Companies that sponsor employee stock ownership plans (ESOPs) must satisfy relevant ERISA requirements from the Department of Labor and the Internal Revenue Service. At least annually, they must obtain an independent valuation of the stock held by the ESOP for purposes of administering the plan.
The regulations are very clear in stating that the valuator must be independent in fact and in perception. The regulations allow the fiduciary to perform the valuation, provided they meet two requirements. First, the fiduciary must be independent of all the parties, other than the plan trust. Second, the fiduciary must have the facilities and the expertise to undertake the valuation. If the fiduciary does not possess the training and expertise to meet these requirements, the fiduciary fails to meet the prudent investigation and the sound business principles requirement of §2510.3-18(b)(3)(iii). When this occurs, the trustee must hire an independent qualified valuation professional.