DOL Offers New Safe Harbor to Fiduciaries

On March 31 the Department of Labor issued a proposed regulation intended to provide a “safe harbor” for retirement plan fiduciaries to apply in selecting investment alternatives. The proposed regulation was issued in response to Executive Order 14330, issued by Pres. Trump in August 2025; that Order directed the DOL to issue guidance to facilitate investments in six classes of alternative investments (such as private equity and debt markets and digital assets). See Doors to Swing Open For Alternative Investments.  

The Basics

The proposed regulation sidesteps the directives contained in the Executive Order. Rather than providing guidance focused on alternative investments, the DOL has identified six “factors” to be considered by plan fiduciaries in selecting any investments and a “process” to be followed by fiduciaries with respect to each factor. The proposed regulation then concludes that if a fiduciary follows this process with respect to a factor, the fiduciary’s judgment is “presumed” to have met ERISA’s fiduciary standards.

The six factors and the process to be followed are as follows:

• Performance: Fiduciaries evaluate risk-adjusted expected returns over an appropriate time horizon in light of participant needs. They satisfy the standard by considering relevant risk metrics and long-term performance data, and by selecting investments that maximize net returns for a given level of risk. 
• Fees: Fiduciaries compare a reasonable range of similar alternatives and determine that fees are appropriate relative to expected returns and other value provided. They are not required to choose the lowest-cost option if higher fees are justified by additional benefits or services. 
• Liquidity: Fiduciaries ensure the investment provides sufficient liquidity to meet anticipated participant and plan-level needs. The standard is met where the fiduciary reasonably evaluates liquidity constraints or relies on investments with established liquidity risk management frameworks. 
• Valuation: Fiduciaries ensure that investments can be valued accurately and in a timely manner. They satisfy this requirement by relying on observable market prices or well-established, conflict-free valuation methodologies that they have reviewed and understood. 
• Benchmark: Fiduciaries assess investments against meaningful benchmarks with similar strategies, risks, and objectives. The requirement is met where they use appropriate comparators and reasonably evaluate performance relative to those benchmarks. 
• Complexity: Fiduciaries determine whether they have the expertise to understand the investment or need to obtain professional advice. They satisfy this duty by conducting adequate due diligence or appropriately relying on qualified, independent experts.

Some Observations

The executive order placed a heavy burden on the DOL—facilitate investments in alternative investments and relieve some of the litigation burden faced by fiduciaries. The proposed regulation makes some progress toward these objectives, but there are limits on what the DOL can actually accomplish by administrative declaration.

• An Inherent Mismatch. The rule doesn’t really solve the basic mismatch between alternative investments and how DC plans actually work—it just makes it easier for fiduciaries to try to manage around it. At a high level, the DOL is saying: don’t worry about the label (private equity, hedge funds, etc.), just follow a careful process. That sounds sensible, but it sidesteps the more practical problem: many alternatives weren’t built for a system where participants can move money daily, expect transparent pricing, and need simple, understandable options.

That tension shows up in a few obvious places. DC plans depend on regular liquidity, clean and timely valuations, and easy administration—while many alternatives come with lockups, pricing uncertainty, and more complicated fee structures. The rule acknowledges those issues by telling fiduciaries to think hard about liquidity, valuation, and complexity, but it doesn’t change the underlying economics of the products themselves. In practice, that means fiduciaries are being asked to fit square pegs into round holes, just more carefully and with better documentation.

Where this likely lands is not widespread direct use of alternatives, but more use of “wrapped” versions—target date funds, managed accounts, or other structures that smooth out the rough edges. While these structures can help, they don’t eliminate the tradeoffs—they just make them less visible to participants and rely on the issuers of these products to develop workarounds that address this mismatch. So the proposed regulation lowers the legal barriers, but the real-world fit problem is still there, and asset managers and fiduciaries will be the ones carrying that burden. As a result, whether alternative investments gain traction in DC plans will depend less on this regulation and more on product design.

• Product Design Will Drive Outcomes. As noted above, if alternative investments gain traction in DC plans, it will be driven less by this regulation and more by product design. The real constraint on use of these investments is not likely to be fiduciary discretion, but whether asset managers can structure products that meet DC requirements—liquidity, valuation, and simplicity—without losing the characteristics that define alternative investments. The regulation lowers legal barriers, but adoption will ultimately depend on whether the market can engineer workable solutions.

• Litigation is Not Going Away. The proposed rule is meant to make it easier for courts to dismiss weak lawsuits early, before they become expensive. It gives judges a clearer checklist for evaluating claims and may help get rid of the most generic cases. But it doesn’t change a basic reality of the legal system: if a complaint is detailed enough, courts generally have to assume it’s true at the outset and let the case move forward.

That creates a practical limit. The rule focuses on whether fiduciaries followed a good decision-making process—but the details of that process usually aren’t available until later in a case. So lawsuits will continue to rely on indirect signals like fees, performance, and comparisons to other plans. In response, complaints will simply be written to match the new framework, and defenses will evolve alongside them.

The likely result is not fewer lawsuits, but more structured ones. Early-stage legal arguments may become more detailed and technical, not simpler or cheaper. Any real reduction in litigation costs would come later—if courts give more weight to a well-documented process. But at the front end, this rule is more about changing how cases are argued than reducing how many are brought.

• A Shift Toward Documentation and Advisors.
  The rule implicitly pushes fiduciaries toward more formalized processes and greater reliance on outside expertise. Across all six factors, the “safe harbor” examples repeatedly emphasize documented analysis, written representations, and consultation with investment professionals. That is not accidental—the regulation is less about changing what fiduciaries must decide and more about how they must demonstrate they got there.

In practice, this will likely increase the role of consultants, advisors, and third-party fiduciaries, particularly for more complex or less liquid investments. It may also raise the baseline cost of compliance, as fiduciaries invest more heavily in process, reporting, and documentation to fit within the regulatory frameworks. For larger plans, that shift may be manageable or even welcome; for smaller plans, it may have the opposite effect—reinforcing a bias toward simpler, more standardized investment menus rather than expanding access to alternatives.

Conclusion

The DOL has issued a proposed regulation and stakeholders with significant economic interests (e.g., private equity and crypto funds) will undoubtedly weigh in during the comment period. But the final rule—like this proposal—will face the same structural limits. Administrative guidance can shape process and expectations, but it cannot fully resolve the tensions between investment innovation, fiduciary risk, and the operational realities of DC plans and it cannot modify the procedures used by courts in evaluating fiduciary litigation.