February 27th, 2011 by Brian Bornino
I fully support efforts to protect the retirement accounts of participants in Employee Stock Ownership Plans (“ESOPs”). I agree that trustees need to be better informed about ESOP valuations. And I am definitely in support of any changes that result in higher quality independent valuations in the ESOP community. However, the DOL’s proposed rule to make independent valuation professionals into fiduciaries would be a nightmare for ESOP companies, ESOP trustees, ESOP valuators, and basically everyone in the ESOP community.
The proposed rule will:
1. Reduce the quality of ESOP valuations
2. Impair valuators independence
3. Dramatically increase the cost of compliance for ESOPs
4. Discourage companies from forming new ESOPs
5. Blur the roles of ESOP trustees and valuators
ESOPs are great tools that offer many advantages to selling shareholders, companies, and employees (click here to read Do the Math: ESOPs Can Dramatically Increase Sellers’ Proceeds). The ESOP community seems to be unilaterally opposed to this new DOL rule…hopefully it is defeated soon!