the Employee Retirement Income Security Act of 1974 (ERISA) concerning the valuation of closely held stock in employee stock ownership plans (ESOPs). The main changes proposed by this bill include:

Definition Amendment

The bill proposes to update the definition of "adequate consideration" in ERISA. Specifically, it seeks to:

• Redesignate existing definitions for clarity and organization.
• Introduce a stipulation that fiduciaries of employee stock ownership plans can rely on valuations provided by independent valuators or business appraisers. However, these valuations must follow the principles and methodologies outlined in a specific IRS ruling (Revenue Ruling 59–60) when determining fair market value.

Implications for Valuation

Under the new provisions, if an independent appraiser uses the IRS designated methodologies for valuation, the fiduciary of the employee stock ownership plan can trust that the valuation reflects adequate consideration. This means that the bill seeks to provide a clearer path for how closely held stock is valued within ESOPs, potentially impacting how these plans operate.

Effective Date

The changes introduced by this bill would apply to valuations made on or after the date the Act is enacted.

Impact on Employee Stock Ownership Plans

By offering clearer guidelines for valuation, the bill might facilitate easier compliance for fiduciaries overseeing ESOPs. It could help reduce uncertainty and risk associated with valuing closely held stock, which in turn may encourage more companies to establish ESOPs as part of their employee retirement plans.

Relevant Companies

None found