From: bsims@beaconmail.com [mailto:bsims@beaconmail.com] 

Sent: Wednesday, February 02, 2011 4:20 PM 

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 want to echo the words of another Company who submitted feedback on the proposed 

"Definition of Fiduciary" Rule as an ESOP Company: 

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. 

Brian Sims 

Beacon Technical Industries, Inc. 

ESOP Trustee 

404-256-1907