From: Aaron Juckett [mailto:ajuckett@esoppartners.com] 

Sent: Wednesday, February 02, 2011 11:33 AM 

To: EBSA, E-ORI - EBSA 

Subject: Definition of Fiduciary Proposed Rule

February 2, 2011 

Mr. Fred J. Wong 

Employee Benefits Security Administration 

U.S. Department of Labor 

Office of Regulations and Interpretations Room N-5655 

200 Constitution Avenue, NW 

Washington, DC 20210 

SUBJECT: Comments on the DOL Proposed Regulation – Definition of the Term “Fiduciary” 

(Federal Register, Volume 75, Number 204, Pages 65263-6578, October 22, 2010, Proposed 

Regulation) 

Dear Mr. Wong: 

I am the President of ESOP Partners, an ESOP consulting and administration firm that works with 

both ESOP companies and companies owners looking to transition the ownership of their 

company to their employees by using an ESOP. We believe that both participants of existing 

ESOP companies and employees that will or would otherwise become ESOP participants in the 

future will be significantly harmed by the DOL Proposed Regulation – Definition of the Term 

“Fiduciary” (Federal Register, Volume 75, Number 204, Pages 65263-6578, October 22, 2010, 

Proposed Regulation). Here are 8 reasons why the DOL proposed regulations should be 

modified to remove the requirement that persons providing ESOP appraisals and fairness 

opinions are fiduciaries: 

1. The cost to perform an ESOP appraisal would significantly increase. Firms performing 

ESOP appraisals would need to obtain additional and more expensive insurance, hire 

counsel, and take additional steps to comply with the regulations and manage the 

additional risk of litigation. These additional costs will be passed through to the ESOP 

companies and negatively impact the accounts of ESOP participants. 

2. The previously-mentioned additional cost and risk associated with performing ESOP 

appraisals would cause some to leave the industry. This would reduce the number and 

quality of available appraisers, which would further increase the cost of performing an 

appraisal and decrease the quality. These additional costs will also be passed through to 

the ESOP companies and negatively impact the accounts of ESOP participants. 

3. The Internal Revenue Code requires that an appraiser be independent. The fiduciary 

responsibility to the plan participants would violate that independence. 

4. The previously-mentioned lack of independence would likely cause a selling shareholder 

to hire a second valuation firm, further increasing the cost of implementing and 
maintaining an ESOP, and further negatively impacting the accounts of ESOP 

participants. 

5. The fiduciary responsibilities of the trustee and appraiser would be unclear and would 

create confusion problems in determining who is responsible for what and how each 

party is supposed to satisfy their fiduciary obligations. 

6. The increased costs to establish and maintain an ESOP would significantly reduce the 

number of new ESOPs and cause existing ESOP companies to terminate their ESOP. 

This would negatively impact ESOP participants, ESOP companies, and society. A 

study, Effects of ESOP Adoption and Employee Ownership: Thirty years of Research and 

Experience, summarized years of research on the effects of ESOPs and employee 

ownership. The study found that ESOP participants benefit by increased employee 

wealth and wages, greater employment stability, and increased job satisfaction. It found 

that ESOP companies experienced an increase in productivity, profitability, and likelihood 

of firm survival. It also found that ESOPs benefit society by providing economic growth 

with increased sales and employment growth. 

7. The DOL proposed regulations do not address the root causes of the problems you have 

identified. These problems include a lack of clear, concise and current valuation 

regulations and a lack of professional competence standards, qualifications, and/or 

credentials to perform an ESOP appraisal. 

8. ESOP trustees are fiduciaries that are currently responsible for determining the fair 

market value. Existing case law and current regulations provide remedies for when the 

ESOP trustee is using an incorrect valuation and when appraisers are acting with 

discretion over plan assets. Remedies also exist for parties that are not satisfying their 

legal, fiduciary, and contractual responsibilities. 

In addition to our comments, many other members of the ESOP community have submitted 

comments and will testify at the March 1, 2011 hearing, including ESOP sponsors, participants, 

and professionals. They have submitted additional legal arguments and remedies that I have not 

addressed in my comments. Please consider my comments and those from others in the ESOP 

community and contemplate their impact. 

We respectfully request that you modify the DOL proposed regulations to remove the requirement 

that persons providing ESOP appraisals and fairness opinions are fiduciaries. If you do not find 

that current regulations provide sufficient remedies, working with the ESOP professional 

community to create professional standards and enforcement procedures and providing the 

community with clear guidance are two solutions that would effectively address your concerns. 

Sincerely, 

Aaron Juckett 

President 
Aaron Juckett, CPA, CPC, QPA, QKA 

ESOP Partners LLC 

Phone: 920-659-6000 

Direct: 920-659-6002

Fax: 866-337-1095 

Email: AJuckett@ESOPPartners.com

Website: ESOPPartners.com

Blog: OneStopESOPBlog.com