DOL's Landmark Proposed Rule Would Open 401(k) Plans to Alternative Assets

What the Department of Labor Proposed

On March 30, 2026, the Department of Labor's Employee Benefits Security Administration published a proposed regulation in the Federal Register that would fundamentally change how 401(k) plan fiduciaries evaluate and select investment alternatives. For the first time, the proposal creates a structured legal framework for including private equity, real estate, private credit, infrastructure, and digital assets in defined contribution plan menus.

The proposed regulation, formally titled "Fiduciary Duties in Selecting Designated Investment Alternatives" and assigned RIN 1210-AC38, implements President Trump's Executive Order 14330, signed August 7, 2025, which directed the Department of Labor to democratize access to alternative assets for 401(k) investors. After a 60-day public comment period that closed June 1, 2026, the rule has entered its final rulemaking phase. The DOL has signaled an intent to finalize the rule by the end of 2026, though the final version could differ meaningfully from the proposal based on the record developed during the comment period.

The Core Mechanism: A Process-Based Safe Harbor

Under ERISA Section 404(a)(1)(B), 401(k) plan fiduciaries have a duty of prudence when selecting investment options for plan participants. In practice, that duty has long functioned as a brake on alternatives in retirement plan menus. Fiduciaries — rightly concerned about litigation — avoided alternatives because the standards for evaluating illiquid, complex investments were unclear and the litigation risk was asymmetric: a well-structured private equity allocation that outperformed produced no benefit for the fiduciary, but an allocation that disappointed generated lawsuits.

The proposed safe harbor changes that calculus. If a fiduciary follows a defined analytical process when selecting a designated investment alternative, the rule creates a rebuttable legal presumption that the fiduciary satisfied the duty of prudence — even if the investment is complex or ultimately underperforms. That presumption is conditioned on the fiduciary objectively, thoroughly, and analytically considering six enumerated factors:

• Performance: A reasonable comparison of similar alternatives, determining that risk-adjusted expected returns net of fees are appropriate.
• Liquidity: An assessment of whether the investment can meet participant-level liquidity demands — withdrawals, loans, hardship distributions, and plan-level events.
• Valuation: Determination that the investment has adequate measures in place for timely, accurate valuation of non-publicly-traded assets.
• Fees and Expenses: Full understanding of the fee structure, including performance fees common in private market vehicles.
• Benchmarking: Identification of an appropriate performance benchmark, even if imperfect, for evaluating the investment.
• Complexity: Assessment of whether the fiduciary has the in-house expertise — or has engaged expert advisors — to adequately evaluate the investment.

The Scope of the Problem Being Addressed

The DOL's proposed rule is notable for its frank acknowledgment of how badly alternatives have been frozen out of employer-sponsored plans. According to figures the DOL included in the proposal, only about 4 percent of defined contribution plans currently offer any alternative investments, and just 0.1 percent of defined contribution plan assets are allocated to alternatives. The DOL estimates the proposed rule, if finalized as written, could result in roughly $178 billion flowing into alternatives across approximately 4.5 million additional plan participants.

The plan sponsors holding back were not prohibited from offering alternatives — ERISA has always been investment-neutral, permitting any asset class that is otherwise legal. What held them back was the combination of DOL's historically cautious posture toward alternatives and the billion-dollar ERISA class action industry, which has targeted 401(k) sponsors over investment underperformance and excessive fees. An asymmetric litigation environment discouraged any innovation that attracted scrutiny, regardless of merits.

What the Rule Does Not Do

The proposed rule does not address the ongoing duty to monitor alternative investments after they are selected — the DOL has indicated that separate guidance on monitoring will follow. The safe harbor creates a rebuttable presumption of prudence, not statutory immunity. Courts, particularly after recent Supreme Court decisions reducing deference to agency interpretations, are not obligated to treat a regulatory safe harbor as dispositive.

The Supreme Court has also granted certiorari in Anderson v. Intel Corporation Investment Policy Committee (No. 25-498), a case addressing whether an ERISA breach claim predicated on fund underperformance requires a meaningful benchmark. That case is unlikely to be argued before fall 2026, and a decision may not arrive until after any final DOL rule is published — leaving the judicial landscape somewhat unsettled regardless of what the regulation ultimately says.

Why This Matters for SDIRA Investors

The proposed rule applies to 401(k) plans governed by ERISA, not to IRAs. Self-directed IRAs are governed by Internal Revenue Code provisions and have always permitted account owners to invest in alternatives, subject to the prohibited transaction rules of IRC Section 4975 and the investment restrictions of IRC Section 408. Self-directed IRA investors have not been waiting for a green light that has existed in the tax code for decades.

What the rule signals is a broader policy environment in which Washington is actively moving to expand access to the same asset classes — private equity, private real estate, private credit, digital assets — that self-directed IRA investors have long been able to access. That convergence matters: as more Americans encounter alternative assets through their employer plans, familiarity with private markets will grow. Some will want more direct exposure and greater control over selection — which is the self-directed IRA value proposition.

The proposed rule is not yet final and may change materially before it is issued as a final regulation. Investors and plan sponsors should consult qualified ERISA and tax counsel regarding their specific situations and obligations.