President Trump signed the Retire Through Ownership Act (Public Law 119-124) into law on October 15, 2026, completing the process for this closely watched ESOP legislation. The law amends the Employee Retirement Income Security Act of 1974 (ERISA) which defines “adequate consideration” by addressing an ESOP fiduciary’s reliance on an independent valuation of certain closely held stock.
For businesses evaluating employee ownership, the immediate question is how this new statutory recognition of good-faith reliance may affect the valuation process while leaving the fiduciary’s broader ERISA duties unchanged.
What Does the New Law Permit?
Under the Retire Through Ownership Act, an ESOP fiduciary determining market value may rely in good faith on a valuation provided by an independent valuation expert or business appraiser, provided the valuation uses the principles and methodologies set forth in IRS Revenue Ruling 59-60. The Ruling provides longstanding IRS guidance for valuing closely held company stock.
The provision establishes a specific statutory basis for that reliance as part of determining adequate consideration under ERISA.
What Does Not Change?
The new valuation provision does not remove the broader responsibilities of ESOP fiduciaries. The law expressly preserves fiduciary obligations under Section 404 of ERISA. It also preserves the Secretary of Labor’s ability to issue regulations interpreting the provision without expanding the Secretary’s existing regulatory authority over “adequate consideration.”
Importantly, the law addresses one element of the ESOP valuation process without turning reliance on an independent valuation into a substitute for a fiduciary’s broader obligations.
When Does the New law Apply?
The amendments apply to covered determinations made on or after October 15, 2026, the date of enactment. Businesses and their advisors should therefore consider the provision when evaluating current ESOP transactions involving covered determinations.
What Does the New Law Mean for ESOP Planning?
For business owners already evaluating an ESOP, the focus now turns to how the enacted provision may apply to a particular transaction. The impact will depend on the transaction’s circumstances, including how the ESOP valuation process and applicable fiduciary responsibilities are addressed.
In practical terms, the law provides greater statutory clarity around a fiduciary’s good-faith reliance on a qualifying independent valuation. It does not create a blanket safe harbor or reduce the need for a prudent, well-documented fiduciary process.
Connect with a Grassi advisor to discuss how the Retire Through Ownership Act may affect an ESOP transaction currently under consideration.
