Key Takeaways
- • The Department of Labor issued a proposed rule on March 30, 2026, establishing a safe harbor for ERISA fiduciaries selecting alternative assets in 401(k) and participant-directed plans, contingent on demonstrating a prudent selection process across six key factors.
- • The framework prioritizes procedural prudence—how fiduciaries make decisions—rather than restricting specific investment types or mandating outcomes, aligning with established ERISA judicial standards and current institutional best practices.
- • Fiduciaries must evaluate risk-adjusted expected returns net of fees, among other criteria, when selecting designated investment alternatives, with particular clarification around valuation and liquidity considerations for non-publicly traded assets.
- • The proposed rule responds to Executive Order 14330 (August 7, 2025) and rescinded prior 2021 DOL guidance that cautioned small-plan fiduciaries against offering private equity, materially expanding the pathway for alternative asset access in defined contribution plans.
- • The safe harbor applies universally to all investments—traditional and alternative—positioning compliance as dependent on documented, objective, and analytical selection processes rather than investment classification.
Summary
On March 30, 2026, the U.S. Department of Labor released a proposed rule clarifying fiduciary duties in the selection of designated investment alternatives for participant-directed retirement plans, including 401(k) plans with exposure to alternative assets. The proposal establishes a safe harbor presuming fiduciary decisions prudent under the Employee Retirement Income Security Act of 1974 (ERISA) when fiduciaries consider six specified factors during the selection process. Importantly, the rule does not mandate or prohibit any particular investment type—except those already illegal—but instead focuses on the rigor and documentation of the decision-making methodology.
The proposed framework reflects the "procedural prudence" standard historically endorsed by courts and represents clarification rather than substantive departure from established practice. The safe harbor introduces notable nuance regarding the valuation and liquidity assessment of non-publicly traded assets, addressing longstanding ambiguities for plan sponsors and institutional investors evaluating alternative allocations. The guidance responds directly to Executive Order 14330, issued August 7, 2025, which mandated DOL review of alternative asset access in employer-sponsored defined contribution plans. Concurrently, the DOL rescinded 2021 guidance that had cautioned small-plan fiduciaries against offering private equity investments, materially reducing regulatory friction for alternative asset deployment at the plan level.
The six-factor framework requires fiduciaries to evaluate designated investment alternatives through a disciplined process. The first enumerated factor mandates consideration of a reasonable number of comparable alternatives and determination that risk-adjusted expected returns, net of fees, advance the plan's investment purpose by maximizing participant risk-adjusted returns. Fiduciaries must document objective, thorough, and analytical evaluation across all factors, with compliance assessments grounded in process quality rather than investment performance outcomes.
The safe harbor applies uniformly across investment categories—traditional and alternative alike—reinforcing that ERISA fiduciary duties depend on decision-making methodology rather than asset class labeling. This framework particularly benefits providers of alternative assets including private credit, hedge funds, private equity, and real estate, by establishing clear procedural requirements for plan inclusion. For institutional investors and family offices advising on plan design, the rule provides enhanced transparency and regulatory certainty for diversified allocation strategies within defined contribution structures.
The proposed framework reflects the "procedural prudence" standard historically endorsed by courts and represents clarification rather than substantive departure from established practice. The safe harbor introduces notable nuance regarding the valuation and liquidity assessment of non-publicly traded assets, addressing longstanding ambiguities for plan sponsors and institutional investors evaluating alternative allocations. The guidance responds directly to Executive Order 14330, issued August 7, 2025, which mandated DOL review of alternative asset access in employer-sponsored defined contribution plans. Concurrently, the DOL rescinded 2021 guidance that had cautioned small-plan fiduciaries against offering private equity investments, materially reducing regulatory friction for alternative asset deployment at the plan level.
The six-factor framework requires fiduciaries to evaluate designated investment alternatives through a disciplined process. The first enumerated factor mandates consideration of a reasonable number of comparable alternatives and determination that risk-adjusted expected returns, net of fees, advance the plan's investment purpose by maximizing participant risk-adjusted returns. Fiduciaries must document objective, thorough, and analytical evaluation across all factors, with compliance assessments grounded in process quality rather than investment performance outcomes.
The safe harbor applies uniformly across investment categories—traditional and alternative alike—reinforcing that ERISA fiduciary duties depend on decision-making methodology rather than asset class labeling. This framework particularly benefits providers of alternative assets including private credit, hedge funds, private equity, and real estate, by establishing clear procedural requirements for plan inclusion. For institutional investors and family offices advising on plan design, the rule provides enhanced transparency and regulatory certainty for diversified allocation strategies within defined contribution structures.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.