Retire Through Ownership Act Signed into Law and Codifies a Process-Oriented Approach to ESOP Valuations
For decades, valuation has been one of the most scrutinized aspects of ESOP transactions. Trustees, fiduciary committees, valuation professionals, lenders and selling shareholders have operated within a framework where the concept of "adequate consideration" carried enormous significance but relatively little statutory guidance. Much of the law in this area developed through litigation, U.S. Department of Labor enforcement activity and professional practice rather than through Congress itself.
Signed into law on October 15, 2026, the Retire Through Ownership Act (RTOA) changes that landscape by amending ERISA's definition of "adequate consideration" to provide that an ESOP fiduciary may, in good faith, rely upon a valuation prepared by an independent valuation or business appraiser if the appraiser relied upon the principles and methodologies set forth in Revenue Ruling 59-60.
Although the amendment adds only a few lines to ERISA, it represents Congress' first direct effort to address the role of independent valuation advice within the adequate consideration framework.
Congress Chose Process Over Prescription
Rather than trying to define fair market value, prescribed valuation methodologies, establish acceptable valuation ranges, or create a statutory safe harbor, the RTOA focused on the manner in which ESOP fiduciaries evaluate and rely upon valuation advice.
That approach reflects the realities of ESOP transactions. Disputes concerning adequate consideration rarely arise because fiduciaries lack valuation methodologies. More often, they stem from differing judgments regarding projections, transaction structure, financing terms, industry conditions and company-specific risks.
Instead of attempting to legislate those realities, Congress reinforced the role of independent valuation professionals in the fiduciary decision-making process. In many respects, the RTOA formalizes an approach that experienced ESOP fiduciaries, trustees, and advisors have followed for years.
Fiduciary Process Remains the Cornerstone
Congress recognized a fiduciary's ability to rely on expert valuation advice, but conditioned that reliance on the use of an independent valuation or business appraiser. The RTOA, therefore, places substantial emphasis on the process by which fiduciaries obtain and evaluate that advice.
Trustees and other ESOP fiduciaries must still understand the valuation they receive, evaluate material assumptions, assess transaction terms, and determine whether the valuation supports the decision before them. The RTOA thus reinforces a longstanding principle of prudent ESOP practice: independent expertise may inform the fiduciary’s judgment, but it cannot replace it.
Revenue Ruling 59-60 Receives Statutory Recognition
For more than 60 years, Revenue Ruling 59-60 has served as the foundation of closely held business valuation practice. Congress elected to incorporate a familiar and widely accepted framework directly into ERISA.
Until now, questions concerning adequate consideration have been shaped primarily through litigation, expert testimony and regulatory interpretation. The RTOA establishes a statutory reference point that previously did not exist. Fiduciary reliance on independent valuation professionals applying Revenue Ruling 59-60 principles now has express recognition within ERISA.
Looking Ahead
With its signing, the RTOA is effective immediately and does not require implementing regulations. The measure provides statutory direction where previously there was relatively little. That additional certainty should be welcomed by trustees, valuation firms, fiduciaries, lenders, and business owners alike.
Please contact Luke Nixon, Todd Denison or any member of the Phelps Business or Employee Benefits/Executive Compensation teams if you have questions or need advice or guidance.
