DOL Proposal on ESOP Fair Value: Withdrawn but Not Forgotten

by Prof. Robert Bloink and Prof. William H. Byrnes

Prior to Trump’s January executive order freezing all regulatory action, the Department of Labor (DOL) issued long-awaited proposed guidance for employee stock ownership plans (ESOPs) seeking to rely on an ERISA prohibited transaction exemption. While the Biden-era guidance now technically remains frozen and has no legal effect, it does offer ESOPs some insight into what constitutes adequate consideration and fair value in the context of ESOP transactions that involve private company stock. The proposed rulemaking is the first set of formal guidance in nearly 40 years on how the DOL views a proper determination of fair market value of private corporation stock in ESOP transactions. As such, interested parties should understand the parameters of the guidance even as the new administration takes shape.

ESOP Fair Value Issue: Background