Retire through Ownership Act
Summary
The "Retire through Ownership Act" aims to amend the Employee Retirement Income Security Act (ERISA) of 1974. It seeks to provide a clearer definition of 'adequate consideration' for certain closely held stock within employee stock ownership plans (ESOPs). The bill allows fiduciaries of ESOPs to rely in good faith on IRS Revenue Ruling 59-60 when determining the fair market value of these assets.
Expected Effects
The primary effect of this bill is to provide more legal certainty for ESOP fiduciaries. This clarity could encourage the use of ESOPs, potentially benefiting employees through stock ownership. The amendment applies to determinations made on or after the enactment date.
Potential Benefits
- Provides clarity for ESOP fiduciaries in valuing closely held stock.
- May encourage the formation and use of ESOPs.
- Potentially increases employee ownership and retirement savings.
- Offers a safe harbor for valuation based on established IRS guidelines.
- Reduces the risk of litigation related to valuation disputes.
Potential Disadvantages
- May not address all potential valuation issues.
- Reliance on IRS Revenue Ruling 59-60 might not always reflect current market conditions.
- Could create opportunities for abuse if not carefully monitored.
- The benefits are primarily focused on employees of companies with ESOPs, not the broader population.
- The legislation's impact on companies without ESOPs is negligible.
Constitutional Alignment
The bill appears to align with the general welfare clause of the Constitution (Preamble). Congress has the power to regulate employee benefits and retirement plans under its authority to promote the general welfare. The bill does not appear to infringe on any specific constitutional rights or limitations.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).