Department of Labor proposes regulation on selecting investment options for individual account plans, including alternative investments

On March 30, 2026, the United States Department of Labor (DOL) issued a proposed regulation addressing the selection of investment options for participant-directed individual account retirement plans. The proposal outlines fiduciary obligations under the Employee Retirement Income Security Act (ERISA) when selecting designated investment options, including those containing alternative assets. 

The guidance was issued in response to Executive Order (EO) 14330, “Democratizing Access to Alternative Assets for 401(k) Investors,” issued August 7, 2025. The DOL’s stated goal is to alleviate certain regulatory burdens and litigation risks by clarifying that ERISA gives fiduciaries the discretion and flexibility to evaluate whether designated investment alternatives – including those that contain alternative assets – are appropriate for participant-directed individual account plans. To that end, the proposed regulation supplements and expands on the existing Investment Duties Regulation (29 CFR § 2550.404a-1), promulgated in 1979, by further defining fiduciarily prudent actions.

The DOL describes three “bedrock” principles underpinning the proposal. This alert discusses these principles, specific requirements under the proposed regulation, and potential considerations for fiduciaries.

Principle 1: ERISA as a process based statute

First, the DOL states that ERISA is “a law grounded in process,” and later elaborates that fiduciary prudence should be evaluated based on the process used “at the time of the investment decision, and not in hindsight based on the investment results.” Consistent with this principle, the proposed regulation:

• Identifies the following six safe harbor factors that a fiduciary must “objectively, thoroughly, and analytically consider” when selecting designated investment alternatives:
  
  
  1. Performance, including consideration of risk-adjusted returns over an appropriate time horizon
     
     
  2. Fees, including consideration of fees and expenses in relation to risk-adjusted returns
     
     
  3. Liquidity, including consideration of liquidity needs at both the plan and participant levels, while recognizing that some illiquid investments may be appropriate for long-term retirement savings
     
     
  4. Valuation, including consideration of whether investments can be timely and accurately valued and any conflicts of interest in the valuation of non-publicly traded assets
     
     
  5. Benchmarking, including comparison of risk-adjusted expected returns to a meaningful benchmark
     
     
  6. Complexity, including consideration of whether fiduciaries have sufficient knowledge and expertise to understand the investment or need to seek assistance from qualified professional advisors 
     
     
• Requires fiduciaries to give appropriate consideration to the relevant facts and circumstances – a requirement similar to the DOL’s 1979 Investment Duties Regulation under ERISA, but with further explanation on what it means “to act accordingly” in the context of selecting designated investment options.
  
  
• Provides examples for each of the six factors that would demonstrate that the fiduciary followed a prudent process, gave appropriate consideration to the relevant facts and circumstances, and acted accordingly.

Principle 2: Fiduciary discretion and asset neutrality

Second, the DOL states that ERISA gives maximum discretion and flexibility to plan fiduciaries in selecting designated investment alternatives, including the alternative investments described in EO 14330. Key points related to this principle are as follows:

• ERISA does not require or restrict any specific type of designated investment alternative, as long as the fiduciary engages in a prudent selection process, and no investment type is considered inherently prudent or imprudent (provided they are not illegal investments).
  
  
• The proposed regulation states the proposed safe harbor is intended to be asset neutral, such that the same prudent process applies to the selection of alternative assets as described in EO 14330, or any other designated investment alternative.

• Although fiduciaries are required to act prudently in establishing a diversified overall menu of designated investment alternatives to allow participants to maximize risk-adjusted returns across their portfolio, the proposed regulation does not describe how this overall menu should be designed.

Principle 3: Presumption of prudence and deference

Third, the DOL states that fiduciary decision-making that follows a prudent process should receive a presumption of prudence and deference from arbiters of disputes. Accordingly, the proposed regulation:

• Establishes a process-based safe harbor under which a fiduciary’s decision-making regarding any of the six factors described above is presumed to be reasonable and is entitled to significant deference if the fiduciary objectively, thoroughly, and analytically considers and makes a determination utilizing the described process.
  
  
• Explains that, if fiduciaries follow the prudent process-based safe harbor under the regulation, fiduciary decision-making should be entitled to deference from the courts under the DOL’s authority to issue safe harbors under ERISA section 505 and US Supreme Court precedents.
  
  
• Emphasizes that plaintiffs bear the burdens of proof and persuasion on the elements of their claim, and a fiduciary facing challenges to those decisions should be confident that it has fulfilled its duties by actively demonstrating compliance with the regulation’s safe harbor.

Looking ahead

The proposed regulation is subject to a public comment period, with comments due by June 1, 2026. While the DOL has not provided a timeline for issuing a final regulation, fiduciaries may wish to begin reviewing their investment policy statements and other fiduciary governance documents to assess internal processes, the potential need for additional advisors, and possible adjustments to the investment lineup in light of any final safe harbor. Fiduciaries may also continue to monitor developments related to this proposed regulation and any other official guidance addressing alternative investments.

This analysis is provided for informational purposes only and does not constitute legal advice. For more information, please contact the authors.