DOL’s 6-Factor ‘Safe Harbor’ Could Reshape 401(k) Fiduciary Playbook
The Department of Labor’s long-awaited proposed rule on alternative investments may open the door to private markets in 401(k)s—but its real impact may lie in a six-step “safe harbor” that could redefine how fiduciaries defend their decisions.
With Monday’s release of the proposed rule—“Fiduciary Duties in Selecting Designated Investment Alternatives”—the retirement industry’s focus shifts to analyzing what’s in it, and providing feedback that could impact what is expected to become a final rule perhaps by the end of this year. If finalized, the framework could give fiduciaries a clearer—and potentially safer—path to include more complex investments, while also shaping how courts evaluate prudence under ERISA.
As the proposed rule was published in the Federal Register today; a 60-day comment period is underway, and will last until June 1, 2026 (more on this below).
The rule could of course significantly expand access to alternative assets—including private equity, real estate, and even cryptocurrency—within defined contribution plans. But beyond the headlines about alternatives, the proposal’s most consequential feature may well be its attempt to clarify how fiduciaries can meet their duty of prudence.
At the center of the proposal is a new six-factor, process-based safe harbor framework that outlines how plan fiduciaries should evaluate and select designated investment alternatives. The proposed rule emphasizes that fiduciary responsibility under ERISA is grounded in process—not outcomes—and seeks to provide clearer guidance that could reduce litigation risk while preserving flexibility in investment selection.
“People are referring to the ‘significant deference’ as a safe harbor. I worry about whether that will be upheld by the courts if challenged, primarily because ERISA, the statute, does not provide for significant deference for fiduciaries.”
Fred Reish
The six factors—performance, fees, liquidity, valuation, benchmarking, and complexity—are designed to serve as a practical roadmap for fiduciaries navigating increasingly complex investment options. If followed, the Department says fiduciaries’ decisions would be presumed prudent and entitled to “significant deference,” a provision aimed at giving plan sponsors more confidence when considering a broader universe of investments.
But whether that protection holds up in court remains an open—and critical—question.
And one that caught the attention of Fred Reish, Director of Fiduciary and ERISA Practice at Prime Capital Retirement, who told 401(k) Specialist Monday that the six steps for a prudent process are indeed the essence of the proposed regulation.
“People are referring to the ‘significant deference’ as a safe harbor. I worry about whether that will be upheld by the courts if challenged, primarily because ERISA, the statute, does not provide for significant deference for fiduciaries. My concern is about whether the DOL can create a standard that protects fiduciaries that is higher than the law,” Reish said.
While the proposed rule says that the steps are “non-exhaustive,” Reish added that people will almost certainly focus on the steps.
He notes that the proposal goes on to say that when a fiduciary follows a prudent process, which includes at least those six steps, “…the plan fiduciary’s judgment with respect to the particular factor or factors, including the relationship between the factors, is presumed to have met the duties under section 404(a)(1)(B) of ERISA of such fiduciary, and is entitled to significant deference.”
Examining the six-factor safe harbor
Law firm Ogletree Deakins released a blog post Monday taking a closer look at the DOL’s proposed six-factor safe harbor to meet a fiduciary’s duty of prudence when selecting designated investment alternatives for DC plans. From it:
The proposed rule would introduce a set of six non-exhaustive factors for plan fiduciaries: (1) performance, (2) fees, (3) liquidity, (4) valuation, (5) benchmarking, and (6) the complexity of the designated investment alternatives. When a fiduciary follows the processes described in making investment decisions, those decisions would be “presumed to be reasonable” and “entitled to significant deference.”
1. Performance. The fiduciary would need to consider “a reasonable number of similar alternatives” and determine the investment’s risk-adjusted expected returns for the purposes of the plan.
2. Fees. The fiduciary would need to “consider a reasonable number of similar alternatives and determine that the fees and expenses of the designated investment alternative are appropriate, taking into account its risk-adjusted expected returns and any other value the designated investment alternative brings to furthering the purposes of the plan.” Interestingly, other value means benefits, features and services other than investment returns, which could arguably permit higher fees for services aiding participants or administering the plan.
3. Liquidity. The fiduciary would need to consider and determine whether a “designated investment alternative will have sufficient liquidity to meet the anticipated needs of the plan at both the plan and individual levels.” Notably, the proposed rule recognizes that because 401(k) plans are long-term retirement savings vehicles, “there is no requirement that a fiduciary select only fully liquid products,” and a prudent process may lead to a decision to sacrifice some liquidity in pursuit of additional risk-adjusted return.
4. Valuation. The fiduciary would need to “appropriately consider and determine that the designated investment alternative has adopted adequate measures to ensure that the designated investment alternative is capable of being timely and accurately valued in accordance with the needs of the plan.”
5. Performance Benchmark. The fiduciary would need to consider “each designated investment alternative has a meaningful benchmark and compare the risk-adjusted expected returns of the designated investment alternative to the meaningful benchmark.”
6. Complexity. The fiduciary would need to “appropriately consider the complexity of the designated investment alternative and determine that it has the skills, knowledge, experience, and capacity to comprehend it sufficiently to discharge its obligations under ERISA and the governing plan documents or whether it must seek assistance from a qualified investment advice fiduciary, investment manager, or other individual.” This could be viewed as an admonishment to seek the advice of a professional.
While labeled non-exhaustive, these steps effectively form a practical checklist that, if followed and documented, could help fiduciaries demonstrate a prudent process and strengthen their defense against potential challenges.
It remains to be seen whether feedback provided during the comment period will lead to any changes in the six-factor safe harbor.
What’s next
With the proposed rule now published in the Federal Register, the DOL is inviting comments on the proposed rule and specifically on the six safe harbor factors outlined with regard to best practices for participant-directed individual accounts and established investment principles, and on potential additional factors.
For now, fiduciaries and advisors may want to review their current investment evaluation processes to ensure they align with the proposed framework—and consider submitting feedback during the comment period. Comments may be submitted, identified by RIN 1210-AC38, by one of the following methods:
- Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.
- Mail or Personal Delivery: Office of Regulations and Interpretations, Employee Benefits Security Administration, Room N-5655, U.S. Department of Labor, 200 Constitution Avenue NW, Washington, DC 20210.
The deadline for submitting comments is June 1, 2026. All submissions received must include the agency name and Regulation Identifier Number (RIN) for this rulemaking. Comments received, including any personal information provided, will be posted without change to http://www.regulations.gov and http://www.dol.gov/ebsa, and made available for public inspection at the Public Disclosure Room, N-1513, Employee Benefits Security Administration, 200 Constitution Avenue NW, Washington, DC 20210.
Commenters are encouraged to include supporting facts, research, and evidence in their comments.
SEE ALSO:
• Industry Leaders React to DOL Proposal Expanding Alternatives to 401(k)s
• DOL Unveils Fiduciary Rule Opening Door to Alternative Investments in 401(k)s
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.