In March 2026, the U.S. Department of Labor (DOL) proposed a rule related to fiduciary prudence under the Employee Retirement Income Security Act of 1974 (ERISA). The proposed Fiduciary Duties in Selecting Designated Investment Alternatives rule clarifies fiduciary obligations when selecting investment options in defined contribution plans, including funds that contain private market investments, and provides safe harbor guidance.
The proposed rule implements an executive order from the Trump administration, directing the DOL to reexamine past and present guidance on what may be a prudent fiduciary process for considering and selecting investments with private market exposure and other alternative investments. The proposed rule aims to reduce litigation risk that the DOL perceives as constraining fiduciaries from offering investments that could improve participant outcomes.
No Change to the ERISA Fiduciary Standard
As private market exposure in defined contribution plan investments gains attention, one thing hasn’t changed: the fiduciary standard under ERISA remains the anchor for fiduciary investment decisions. ERISA requires fiduciaries to act:
- Solely in the interest of participants and beneficiaries
- For the exclusive purpose of providing benefits and paying reasonable plan expenses
Investment decisions cannot be driven by trends, external pressure, or non-financial objectives. Every decision must tie back to risk-adjusted financial outcomes for participants.
Safe Harbor Designed to Provide Legal Protections
The key feature of the proposed rule is a safe harbor for responsible plan fiduciaries selecting investment options for a plan lineup. It identifies six factors, outlined below, fiduciaries should consider during the process. If a fiduciary follows the described process with respect to these factors, the DOL intends for the fiduciary’s judgment to be presumed prudent under ERISA if challenged in court.
- Performance. Investments must be reasonably determined to maximize risk-adjusted financial returns, net of fees, and considered in the context of investment time horizons.
- Fees. A fiduciary must consider fees and expenses in the selection of an investment option in the plan lineup and is not required to select the lowest cost investment.
- Liquidity. A fiduciary must appropriately determine that the investment option provides sufficient liquidity to meet plan and participant needs.
- Valuation. Investments must have adequate measures to ensure timely and accurate value, as determined through a conflict-free process.
- Performance Benchmarks. Each investment must have a meaningful benchmark with similar mandates, strategies, objectives, and risks.
- Complexity. Fiduciaries must have the skills and knowledge to understand an investment or seek assistance from qualified professionals. The proposed rule makes clear that complexity alone does not disqualify an investment.
Where This Matters Most Right Now
Consistent with ERISA-related Supreme Court rulings, the proposed rule is clear that the same ERISA fiduciary investment standard applies to all investment options, regardless of asset class or private or public market exposure. The law also is clear that any ERISA investment decision must be supported by a prudent process that considers all relevant facts and circumstances.
The proposal is open for public comment through June 1, 2026. It may be reasonable to expect changes to the proposed rule, including safe harbors in response to such comments.
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