The Department of Labor (DOL) has eliminated the “appraiser-as-fiduciary” rule from its newly reissued proposal of a broader fiduciary rule. The original proposed rule, in limbo for several years, would have classified appraisers as ERISA fiduciaries in connection with valuations of employee stock ownership plans (ESOPs).

Carved out: A DOL fact sheet states that the proposed measure, which has been issued in draft form for comment prior to being finalized, “excludes valuations or appraisals of the stock held by employee stock ownership plans (ESOPs) from the definition of fiduciary investment advice. The proposed rule clarifies that such appraisals do not constitute retirement investment advice subject to a fiduciary standard. DOL may put forth a separate regulatory proposal to clarify the applicable law for ESOP appraisals.”

The DOL had earlier issued a more far-reaching proposal to redefine many financial activities under the category of “fiduciary,” including the activities of ESOP valuation and appraisal firms. Opponents claimed that it would create a conflict between a fiduciary’s strict duty of loyalty to plan participants and professional appraisal standards, which require an appraiser to perform assignments with impartiality, objectivity, and independence. Appraisers also feared that the rule would force them to buy expensive fiduciary insurance and hire specialized counsel, as well as expose them to unwarranted litigation.

More to come: The DOL wants to work with the appraiser community to improve guidance for ESOP appraisers.