A Long-Awaited Win for Employee Owners: Congress Passes the Retire Through Ownership Act

For decades, one question has loomed over every ESOP transaction: what is a fair price for the company’s stock? This week, Congress finally gave employee owners a clear answer.

On Sept. 18, the U.S. House of Representatives passed the Retire Through Ownership Act (S. 2403) by a vote of 401-14. The Senate passed it unanimously last October. The bill now goes to President Donald Trump for his signature.

The law does something straightforward and long overdue. It confirms that an ESOP fiduciary may rely in good faith on a valuation prepared by an independent professional appraiser who follows the longstanding principles of IRS Revenue Ruling 59-60. That framework has guided the valuation of closely held businesses for more than 60 years. It is now written into federal law.

Here is why that matters. For years, the Department of Labor failed to issue regulations defining “adequate consideration” for privately held ESOP stock. That silence left responsible fiduciaries exposed. Companies did everything right — they hired qualified, independent appraisers and followed established methods — yet still faced investigations, litigation, and the compliance costs that come with uncertainty. That risk chilled the formation of new ESOPs and discouraged owners who wanted to sell to their employees.

The Retire Through Ownership Act replaces that uncertainty with a clear, consistent standard. Because the rule is now in statute, it applies regardless of who leads the Department of Labor. Fiduciaries, appraisers, regulators, and courts will work from the same playbook.

Let me be clear about what the law does not do. It does not lower the bar. A fiduciary must still act prudently and solely in the interests of plan participants. The goal is not to protect anyone who cuts corners. The goal is to protect the employee owners who deserve confidence that their shares were valued fairly — when the plan is formed and every year thereafter.

The price an ESOP pays has real consequences for real people. No one wants the plan to overpay when it purchases the owner’s shares, and no employee wants to be shortchanged when they retire and sell their shares. A transparent, process-based standard protects both.

I also want to note how this bill passed. A 401-14 House vote and a unanimous Senate are not common. Employee ownership brought both parties together. My thanks to Sens. Roger Marshall, R-Kan., and Tim Kaine, D-Va., who introduced the bill, and to Rep. Rick Allen, R-Ga., who carried the House companion. James Bonham and The ESOP Association led a multiyear advocacy effort to get this across the finish line, and their work shows.

At DeWitt, we advise more than 100 employee-owned companies. We have watched good clients navigate this uncertainty for years. This is welcome, practical news, and we will help our ESOP clients understand what it means for them.

If you own a business and have wondered whether employee ownership is the right succession path, now is a good time to take another look. When it matters, DeWitt.