ComplianceJuly 1, 2011

Bill Would Exclude ESOP Appraisers from Fiduciary Rule

A recently introduced U.S. Senate bill would exclude appraisers of employee-stock ownership plans (ESOPs) from the U.S. Department of Labor’s new definition of fiduciary.

Reported by Rebecca Moore

S. 1232 says, “Section 3(21)(A) of the Employee Retirement Income… Security Act of 1974 (29 U.S.C. 1002(21)(A)) is amended by inserting ‘‘and except to the extent a person is providing an appraisal or fairness opinion with respect to qualifying employer securities (as defined in section 407(d)(5)) included in an employee stock ownership plan (as defined in section 407(d)(6)).’’

The DoL issued a proposed rule to revamp the definition of fiduciary under ERISA last October (see “Rules/Regs: Wider World“).

Some commenters argued that the proposal would hold down the number of ESOPs being started because of additional costs arising from the new need for fiduciary insurance and would ultimately lead to fewer qualified appraisers because some would drop out of the business (see “Fiduciary Expansion Proposal Could Hurt ESOPs“).

However, one commenter contended incorrect ESOP valuations are not unusual, and the impact of such errors on plan participants is severe (see “Law Firm Supports Making ESOP Valuators Fiduciaries“).