ESOP Bill Passes House

The House of Representatives has passed S. 2403, the Retire through Ownership Act by a vote of 401-14. The legislation aims to alleviate uncertainty around valuations when an ESOP buys shares of a privately held company by doing the following.

• Amend the definition of “adequate consideration” under ERISA to provide a fiduciary with good faith reliance on the methodologies set forth under Internal Revenue Service Revenue Ruling 59-60 in determining the fair market value of an asset.

• Clarify that the change to the definitions does not preclude the DOL from providing interpretive guidance nor would it expand the regulatory authority of the Department of Labor or modify a fiduciary’s obligations under section 404 of ERISA.

The bill cleared the Senate last year and now heads to the President for signature.