U.S. Department of Labor Proposed Rule on Fiduciary Duties and Investment Selection Under ERISA

On March 30, 2026, the U.S. Department of Labor (DOL) released for public comment a proposed rule addressing fiduciary duties in the selection of designated investment alternatives for participant-directed retirement plans, with comments due on or before June 1, 2026.  The proposal implements Section 3(c) of Executive Order 14330, “Democratizing Access to Alternative Assets for 401(k) Investors,” issued on August 7, 2025, and reflects the DOL’s continued reassessment of how ERISA fiduciary standards apply in an evolving investment landscape.

ERISA does not prohibit fiduciaries from offering any particular asset class.  Historically, however, alternative investments have drawn heightened scrutiny due to concerns regarding valuation, liquidity, fees and complexity.  Under the existing framework, fiduciaries selecting investment options for defined contribution plans must satisfy ERISA’s duty of prudence, acting with the care, skill, prudence and diligence that a prudent person familiar with such matters would exercise under similar circumstances.  Given the principles-based nature of this standard, fiduciaries have long faced uncertainty as to whether the inclusion of alternative investments could later be challenged as imprudent.

The proposed rule is intended to mitigate this risk by establishing a process-based safe harbor for fiduciaries evaluating alternative investment options.  The rule confirms that fiduciaries may consider a broad range of investment strategies, provided their decisions are based on an objective, thorough and analytical decision-making process that appropriately accounts for relevant facts and circumstances.  To that end, the proposal identifies a non-exclusive set of factors that fiduciaries should consider, as applicable, when selecting an investment alternative, including performance, fees, liquidity, valuation, meaningful benchmarking and investment complexity.  These factors are intended to guide, but not limit, the fiduciary’s analysis based on the relevant facts and circumstances.  Where a fiduciary conducts a disciplined and well-documented evaluation of these and other relevant considerations, the fiduciary will be presumed, based on the facts and circumstances, to have satisfied ERISA’s prudence requirement with respect to the selection decision.

In practical terms, the proposal shifts the analytical focus away from whether a particular asset class is per se appropriate and toward whether the fiduciary’s process can withstand scrutiny.  For plan sponsors and fiduciaries considering alternative investments, this places increased emphasis on the design, documentation and ongoing application of the investment selection framework, including how liquidity constraints, valuation methodologies and benchmarking limitations are evaluated and monitored over time.  While the proposal does not eliminate fiduciary risk, it provides a clearer roadmap for managing that risk within ERISA’s principles-based framework.

The significance of the proposal is not that it changes the substantive standard of prudence, but that it more clearly defines the process required to satisfy it.  The ultimate impact on market practice will depend on how fiduciaries implement these principles in specific contexts, but if adopted substantially as proposed, the rule is likely to facilitate broader consideration of alternative investments within participant-directed retirement plans.