Why It Matters

The Department of Labor (DOL) is moving to rewrite the rules governing how retirement plan managers select investment options for American workers, and the implications stretch from Wall Street private equity firms to the 401(k) accounts of everyday workers.

A new CRS Report IF13228 published May 15 breaks down the DOL fiduciary duties regulation that were proposed on March 31. It's a rule that would clarify how fiduciaries, the people responsible for managing retirement plan investments, must evaluate and select designated investment alternatives for participants in defined contribution plans like 401(k)s. The question is, how much flexibility should retirement plan managers have to offer workers access to riskier, more complex investments, and who bears the consequences if those bets go wrong?

Under the Employee Retirement Income Security Act of 1974 (ERISA), fiduciaries managing private-sector retirement plans are legally required to act prudently and exclusively in the interest of plan participants. But the law has long left ambiguous exactly what "prudent" means when it comes to newer asset classes like private equity, cryptocurrencies, real estate, and infrastructure projects.

The proposed rule attempts to answer that question with a process-based safe harbor. It's a six-factor checklist that, if followed, gives fiduciaries a presumption of prudence and substantially reduces their exposure to lawsuits from plan participants.

The rule could open 401(k) investment menus to asset classes that have historically been available only to institutional investors and high-net-worth individuals. Proponents say that means better returns and greater diversification. Critics say it means more risk, higher fees, and less liquidity for people who may not fully understand what they're invested in.

The Big Picture

The DOL's proposed regulation on fiduciary responsibility in 401(k) retirement plan investment selection is the direct product of a series of policy reversals and a presidential executive order.

The regulatory history is worth tracing. In June 2020, DOL issued guidance indicating that offering a professionally managed asset allocation fund with a private equity component would not violate fiduciary duties. The Biden administration walked that back in December 2021, issuing a supplemental statement cautioning against broad application of the 2020 guidance. In March 2022, DOL issued a compliance release expressing skepticism about cryptocurrency in 401(k) plans, warning that such investments raised "serious concerns."

The Trump administration has systematically dismantled those guardrails. On May 28, 2025, DOL rescinded the 2022 cryptocurrency compliance release. On August 12, 2025, it rescinded the 2021 supplemental statement cautioning private equity. And on August 7, 2025, President Trump signed Executive Order 14330, directing DOL to clarify its position on alternative assets and the "appropriate fiduciary process" for offering them under ERISA. The executive order defined alternative assets broadly, encompassing private equity, private credit, real estate, digital assets, commodities, infrastructure projects, and lifetime income investment strategies.

The March 2026 proposed regulation is the formal regulatory output of that executive order.

DOL describes the rule as "asset neutral," meaning it applies to any potential designated investment alternative, not just the alternative assets that prompted the executive order. The proposal rests on three stated principles, namely that ERISA is a law grounded in process; that fiduciaries have maximum discretion and flexibility in selecting investment options; and that when fiduciaries follow a prudent process, courts should defer to their judgment under a presumption of prudence.

The six factors DOL identifies for fiduciaries to consider are performance, fees, liquidity, complexity, performance benchmarks, and valuation. Notably, fiduciaries are not required to select the highest-returning or lowest-cost options. On liquidity, the proposal states explicitly that because 401(k) plans are long-term savings vehicles, "there is no requirement that a fiduciary select only fully liquid products." For complex investments, fiduciaries must either have the skill to evaluate them or hire qualified outside help.

On valuation, the rule requires that non-publicly traded securities be valued at least quarterly through a conflict-free, independent process meeting Financial Accounting Standards Board standards.

The proposal also excludes brokerage windows, arrangements within defined contribution (DC) plans that allow participants to purchase a wider range of investments beyond the plan's curated menu, from the definition of designated investment alternatives. Roughly 25 percent of plans offer brokerage windows, meaning those investment arrangements will face different regulatory treatment.

Political Stakes

For the Administration

The rule is a clean expression of the Trump administration's deregulatory agenda applied to retirement savings. It reverses Biden-era caution, implements a direct presidential directive, and frames expanded investment access as a pro-worker policy. The proposal's language explicitly states that DOL seeks to remove "regulatory barriers... that interfere with the ability of American workers to achieve... competitive returns and asset diversification necessary to secure a dignified and comfortable retirement."

For the Financial Industry

Private equity firms, cryptocurrency platforms, and financial advisors stand to benefit materially. The rule opens access to trillions of dollars in 401(k) capital that has largely been off-limits to alternative asset managers, while the safe harbor structure reduces the litigation risk that has historically made plan sponsors cautious about offering complex investment options.

For Democrats and Worker Advocates

The same features that the administration frames as pro-worker, fewer restrictions, more investment choices, reduced fiduciary liability, can be characterized as prioritizing Wall Street access over worker protection. The combination of illiquid investments, high and sometimes opaque fees, and the complexity of private markets creates real risk for workers who may not have the financial sophistication to evaluate what they're being offered.

For Congress

The CRS report signals that lawmakers may need to weigh in. ERISA itself does not restrict what investments a plan sponsor can offer, but the proposed rule's legal durability is not guaranteed. DOL is invoking Skidmore deference, a legal doctrine under which courts give weight to agency reasoning based on its quality and the agency's expertise, rather than the stronger Chevron deference that courts once extended to agency interpretations of ambiguous statutes. The Supreme Court's 2024 decision in Loper Bright v. Raimondo eliminated Chevron deference, meaning courts are not obligated to follow DOL's interpretation of ERISA. If the rule is challenged, its survival will depend on the persuasiveness of DOL's reasoning, not its authority.

The Bottom Line

The DOL fiduciary duties regulation is a significant policy shift that could expose millions of American retirement savers to a broader but riskier universe of investment options. The administration is betting that expanded access to private markets will benefit workers. The legal and financial risks of that bet will ultimately be borne by the workers themselves.

For Congress, the report is a signal that ERISA's fiduciary framework, largely unchanged since 1974, may need legislative attention as investment markets evolve well beyond the mutual funds and target-date funds the law was originally designed to govern.

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