Recent regulatory and judicial developments in the 401(k) landscape are set to significantly reshape the market for alternative investments in defined contribution plans. These changes could ease longstanding fiduciary concerns that have constrained product innovation while accelerating plan sponsor interest in nontraditional strategies and private market exposure.
The DOL’s Proposed Rule
On March 31, 2026, the Department of Labor (DOL) proposed a rule on fiduciary duties in selecting designated investment opportunities. The proposal clarifies the fiduciary evaluation and selection process for investment alternatives—particularly nontraditional and alternative strategies—by establishing that compliance depends on prudent, well-documented decision-making processes rather than investment outcomes.
By providing clearer standards and procedural guidance, the Rule aims to meaningfully reduce litigation risk associated with offering alternative assets in 401(k) plans. While the Employee Retirement Income Security Act (ERISA) does not expressly prohibit alternative investments in defined contribution plans, its fiduciary framework has historically created practical barriers to their inclusion. The Rule reinforces that selecting alternative investments is a fiduciary act and evaluated under the same ERISA prudence framework that governs any other investment decision.
The Safe Harbor
It also introduces a safe harbor designed to give plan fiduciaries a more predictable path when evaluating designated investment alternatives. Under the safe harbor, if a fiduciary follows the prescribed process for six relevant factors, the fiduciary’s judgment is presumed reasonable and entitled to significant deference.
The safe harbor focuses on six core considerations:
- Performance. The fiduciary must determine that the alternative investment’s risk-adjusted expected returns further the purposes of the plan.
- Fees. The fiduciary must determine that the fees and expenses associated with the investment are appropriate.
- Liquidity. The fiduciary must determine that the investment has sufficient liquidity to meet anticipated plan needs at both the plan and participant levels.
- Valuation. The fiduciary must determine that the investment has adopted adequate measures to ensure that it can be timely and accurately valued.
- Performance Benchmarks. The fiduciary must determine that the investment has a meaningful benchmark.
- Complexity. The fiduciary must determine whether it has the skills, experience, and capacity needed to understand the investment sufficiently.
In practice, fiduciaries will likely look toward investment advisers and alternative asset managers to provide representations and assurances regarding the satisfaction of the safe harbor requirements, particularly for liquidity, valuation, and benchmark considerations.
For valuation and liquidity, the Rule’s examples suggest that fiduciaries should look to asset managers to provide supporting diligence materials formally addressing liquidity management, valuation frequency, independence, and methodology. In that sense, asset managers may themselves become an important source of reassurance for fiduciaries seeking to fit within the Rule’s proposed safe harbor. Asset managers should familiarize themselves with these requirements to effectively market to 401(k) fiduciaries and their investment advisers.
The proposed Rule is open for public comment until June 1, 2026. The DOL did not give an applicability date for the Rule.
Regulatory Context
The Rule responds directly to President Trump’s August 7, 2025 Executive Order (EO) directing federal agencies to expand access to alternative assets in 401(k) plans. The DOL, Securities and Exchange Commission (SEC), and Department of the Treasury were instructed to collaborate on dismantling regulatory barriers and establishing clearer pathways for fiduciaries to offer private equity, hedge funds, real estate, and other nontraditional strategies within defined contribution plans.
Rather than altering ERISA’s substantive standards, the EO emphasizes accelerating product innovation, standardizing fiduciary processes, and curtailing litigation that has traditionally deterred plan sponsors from adopting alternatives. Proponents of this reform contend that exposure to private markets would increase long-term growth potential for 401(k) participants, while critics raise concerns about the heightened risks that exposure may pose to a substantial portion of American retirement savings.
SEC Chair Paul Atkins endorsed the EO’s objectives, affirming that access to alternative investments and private markets within defined contribution plans is necessary “within reason.” SEC Commissioner Mark Uyeda elaborated further, emphasizing the need for litigation reform to ensure plan sponsors have adequate legal protection when using alternative assets. Without this protection, Uyeda cautioned, lawsuits would “continue to chill innovation and discourage fiduciaries from offering more diversified investment options—even when those options are in the best interest of participants.”
The Intel Case
On January 16, 2026, the Supreme Court agreed to review Anderson v. Intel Corp. Inv. Pol’y Comm., currently the seminal case addressing the permissibility of alternative assets in defined contribution plans. The case centers on whether plan sponsors face fiduciary liability for including nontraditional investment options in their plans. Plaintiffs contend that plan fiduciaries breached their duty of prudence by allocating substantial assets to customized target-date funds that, in turn, directed significant capital toward alternative investments, including hedge funds and private equity, resulting in material underperformance relative to comparable peer mutual funds.
A critical legal issue at stake in Intel, one currently subject to a circuit split among federal courts, is whether plaintiffs must establish a “meaningful benchmark” to demonstrate that an ERISA fiduciary failed to exercise appropriate care in underperformance cases involving alternative investments. The Supreme Court’s resolution of this question—and the broader principles it articulates regarding fiduciary obligations in the alternative investment context—could alter the legal landscape for defined contribution plans.
By potentially providing authoritative guidance on fiduciary action and limiting the ability of prospective plaintiffs to mount claims based solely on underperformance attributable to alternative allocations, Intel may materially lower legal barriers to broader plan sponsor consideration of these strategies.
Looking Ahead
While the outcomes of the DOL rulemaking and the Intel appeal remain uncertain, the convergence of these developments is likely to elevate focus on alternative investments among plan sponsors and institutional investors.
For asset managers—many of whom have long sought to access the substantial investment capital flowing through defined contribution plans—these regulatory and judicial developments present a significant market expansion opportunity.
Investment managers should view this period as a critical moment to assess their product development capabilities, strengthen their fiduciary expertise and documentation practices, and engage proactively with plan sponsors to position themselves as trusted partners in navigating these evolving standards and opportunities.
The coming months will likely generate strategic discussions with existing and prospective institutional clients on the role of alternative investments in diversified portfolio construction.
If you have any questions, or would like additional information, please contact one of the attorneys on our Investment Funds team.
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