AICPA Opposes DOL's Proposal to Change "Fiduciary" Definition Affecting Business Valuation

May 25, 2011

Robert Reilly, CPA/ABV, member of the AICPA’s Forensic and Valuation Services Executive Committee, testified against proposed changes to the definition of “fiduciary” at a hearing before the U.S. Department of Labor Employee Benefits Security Administration.

Many CPAs perform business valuation services for employee benefit plans and “treating the sponsor company valuation analyst as a fiduciary will be disadvantageous to benefit plan participants,” Reilly said. Currently there are about 11,500 employee stock option plans with over 10 million participants. Most ESOPs are offered in small businesses.

Reilly pointed to four significant concerns with the proposed change:

  • The proposed change to the definition is incompatible with the Internal Revenue Service’s requirements for an independent appraisal of employer securities,

  • The proposed change does not address the underlying issue of proper qualifications and standards for performing valuation services,

  • The proposed change will increase the cost of valuation services for ESOP plans,
  • The proposed change will restrict the number of valuation specialists willing to do valuations for ESOP plans.

Instead of making CPAs who provide these services fiduciaries, Reilly said, the DOL should “require all sponsor company valuations to be performed by professionally credentialed valuation analysts who would be required to prepare the valuations in compliance with generally accepted business valuation standards.”

Read the AICPA DOL testimony.

Read the AICPA’s February comment letter to the DOL regarding the proposed changes to the term “fiduciary” and its April 12 comment letter.