Retire through Ownership Act signed to reduce ESOP valuation risks

The Retire through Ownership Act (S. 2403) was signed into law on October 15, 2026, to address valuation uncertainties in Employee Stock Ownership Plans (ESOPs). The legislation aims to reduce the litigation risks faced by fiduciaries when determining the price paid for privately held employer stock.

Under the new law, an ESOP fiduciary is expressly permitted to rely in good faith on an independent valuation that utilizes the principles and methodologies of IRS Revenue Ruling 59-60. This provides greater statutory certainty in a process that has historically been complicated by the difficulty of determining fair market value for shares without a public market.

Previously, the Department of Labor and various courts evaluated whether ESOPs provided ‘adequate consideration’ for stock. Because valuing private companies requires significant professional judgment regarding financial projections and discount rates, the lack of a comprehensive regulatory framework often led to legal disputes. The Act seeks to make these transactions more predictable for business owners transitioning ownership.