{"database": "openregs", "table": "crs_reports", "rows": [["IF13228", "Department of Labor\u2019s Proposed Regulation on Fiduciary Duties in Selecting Designated Investment Alternatives", "2026-05-15T04:00:00Z", "2026-05-16T04:53:13Z", "Active", "Resources", "John J. Topoleski, Elizabeth A. Myers", null, "Introduction\nThe fiduciary standards in the Employee Retirement Income Security Act of 1974 (ERISA; P.L. 93-406) require that individuals (referred to as fiduciaries) who make decisions in private-sector pension plans adhere to specified standards of conduct. The standards include an obligation to act prudently and for the exclusive purpose of providing benefits to participants and beneficiaries. Among the individuals who are fiduciaries are those who choose plan investments in defined contribution (DC) plans (such as 401(k) plans).\nIn DC plans, participants have individual retirement savings accounts in which contributions by employees, employers, or both are invested. DC plans typically offer their participants a variety of investments, such as mutual funds, collective investment trusts (CITs), target date funds, employer stock, and annuities or other lifetime income products. The investment options that DC plan sponsors provide to their participants are called designated investment alternatives (DIAs).\nIn recent years, various stakeholders have expressed interest in expanding investment options in 401(k) plans to include alternative assets, such as private investments (e.g., private equity) and digital assets (e.g., cryptocurrencies). Proponents say that the benefits of incorporating these investments include the potential for higher investment returns and increased portfolio diversification. Opponents note the risky and speculative nature of these investments, the high and sometimes opaque nature of private equity fees, and concerns about the liquidity of these investments.\nERISA does not restrict the investments a 401(k) plan sponsor can offer; however, plan sponsors generally act cautiously for a number of reasons, such as the obligation to act prudently and the possibility of lawsuits by plan participants for perceived violations of fiduciary duty. \nRegulatory History\nIn 1979, DOL issued a regulation titled \u201cInvestment Duties,\u201d which said that a fiduciary has satisfied their duties if they have given \u201cappropriate consideration to those facts and circumstances\u201d relevant to the particular investment and has \u201cacted accordingly.\u201d\nIn recent years, DOL has addressed the use of alternative assets in DC plans. In response to efforts to include cryptocurrency in DC plans, on March 10, 2022, the Department of Labor (DOL) issued a Compliance Assistance Release, \u201c401(k) Plan Investments in Cryptocurrencies,\u2019\u201d in which the department expressed  \u201cserious concerns\u201d about plan fiduciaries\u2019 decisions to allow DC plan participants to invest in cryptocurrencies. On May 28, 2025, DOL rescinded the March 2022 compliance release.\nRegarding private equity, in a June 3, 2020, Information Letter, DOL indicated that offering \u201ca professionally managed asset allocation fund with a private equity component,\u201d as described in the letter, would not violate the fiduciary\u2019s duties. On December 21, 2021, DOL issued a supplemental statement cautioning its applicability outside of the context of the 2020 Information Letter. On August 12, 2025, DOL rescinded the supplemental statement. \nOn August 7, 2025, President Trump issued Executive Order 14330 directing DOL to clarify its \u201cposition on alternative assets and the appropriate fiduciary process associated with offering asset allocation funds containing investments in alternative assets under ERISA.\u201d The executive order defined \u201calternative assets\u201d as private market instruments (such as private equity and private credit that are not traded on public exchanges), real estate, digital assets, commodities, infrastructure projects, and lifetime income investment strategies.\nDOL\u2019s 2026 Proposed Regulation\nOn March 31, 2026, DOL issued a proposed regulation titled \u201cFiduciary Duties in Selecting Designated Investment Alternatives,\u201d indicating that it \u201csupplements and expands on the 1979 Investment Duties Regulation.\u201d The proposed regulation \u201cclarifies, and provides a safe harbor for, a fiduciary\u2019s duty of prudence\u201d under ERISA \u201cin connection with selecting designated investment alternatives for a participant-directed individual account plan, including asset allocation funds that include alternative assets.\u201d DOL is accepting comments on the proposed regulation through June 1, 2026. \nWhile E.O. 14330 specifically addressed alternative assets, DOL describes the proposed regulation as \u201casset neutral\u201d and therefore applicable to any potential DIA. The proposed regulation defines a DIA as an investment alternative \u201cdesignated by the plan into which participants and beneficiaries may direct the investment of assets held in, or contributed to, their individual accounts, including a qualified default investment alternative.\u201d The proposal specifically excludes brokerage windows from the definition of DIAs. A brokerage window is an arrangement within a DC plan through which participants may purchase a wide range of investments beyond those selected by the plan. About 25% of plans offer brokerage windows.\nDOL indicated that the goal of the proposed regulation is \u201cto alleviate certain regulatory burdens and litigation risk that interfere with the ability of American workers to achieve, through their retirement accounts, the competitive returns and asset diversification necessary to secure a dignified and comfortable retirement.\u201d To support this goal, DOL identifies three key principles of the proposal: (1) it affirms ERISA as a law grounded in process, (2) ERISA gives maximum discretion and flexibility to plan fiduciaries in selecting DIAs, and (3) when fiduciaries follow a prudent process, arbiters of disputes should defer to fiduciaries under a presumption of prudence.\nThe proposal begins with a discussion of the general duties of prudence by plan fiduciaries and statements that selecting DIAs is a fiduciary act and that prudent fiduciaries have maximum discretion to select investments to further the purposes of the plan. DOL notes that there is no requirement or restriction on DIAs that are otherwise legal. For example, a plan could not include an investment in a  sanctioned program or country. \nThe proposal notes that fiduciaries have the \u201cduty to act prudently when establishing a plan investment menu to maximize risk-adjusted returns\u201d and that prudence \u201crequires appropriate consideration of all relevant factors.\u201d\nSafe Harbor Factors in the Proposed Regulation\nThe proposal provides a process-based safe harbor for fiduciaries to use when selecting DIAs. DOL identifies six (non-exhaustive) factors for a fiduciary to \u201cobjectively, thoroughly, and analytically\u201d consider when selecting DIAs. If fiduciaries follow the process with respect to the factors (which may include relying on recommendations from outside fiduciaries), then \u201cthe plan fiduciary\u2019s judgment with respect to the particular factor or factors, including the relationship between the factors, is presumed to have met the duties\u201d in ERISA.\nThe six factors in the proposed regulation include performance, fees, liquidity, complexity, performance benchmarks, and valuation. Within the six factors, the proposal provides 20 examples in total as illustrations of what DOL believes would (and would not) be considered prudent processes. The factors are summarized as follows:\nPerformance. DOL indicates that fiduciaries do not have to try to achieve the highest absolute returns. Rather, this factor says to consider the \u201crisk-adjusted expected returns, over an appropriate time-horizon, of the designated investment alternative, net of anticipated fees and expenses.\u201d\nFees. DOL notes that fiduciaries are not required to choose DIAs with the lowest fees. Rather they must determine that the fees are \u201cappropriate, taking into account its risk-adjusted expected returns and any other value\u201d that the DIA brings to the plan. DOL says that \u201ca prudent plan fiduciary could choose to pay more in exchange for greater services.\u201d\nLiquidity. Liquidity refers to how easily an investment can be bought or sold. Some investments, such as mutual funds, are considered liquid because they can be redeemed for cash quickly, while others, such as annuities, may restrict or impose fees when cashing out. The proposal says that fiduciaries must consider whether the DIA has sufficient liquidity to be able to meet both the plan\u2019s liquidity needs (such as a change in the plan\u2019s investment menu) and participants\u2019 liquidity needs (such as withdrawals). The proposal notes that \u201cbecause participant-directed individual account plans are long-term retirement savings vehicles, particularly for participants early in their careers, there is no requirement that a fiduciary select only fully liquid products.\u201d\nValuation. The DIA must be \u201ccapable of being timely and accurately valued in accordance with the needs of the plan.\u201d Securities that are not publicly traded must be \u201cvalued through a conflict-free, independent process no less frequently than quarterly, according to procedures that satisfy\u201d Financial Accounting Standards Board Topic 820.\nPerformance Benchmarks. Each DIA must have a meaningful benchmark in order to evaluate the performance of the DIA. The proposed regulation defines a meaningful benchmark as \u201can investment, strategy, index, or other comparator that has similar mandates, strategies, objectives, and risks to the designated investment alternative.\u201d\nComplexity. The fiduciary must determine that it has the skill to evaluate the complexity of DIAs and, if not, then it \u201cmust seek assistance from a qualified investment advice fiduciary, investment manager, or other individual.\u201d The proposal provides examples of complexity as fees in private assets and participant needs (such as choosing appropriate investments based on participants\u2019 characteristics such as ages and risk tolerances).\nSkidmore Deference\nThe proposal suggests that the \u201cregulation should carry persuasive weight to courts under Skidmore [Skidmore v. Swift & Co., 323 U.S. 134 (1944)].\u201d Following the Supreme Court\u2019s decision in Loper Bright v. Raimondo [603 U.S. 369 (2024)], courts no longer defer to an agency\u2019s reasonable interpretation of an ambiguous statute, but courts may give such interpretations \u201cdue respect,\u201d under Skidmore, based on the thoroughness of the agency\u2019s reasoning and the agency\u2019s expertise. In its proposal, DOL suggests that courts should find the agency\u2019s reasoning persuasive such \u201cthat fiduciaries that comply with the regulation should be found to have followed a prudent process.\u201d \nDuty to Monitor DIAs\nThe proposed regulation does not address the duty to monitor DIAs at regular intervals after their selection, and DOL notes that it anticipates issuing interpretive guidance on this in the near term. It says that DOL \u201cgenerally is of the view that the factors and processes (or substantially similar factors and processes) outlined in the proposed regulation\u2014including the illustrative safe harbor examples\u2014apply to this ongoing duty.\u201d", "https://www.congress.gov/crs_external_products/IF/PDF/IF13228/IF13228.1.pdf", "https://www.congress.gov/crs_external_products/IF/HTML/IF13228.html"]], "columns": ["id", "title", "publish_date", "update_date", "status", "content_type", "authors", "topics", "summary", "pdf_url", "html_url"], "primary_keys": ["id"], "primary_key_values": ["IF13228"], "units": {}, "query_ms": 1.430233009159565, "source": "Federal Register API & Regulations.gov API", "source_url": "https://www.federalregister.gov/developers/api/v1", "license": "Public Domain (U.S. Government data)", "license_url": "https://www.regulations.gov/faq"}