The Department of Labor (DOL) will issue long-awaited guidance on ESOP valuations by the end of this year, according to a blog post from the National Center for Employee Ownership (NCEO). Once the proposed regulations are issued, there will be a two-to-three-month public comment period before they are finalized.

Tide is turning: The regulation will clearly define “adequate consideration” under Section 408(e) of the Employee Retirement Income Security Act of 1974 (ERISA). It has been four decades since such regulations were proposed but never finalized. Valuation experts have long maintained that the DOL has been playing by its own valuation rules in its aggressive enforcement of ESOPs—rules that are not consistent with accepted valuation standards. After a long winning streak, the courts rejected the DOL’s valuations in several recent and important cases, alleging that the ESOPs overvalued (and thus overpaid for) the stock of the sponsoring companies.

“Valuation regulations will have a profound impact on the creation and ongoing viability of ESOPs,” says Corey Rosen, NCEO founder and senior staff member, in the post. “The community must engage with the regulatory process to ensure they adequately accommodate the needs of ESOPs and ESOP participants, so the regulations do not discourage ESOPs.”