ESOP Valuation Guidance Could Come Early in 2026

According to the DOL's latest regulatory agenda, guidance on ESOP valuation could come as early as January of 2026. By way of background, an important prohibited transaction exemption exists to protect ESOPs when acquiring employer stock. One key condition that must be satisfied under the exemption is that the employer stock must be acquired for fair market value—known as the “adequate consideration” component of the exemption. In 2024, pursuant to a mandate contained in the SECURE Act 2.0, the DOL released a proposal that would have provided clarity on how to satisfy the PTE. The Trump DOL promptly withdrew that proposal. The now-withdrawn proposal contained two key elements that would have to be satisfied to qualify under the existing prohibited transaction exemption: (1) a fair market value test and (2) a “good faith” determination of the fair market value. The Trump-era DOL has indicated that it will be more ESOP-friendly when compared with prior administrations. For more information on the valuation of ESOP securities, visit Tax Facts Online. Read More: Link to Q3822. Note: Q is updated.