Find a BV Appraiser
ZipCode or State Advanced Search

BV News and Events

ASA Testifies at Hearing on EBSA’s Reproposed “Fiduciary” Rule

Aug 13, 2015

Applauds Carve Out of Employer Securities Appraisals, but Criticizes Provisions Which Continue to Apply Fiduciary Requirements to Appraisals of Real Estate and Other Assets In Individual Transactions By Employee Retirement Plans

On August 13, ASA testified before the Labor Department’s Employee Benefits Security Administration (EBSA) regarding its reproposed “fiduciary” rules. The hearing, which follows written comments provided by ASA (joined by NAIFA, and ASFMRA) to EBSA, provided stakeholders an additional opportunity to expound on certain issues, and respond to views expressed by others during the comment period.

By way of background, this reproposal comes nearly five years after EBSA originally proposed to change its definition of “fiduciary” to include those who perform appraisals for employee stock ownership plan (ESOP) companies. After significant stakeholder pushback, EBSA ultimately withdrew its original proposal and worked on a modified reproposal that addressed the concerns that were raised; namely, that requiring an appraiser to act as a fiduciary would place them in an untenable professional situation, both in owing a duty to one party (and thereby unable to be truly neutral and impartial), as well as requiring them to seek fiduciary insurance protection, which would likely be cost prohibitive for all but the largest firms.

In the reproposed regulations, EBSA refines its changes to the definition of “fiduciary” to carve out those appraisers who perform valuations for employer securities held in an ESOP plan as part of fulfilling the plan’s regulatory requirements. However, the reproposal would still treat an appraiser as a fiduciary when valuing non-employer security assets for individual transaction.

In its testimony, ASA thanked EBSA for listening to concerns regarding the imposition of “fiduciary” status on appraisers, and for creating the carve out stated above. However, ASA remains concerned about a “carve out from the carve out” dealing with individual, non-employer security transactions. In its opposition to the “carve out from the carve out”, ASA stated that:

We do not believe there is any reasonable public policy rationale which supports EBSA having two separate and distinct appraisal policies: one involving the valuation of employer securities held by ESOPs and another involving all other assets that a plan might purchase, sell or exchange.  EBSA should have one appraisal policy governing the valuation of plan assets, not two. Accordingly, we urge that the proposed rule be amended by excluding from the definition of “fiduciary” appraisals and fairness opinions not just of ESOP securities but of all assets held by ESOPs and other ERISA plans; and that EBSA address its valuation concerns in a separate initiative.

Further driving ASA’s opposition to the “carve out from the carve out” is the fact that EBSA has stated it intends to undertake a separate rulemaking process to address concerns it has generally with valuations performed in connection with EBSA-regulated activities. Given this pending activity, along with the continued untenability of making an appraiser a “fiduciary” for reasons stated above, ASA instead urges EBSA to “exclude[e] all appraisals from the fiduciary provisions of the current proposal, and instead, covering them through an alternative process such as that underway for ESOPs or suggested in the rule commentary.”

ASA wishes to thank Jeffrey Tarbell, ASA, who helped to prepare and presented ASA’s testimony to EBSA. To read the full text of ASA’s written testimony, click here.