On September 16, 2026, the U.S. House of Representatives passed S. 2403, the Retire Through Ownership Act, by a bipartisan vote of 401–14. The bill would clarify how Employee Stock Ownership Plans (ESOPs) determine fair market value of closely held company stock under ERISA’s “adequate consideration” standard—and it would expressly allow ESOP fiduciaries to rely in good faith on an independent appraisal that follows the principles of IRS Revenue Ruling 59-60.

As of this writing, Congress has completed passage and the measure has been described as headed to the President’s desk. It should not yet be treated as enacted law until signature (or other final enactment) is confirmed. Even so, the direction of travel matters for Main Street owners who are weighing succession options—and for the valuation work that sits under those options.

Why this matters for small and mid-sized business owners

An ESOP can be a powerful succession path: selling to an employee trust, preserving culture and jobs, and giving workers a stake in the enterprise they helped build. For decades, though, ESOP formation in closely held companies has been chilled by valuation uncertainty. When an ESOP buys (or later redeems) private-company stock, fiduciaries must show the price was “adequate consideration”—essentially, that the plan did not overpay.

Litigation and regulatory ambiguity around that standard made some owners, trustees, and lenders hesitant. Clearer rules of the road do not create an ESOP by themselves. They can make a carefully structured ESOP less of a legal lottery—and that is often the difference between “interesting idea” and “we will actually explore it.”

What S. 2403 would change (in plain English)

According to the House Education & Workforce Committee’s description of the bill and practitioner summaries of the text, S. 2403 would:

• Clarify adequate consideration” for ESOP purchases of closely held stock.
• Let fiduciaries rely in good faith on valuations prepared by independent valuation experts or business appraisers who apply the principles and methodologies of Revenue Ruling 59-60.
• Encourage employee ownership by reducing gray areas that have discouraged plan formation and maintenance.

Groom Laws client alert puts the practical point well: the Act would reinforce that trustees are not expected to be valuation experts themselves, and that process—qualified independent appraisal, good-faith reliance—matters. It would also hard-wire familiar 59-60 ideas into the adequate-consideration analysis: valuation is not an exact science; fair market value is often a range; informed judgment across multiple factors is required.

If enacted, the amendment would apply to adequate-consideration determinations made on or after the date of enactment. Court cases involving pre-enactment deals would not instantly disappear.

Rev. Rul. 59-60 is still not a shortcut

Here is the message owners and boards should hear clearly.

Statutory clarity is not a substitute for a real appraisal. Revenue Ruling 59-60 is a framework—factors and judgment for valuing closely held stock—not a checklist that produces a single “safe” number if someone recites the headings. An ESOP still needs:

• An independent valuation professional with an assignment suited to the transaction (or annual update)
• A defensible process documented for fiduciaries
• Attention to earnings quality, risk, growth, and transferability—the same issues that drive value in any closely held sale
• Advisors who understand that ESOP timing, financing, and governance are as important as the headline multiple

If you are considering an ESOP as an exit, treat this legislation as a reason to explore the path with better standards—not as a reason to skip quality valuation work. The Black Box still has to print money without you. The appraisal still has to explain why.

Practical next steps for owners

1. 1. If you are succession-curious: Ask whether an ESOP belongs on your short list alongside a third-party sale, management buyout, or family transfer—not as a slogan, but as a structure with costs, timelines, and fiduciary duties.
2. 2. If you already have an ESOP: Watch enactment status. Confirm with ERISA counsel and your annual appraiser how any new adequate-consideration language would interact with your next valuation cycle.
3. 3. Either way: Get a current, assignment-specific view of fair market value before you negotiate with any buyer—including an employee trust. Clarity in the statute does not replace clarity in your numbers.

Bottom line

House passage of the Retire Through Ownership Act is a rare standards-level development in ESOP valuation. It points toward clearer reliance on independent, Rev. Rul. 59-60-based appraisals for closely held ESOP stock. Until the bill is signed (or otherwise enacted), treat it as pending—and treat any ESOP conversation as still requiring careful legal, tax, and valuation advice.

AVS LLC helps closely held owners understand what their business is worth and how succession options—including employee ownership—fit the facts. This article is educational, not legal advice or a formal valuation opinion for any specific company.

Sources

1. 1. Office of the Clerk, U.S. House of Representatives, Roll Call 314 on S. 2403 (Sep. 16, 2026; passed 401–14): https://clerk.house.gov/Votes/2026314
2. 2. House Committee on Education & the Workforce, “Chairman Walberg Applauds House Passage of Legislation Strengthening Employee Ownership Plans” (Sep. 16, 2026): https://edworkforce.house.gov/news/documentsingle.aspx?DocumentID=413798
3. 3. Groom Law Group, “Congress Passes Bipartisan ESOP Valuation Legislation” (Sep. 21, 2026): https://groominbrief.groom.com/post/102o1q0/congress-passes-bipartisan-esop-valuation-legislation