EBSA Nominee Daniel Aronowitz Pledges to "End the War on ESOPs"

Daniel Aronowitz, the nominee to head the Employee Benefit Security Administration (EBSA) in the Department of Labor (DOL), promised to “end the war on ESOPs.”

At Aronowitz’s June 5, 2025, confirmation hearing (the segment with Aronowitz starts at 35:30 in the video), Alaska Republican Senator Lisa Murkowski (who once worked for an ESOP company) noted that Aronowitz was “probably very familiar with the angst that has been expressed by some that ESOPs have been operating under a patchwork of litigation and there has been a need for a single clear regulatory definition of good-faith effort of valuation of ESOP stock.”

Aronowitz replied, "I believe that Congress wants ESOPs, and everybody is for ESOPs except for the DOL for the last 20 years. I will end the war on ESOPs. I think it's the best way for employees to get an additional benefit and ownership in an American company. The valuation companies have all been sued by the DOL. . . . it can't be right that every single one of them is doing it wrong. What the Department is doing is nitpicking the professional judgment of the valuation professionals. I'm going to put an end to that. Because I think unless there is a clear conflict of interest, then the valuation is appropriate when done by an independent valuation firm."

More broadly, Aronowitz said EBSA will “end the practice of open-ended investigations that go on for years. We will end the bias against ESOPs and other legitimate ways to expand retirement benefits and ownership to America’s workers. And we will end the regulatory abuse of common-interest agreements with plaintiff lawyers. EBSA’s enforcement will be fair, even-handed, and efficient. . . . We will restore discretion to plan fiduciaries as Congress intended in the ERISA statute so that fiduciaries, not the government or plaintiff lawyers, decide what is best for plan participants.”

Many people in the ESOP community have been concerned that the DOL has taken an excessively aggressive stance against ESOPs, particularly in investigations and litigation concerning whether the ESOP overpaid for shares in the initial transaction. On the other hand, although abusive ESOP transactions are outliers, their existence suggests the need for both industry self-monitoring and a role for the DOL and the IRS. In any event, the DOL has been much less active on issues with ongoing ESOPs other than administrative errors. However, in recent years, both the number of investigations and the number of lawsuits initiated by the DOL have declined significantly, as described in our ESOP and 401(k) Plan Employer Stock Litigation Review 1990–2024. Recently proposed and withdrawn valuation regulations, however, would have created some significant problems for ESOP transactions.