DOL proposes safe harbor for alternative investments in 401(k)s

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The Department of Labor (DOL) issued a proposed regulation (RIN 1210-AC38) on March 31, intended to clarify a fiduciary’s duty of prudence under the Employee Retirement Income Security Act of 1974 (ERISA) in connection with the selection of investment alternatives for a participant-directed individual account plan, including a 401(k) plan.

The proposed regulation also includes a safe harbor process that, if followed, would provide a presumption of prudence that may be entitled to deference.

The ERISA “duty of prudence” generally provides that a plan fiduciary must discharge its duties with respect to the plan (including the selection of investment alternatives) with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person, acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of a like character and with like aims.

The proposed regulation is intended to implement Section 3(c) of President Trump’s Executive Order 14330, Democratizing Access to Alternative Assets for 401(k) Investors, which was issued in August 2025 and instructed the DOL to clarify, within 180 days of the order, the DOL’s position on alternative assets and the appropriate fiduciary process associated with offering alternative assets under 401(k) plans.

The order generally defined alternative assets to include, among potentially others, the following types of investments:

• Private market investments, including direct and indirect interests in equity, debt, or other financial instruments that are not traded on public exchanges, including those where the managers of such investments, if applicable, seek to take an active role in the management of such companies
• Direct and indirect interests in real estate, including debt instruments secured by direct or indirect interests in real estate
• Holdings in actively managed investment vehicles that are investing in digital assets
• Direct and indirect investments in commodities
• Direct and indirect interests in projects financing infrastructure development
• Lifetime income investment strategies, including longevity risk-sharing pools

The DOL indicated that the overarching goal of the proposed regulation is to alleviate certain regulatory burdens and litigation risk that interferes with the ability of American workers to achieve, through their retirement assets, the competitive returns and asset diversification necessary to secure a dignified and comfortable retirement.

The DOL also explained that the three key principles that form the bedrock of the proposed regulation include:

1. A need to affirm ERISA as a law grounded in process
2. ERISA gives maximum discretion and flexibility to plan fiduciaries in selecting investment alternatives, including alternative investments
3. When ERISA fiduciary decision making follows a prudent process – including the safe harbor process reflected in the proposed regulations – arbiters of disputes should defer to fiduciaries under a presumption of prudence.

Although the executive order directed the DOL to focus its guidance on fiduciary responsibilities in connection with offering alternative investments, the proposed regulation is not limited to just those types of funds. Rather, the proposed regulation addresses the duty of prudence with respect to the selection of any investment alternative under a participant-directed individual account plan.

The preamble to the proposed regulation also notes that it does not address ERISA’s well-established duty for fiduciaries to continue to monitor investment alternatives at regular intervals after their initial selection. The DOL explained that it anticipates issuing interpretative guidance in the near term regarding this ongoing duty to continue to monitor investment alternatives after their initial selection.