Fair Market Value

• Employee stock ownership plans are qualified retirement plans governed by the Employee Retirement Income Security Act (ERISA). ERISA requires employee stock ownership plans to pay no more than “adequate consideration,” or fair market value, as reasonably determined by a trustee of an employee stock ownership trust, when investing in employer securities. The United States Department of Labor defines fair market value as:

• “the price at which an asset would change hands between a willing buyer and a willing seller, when the former is not under any compulsion to buy and the latter is not under any compulsion to sell and both parties are able, as well as willing, to trade and are well informed about the asset and the market for such asset.”