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ARTICLE · 06 NOVEMBER 2026

ESOP “Adequate Consideration” Inadequate No More?

Seyfarth Shaw LLP
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The Retire Through Ownership Act establishes a clear safe harbor for ESOP fiduciaries determining fair market value of closely-held stock by allowing good faith reliance on independent valuations based on IRS Revenue Ruling 59-60. This legislation addresses decades of uncertainty surrounding the "adequate consideration" requirement under ERISA, potentially reducing litigation exposure for plan sponsors and fiduciaries while encouraging broader adoption of employee ownership structures.

United StatesEmployment and HR
Lisa K. Loesel
Lisa K. Loesel
Jennifer F. Cote
Jennifer F. Cote
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Seyfarth Synopsis: A deceptively simple question—How can an ESOP fiduciarydetermine that the price paid for closely-held stock constitutes“adequate consideration” under ERISA?—has created uncertainty in the employee stock ownership plan (“ESOP”) world for years. Reliefis finally here in the form of the Retire Through Ownership Act (the “Act”), which was passed by the Senate in October 2025 and the House on September 16, 2026. The President signed the Act into law on October 15, 2026.

Background

An ESOP is a specialized type of retirement plan that allow employees to become partial owners of the company they work for. ESOPs are generally subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), including the fiduciary requirement that an ESOP pay no more than “adequate consideration” for company stock. ERISA defines “adequate consideration” by reference to fair market value, as determined in good faith by the trustee or named fiduciary. However, because

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