April 6, 2026

Show Your Work: The DOL Proposes New Fiduciary Roadmap for 401(k) Investments

Libby Brown, Amberlee Conley, Anne Meyer Snell & Wilmer + Follow Contact LinkedIn Facebook X Send Embed

On March 31, 2026, the Department of Labor (the “DOL”) published proposed regulations (the “Proposed Rule”) addressing fiduciary responsibilities in selecting investment alternatives for participant-directed individual account plans, including 401(k) plans. As detailed further below, the Proposed Rule introduces a structured framework and process-based safe harbor for fiduciaries selecting investment options (the “Safe Harbor”).

Section 404(a)(1)(B) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), sets forth the fiduciary duty of prudence, which requires plan fiduciaries to act “with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.” Consistent with Executive Order 14330: Democratizing Access to Alternative Assets for 401(k) Investors (the “Order”), the Proposed Rule seeks to clarify how the duty of prudence applies to the selection of investment options in an effort to curtail litigation risk that may deter plan fiduciaries from selecting investments they would otherwise consider appropriate.

The DOL did not establish an effective date for the Proposed Rule and did not indicate that plan fiduciaries may rely on it before final regulations are issued. Accordingly, the Proposed Rule does not create new compliance obligations at this time. Plan fiduciaries cannot rely on the Safe Harbor until the DOL issues further guidance. The DOL has invited public comments, with submissions due by June 1, 2026.

Below is an overview of the Safe Harbor and some initial key takeaways for plan sponsors to consider.

Overview of the Proposed Safe Harbor

The Safe Harbor, which is optional, offers fiduciaries a rebuttable presumption of prudence under ERISA with respect to the selection of a “designated investment alternative.” The Safe Harbor requires the fiduciary to objectively, thoroughly, and analytically consider, and make determinations on, at least six factors identified in the Proposed Rule, and to follow certain procedures set forth in the Proposed Rule for each factor. The Proposed Rule notes that the six identified factors, each summarized below, are non-exhaustive, meaning it may be appropriate for fiduciaries to consider other factors.

1. Performance – Whether certain performance metrics of the investment are competitive, considering a reasonable number of similar investments.

2. Fees – Whether the investment’s fees and expenses are appropriate, considering a reasonable number of similar investments.

3. Liquidity – Whether the investment has sufficient liquidity to meet anticipated needs.

4. Valuation – Whether the investment has adopted adequate valuation measures.

5. Performance Benchmark – Whether the investment has a meaningful benchmark, and how the investment’s returns compare to said benchmark.

6. Complexity – The complexity of the investment and whether the fiduciary has sufficient ability to comprehend the investment or must seek assistance to do so.
   The Safe Harbor would apply to the selection of any “designated investment alternative,” which the Proposed Rule defines broadly to generally include any investment alternative designated by the plan into which participants may direct their investments, including a qualified default investment alternative (“QDIA”), but excluding brokerage windows and similar arrangements.

Key Takeaways

The Proposed Rule is an important development for plan sponsors and fiduciaries. The Safe Harbor framework may reduce litigation risk when selecting investment options. If fiduciaries follow a well-documented, thoughtful process, their decisions would benefit from a rebuttable presumption of prudence, effectively shifting the burden to the challenger to demonstrate that the fiduciary’s process was deficient.

Importantly, the Safe Harbor is asset-neutral with a much broader applicability than the alternative asset classes originally targeted in the Order. It applies equally to traditional investments (such as cash equivalents and publicly traded securities) and alternative asset classes (including private equity, digital assets, real estate, and commodities) as well as lifetime income products, signaling that neither traditional nor alternative investments should be viewed as inherently prudent or imprudent.

Although the Proposed Rule is still in the proposed stage and may face legal challenges, it provides a useful roadmap. Investment committees may want to review their current processes and investment policy statements to see how they align with the Safe Harbor’s six-factor framework. Notably, the Proposed Rule focuses only on the selection of investment options, not the ongoing duty to monitor them or the curation of an investment menu as a whole. Additional guidance on monitoring may come later, and the DOL indicates in the preamble to the Proposed Rule that its general view is that the same six-factor framework will apply in the monitoring context.

Finally, in a post- Loper Bright environment where courts are no longer required to defer to agency interpretations under Chevron, it remains unclear how much weight courts will ultimately give to the Safe Harbor presumption. Plan fiduciaries may want to keep this evolving judicial landscape in mind when evaluating the degree of protection the Safe Harbor may ultimately afford.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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