DOL Proposes Safe Harbor for 401(k) Alternative Investment Fiduciary Duties

April 15, 2026

DOL Releases Proposed Rule to Clarify ERISA Fiduciary Duties for Alternative Investments in 401(k) Plans

Fanny Patel, Matthew Zischke Nelson Mullins Riley & Scarborough LLP + Follow Contact LinkedIn Facebook X Send Embed

The U.S. Department of Labor (“DOL”) recently published a Notice of Proposed Rulemaking (“NPRM”) titled “Fiduciary Duties in Selecting Designated Investment Alternatives.” The NPRM would pave the way for participant-directed defined contribution plans to offer alternative investments by introducing a “process-based safe harbor” for fiduciaries to apply when selecting alternative investments in a manner consistent with their fiduciary obligations under the Employee Retirement Income Security Act of 1974 (“ERISA”).

Background

The NPRM implements President Trump’s Executive Order 14330, Democratizing Access to Alternative Assets for 401(k) Investors (the “EO”). The EO directed the DOL to “propose regulations or other guidance, including appropriately calibrated safe harbors, that clarify the ERISA fiduciary duties owed to plan participants when asset allocation funds with investments in alternative assets are made available as investment options.”

Consistent with that directive, the NPRM clarifies that ERISA’s duty of prudence governs the selection of a plan’s investment alternatives and provides guidance on how plan fiduciaries can satisfy that duty using the process-based safe harbor framework.

Notably, however, the NPRM does not limit the safe harbor to asset allocation funds holding alternative assets. Instead, the NPRM expands the framework to the selection of any alternative investments offered on a plan’s investment menu. According to the DOL, this broader approach is intended to avoid suggesting that asset allocation funds are either favored or disfavored and to reflect the principle that ERISA’s duty of prudence applies to the selection of any investment without any categorical restriction based on investment type.

Key Provisions of the Process-Based Safe Harbor Framework

The NPRM identifies six non-exhaustive factors a plan fiduciary should “objectively, thoroughly, and analytically” consider when selecting a designated investment alternative for the plan’s investment menu:

1. Performance. A fiduciary must consider a reasonable number of similar investment alternatives and then determine whether the designated investment alternative’s risk-adjusted expected returns, net of fees and expenses, are appropriate, taking into account general investor risks and participants’ risk capacity over the designated investment alternative’s time horizon.

2. Fees. A fiduciary must consider a reasonable number of similar investment alternatives and then determine whether the designated investment alternative’s fees and expenses are appropriate, taking into account their risk-adjusted expected returns, net of fees and expenses, and their value proposition to the plan (e.g., benefits, features, or services other than risk-adjusted returns net of fees).

3. Liquidity. A fiduciary must consider whether the designated investment alternative’s liquidity is sufficient to meet the needs of the plan and the plan participants.

4. Valuation. A fiduciary must consider whether the designated investment alternative has adopted adequate measures to ensure that it is capable of being timely and accurately valued in accordance with the terms of the plan.

5. Benchmarking. A fiduciary must compare a designated investment alternative’s risk-adjusted expected returns, net of fees, to a meaningful benchmark.

6. Complexity. A fiduciary must consider the designated investment alternative’s complexity and determine whether the fiduciary’s skills, knowledge, experience, and capacity to understand the designated investment alternative are sufficient to discharge its obligations under ERISA and the plan documents, or whether the fiduciary should seek assistance from a qualified adviser when evaluating the designated investment alternative.

The NPRM is grounded in two key principles underlying ERISA’s duty of prudence: (1) procedural prudence is at the core of proper fiduciary action, and (2) plan fiduciaries have broad discretion and flexibility when they follow a prudent and well-documented process for selecting investment options. Consistent with those principles, the NPRM states that when a plan fiduciary discharges its duty of prudence through the safe harbor framework, the selection of a designated investment alternative is entitled to a “presumption of prudence.”

The framework applies to defined contribution plans in which participants and beneficiaries may direct the investment of their accounts among the plan’s designated investment alternatives. Accordingly, the safe harbor does not apply to brokerage windows, self-directed brokerage accounts, or other similar arrangements in which participants and beneficiaries select investments beyond those designated by plan fiduciaries.

Key Takeaways

Submit comments to the DOL. The NPRM’s public comment period closes on June 1, 2026. The DOL specifically invites public comments on the applicability of the six safe harbor factors and on any supplemental factors that could strengthen the framework. For example, the DOL seeks comments on risks associated with the valuation and asset selection process for certain private investment vehicles, such as continuation funds.

Monitor for further DOL guidance. The regulatory landscape for alternative investments in defined contribution plans continues to evolve. The DOL anticipates issuing additional guidance regarding plan fiduciaries’ ongoing duty to monitor designated investment alternatives after they are added to a plan’s investment menu.

Review existing procedures for investment alternative selection. In anticipation of the final rule, retirement plan committees and other plan fiduciaries should begin to evaluate their process for selecting investment options on the plan’s investment menu against the safe harbor framework.

Review existing service provider arrangements. Retirement plan committees and other plan fiduciaries should also begin review of their advisory agreements, including those with ERISA section 3(21) investment advisers, ERISA section 3(38) investment managers, and qualified professional asset managers, as applicable, in light of the framework’s core factors.

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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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