The American Institute of CPAs recently sent a letter supporting S. 1232, a bill that would modify the definition of fiduciary under the Employee Retirement Income Security Act of 1974 to exclude appraisers of employee stock ownership plans.
The bill was introduced by Senators Kelly Ayotte, a New Hampshire Republican, Mary Landrieu, a Louisiana Democrat, Susan Collins and Olympia Snowe, Maine Republicans, and Scott Brown, a Massachusetts Republican. The bill is co-sponsored by Senators Mitch McConnell, a Kentucky Republican, and Roy Blunt, a Missouri Republican.
In November 2010, the Department of Labor issued proposed rules that would broaden the agency’s long-standing interpretation of a “fiduciary” under ERISA. DOL expressed concerns with the quality of a limited number of employee stock ownership plan (ESOP) appraisals, and included in its revised definition “persons who provide advice, or an appraisal or fairness opinion concerning the value of securities or other property.”
The DOL announced in September 2011 that it would re-propose its fiduciary rule although it has not yet disclosed the approach it would take for a revised definition and a timetable for releasing the reproposal. AICPA representatives met with DOL officials in October 2011. The AICPA will remain engaged throughout the reproposal process and work toward a positive outcome.
Melancon noted in the letter that “the DOL’s 2010 proposed definition of fiduciary, which would contradict over 35 years of practice, will not solve the agency’s quality concerns regarding a limited number of ESOP appraisals. Rather, it takes a one-size-fits-all approach to correct an admittedly small potential problem which craves a far more tailored solution. Rather, the AICPA believes that the DOL should implement rules to ensure only qualified individuals prepare valuations for benefit plans and that individuals follow recognized valuation standards.”
The AICPA has long been on record opposing the DOL’s proposal. During testimony before the DOL’s Employment Benefit Security Administration and in subsequent comment letters, Robert Reilly, CPA/ABV/CFF and member of the AICPA’s Forensic and Valuation Services Executive Committee, expressed significant concerns with the DOL proposal. Importantly, Reilly stated that the proposal would create a conflict between a fiduciary’s strict duty of loyalty to plan participants and beneficiaries and professional appraisal standards, which require an appraiser to perform assignments with impartiality, objectivity and independence. Reilly also noted that the AICPA believes that the new definition will increase the cost of valuation services for ESOP plans, and that it will restrict the number of valuation specialists willing to do valuations for ESOP plans.
For more information see the Forensic and Valuation website.