DOL Proposes Safe Harbor Rule Expanding 401(k) Access to Alternative Investments

On March 31, 2026, the U.S. Department of Labor's (DOL) Employee Benefits Security Administration published a proposed rule that would establish a formal regulatory framework, including a process-based safe harbor, clarifying how ERISA fiduciaries must evaluate and select investment options for participant-directed defined contribution plans, such as 401(k) plans, with a particular focus on investments involving alternative assets such as private equity, private credit, real estate, infrastructure, and digital assets.

The proposed rule would implement a directive in Executive Order 14330, "Democratizing Access to Alternative Assets for 401(k) Investors," which instructed the DOL to issue guidance, including appropriately calibrated safe harbors, to clarify fiduciary duties in this area and to prioritize approaches designed to reduce the litigation risk that has historically deterred fiduciaries from offering such investments. Public comments on the proposed rule are due on or before June 1, 2026.

The proposed rule, if finalized, would be most directly relevant to plan sponsors, plan committees, trustees, and investment advisors serving 401(k) and other participant-directed defined contribution plans that currently offer, or are considering offering, alternative assets as part of their investment lineup, including through target date funds or asset allocation funds with alternative investment sleeves. The DOL expects the proposed rule would affect most participant-directed defined contribution plans, their participants and beneficiaries, and the service providers and product sponsors that serve them.

The proposed rule reflects a significant shift from prior DOL guidance issued during the Biden administration. A 2021 DOL statement had cautioned fiduciaries against selecting investment options with a private equity component for "typical 401(k) plans," and separate 2022 guidance warned against including cryptocurrency in 401(k) lineups. Both were subsequently rescinded by DOL after President Trump returned to the Oval Office. The proposed rule would adopt a neutral, principles-based approach, expressly providing that ERISA does not require or restrict any specific type of designated investment alternative and establishing a presumption of prudence for fiduciaries who follow the deliberate selection process described in the proposed rule.

The centerpiece of the proposed rule would be a process-based safe harbor structured around six factors that fiduciaries must objectively, thoroughly, and analytically consider when selecting a designated investment alternative:

1. performance,
2. fees,
3. liquidity,
4. valuation,
5. benchmarking against a meaningful benchmark with similar mandates and objectives, and
6. complexity.

If a fiduciary appropriately uses these factors in its decision making process, the fiduciary's judgment would be presumed reasonable and entitled to significant deference according to the proposed rule.

Notably, the proposed rule would acknowledge that alternative assets are often less liquid than traditional investments and clarify that plans would not be required to offer fully liquid investment options, provided fiduciaries determine that the liquidity profile is sufficient for the plan's and participants' needs.

The proposed rule would also require that fiduciaries have sufficient expertise to evaluate complex investments, or engage qualified advisors or investment managers to assist them. Importantly, the proposed rule's safe harbor would not relax ERISA's duties of loyalty or the prohibited transaction rules, which would continue to apply.

The safe harbor is helpful to plan fiduciaries by providing them express flexibility regarding alternative investments, setting forth a discrete list of factors to consider, as well as providing detailed examples of how the factors might be applied in the context of alternative investments. However, unlike some regulatory safe harbors, this one does not attempt to set forth bright-line tests, and the steps a fiduciary must take in order to fit within it are extensive.

The proposed rule is not yet final, and plan fiduciaries and sponsors cannot yet rely on it. Nonetheless, because of the importance of this issue, it may be appropriate for them to begin considering the possibility of including alternative investments in their 401(k) plans, reviewing their investment selection processes and documentation in light of the safe harbor's framework, and evaluating their level of internal expertise regarding alternative investments, as well as to consider whether to submit comments to the DOL by the June 1, 2026 deadline.

The DOL has not specified a target date for a final rule, which will likely be announced after the close of the comment period. If you have any questions about the proposed rule, its potential impact on your organization or plan, or your fiduciary governance practices, please do not hesitate to contact a member of Calfee's Employee Benefits and Executive Compensation practice group.

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