Article contributed by Harrison Taylor, Ellenoff Grossman & Schole LLP
On March 30, 2026, the U.S. Department of Labor (“DOL”) proposed a regulation that may create a path for private equity, real estate, cryptocurrency, and other “alternative assets” to be added to plan investment menus, and plan fiduciaries would be able to make these additions using a safe harbor that would limit breach of fiduciary duty claims. Here is the background, when it is expected to take effect, and some takeaways for fiduciaries.
On August 7, 2025, President Trump signed Executive Order 14330, “Democratizing Access to Alternative Assets for 401(k) Investors,” which sought to expand Americans’ access to alternative assets by enabling 401(k) plan fiduciaries to add them to plan investment menus. Alternative assets include private equity, real estate, infrastructure, cryptocurrencies, commodities, and lifetime income products. The order instructed the DOL to clarify how plan fiduciaries can fulfill their fiduciary obligations when adding alternative assets to their plan’s investment menu and to curb the litigation risk plan fiduciaries face when adding funds to their investment menu.
The heart of the Proposed Regulation is a process-based safe harbor. Importantly, the Proposed Regulation is asset neutral. It enables fiduciaries to avail themselves of the safe harbor when adding a new target date fund the same as if the fiduciaries were adding a cryptocurrency investment option to their plan’s investment menu. A committee that evaluates an investment option “objectively, thoroughly, and analytically” across six factors may earn a presumption that it acted prudently under ERISA. The safe harbor wouldn’t be bullet proof, but it would afford fiduciaries’ judgment “significant deference.”
The Proposed Regulation’s six factors are: (1) performance (risk-adjusted expected returns); (2) fees (appropriate in light of the value delivered, which doesn’t require the cheapest option); (3) liquidity (considered at both a plan and participant level); (4) valuation (impartial, timely, and accurate); (5) benchmarking (a “meaningful benchmark” with a similar strategy and risk profile); and (6) complexity (the fiduciary must understand the product).
Notably, the Proposed Regulation is not yet effective and will not become effective until the DOL issues a final regulation. A final regulation is expected in 2027 as the DOL received over 47,000 comments to the Proposed Regulation, which is expected to take the DOL several months to process and consider as it writes the final regulation. Additionally, the Supreme Court agreed to consider a case (see Anderson v. Intel) to decide what a “meaningful benchmark” is. The DOL will likely wait until the Supreme Court rules in that case to avoid a potential conflict between the Supreme Court’s ruling and the final regulation.
Although the Proposed Regulation is not yet effective, prudent fiduciaries should act now to educate themselves and to prepare for a new process to add investments to plan investment menus. Regardless of fiduciaries’ stance on alternative assets, the Proposed Regulation will likely impact all plans, for two reasons.
First, alternative asset investments may come into plan investment menus through the back door. Alternative assets may enter plans as components inside aggregated investments, such as target date funds. This common investment offering in 401(k) plans may add alternative assets without fiduciaries ever voting to add alternative assets. Fiduciaries should educate themselves on what changes may be coming to their current plan investment offerings and prepare for future investment pitches by learning more about alternative investments.
Second, the six factors will likely become the measuring stick for every investment menu decision. Plaintiffs’ lawyers and courts alike will treat them as the template of a sound process. If the DOL gives fiduciaries a safe harbor method to evaluate investment decisions, failing to utilize the safe harbor process may eventually become prima facie evidence of an imprudent process. Fiduciaries should educate themselves on the six factors and begin considering them when making decisions regarding their plan’s investment menu.
1. The Proposed Regulation would create a safe harbor, which is expected to reduce plaintiff allegations regarding breaches of the duty of prudence. However, the safe harbor is not an absolute bar to breach of prudence claims. Rather, it creates a presumption in favor of the fiduciaries, which plaintiffs could overcome, but the bar for doing so would be higher than what currently exists.
2. The safe harbor does not apply to monitoring either investment advice fiduciaries or the performance of investments after they are added to a plan’s investment lineup. The DOL indicated that it anticipates addressing this topic in upcoming guidance.
3. The Proposed Regulation would enable fiduciaries to prudently add alternative assets to an investment menu, but it applies to all investment menu additions, not just alternative assets.
4. Alternative assets may creep into plans through target date funds or other aggregated investment options. Speak with financial advisors to learn more about what is in your plan and what may be coming.
Harrison Taylor, counsel to Ellenoff Grossman & Schole LLP, focuses in the areas of executive compensation, employee benefits, and ERISA. Mr. Taylor’s experience includes counseling clients on executive compensation and employee benefits aspects of mergers and acquisitions, initial public offerings, and other transactions.
Mr. Taylor also regularly assists clients in designing and implementing employment, severance, deferred compensation, and equity incentive compensation arrangements.
Mr. Taylor’s practice also includes representing public companies in preparing proxy materials and securities filings related to executive compensation matters. Mr. Taylor can be reached at (212) 370-1300 or htaylor@egsllp.com.
