ERISA is grounded in process, not outcomes. Prudence is evaluated based on the fiduciary’s investigation and reasoning at the time of the decision - not by hindsight or subsequent performance. Indeed, many practitioners colloquially refer to the prudence standard as being one of “procedural prudence.”
ERISA affords fiduciaries broad discretion. The statute neither mandates nor prohibits specific investment types; fiduciaries may select among a wide range of reasonable options.
Courts should defer to fiduciaries who follow a prudent process. When fiduciaries act within a documented, reasonable decision‑making framework, their judgments should receive substantial judicial deference.
The third principle - judicial deference that would be implemented under the Proposed Regulation through a presumption of prudence - is likely to be the focal point of legal challenges. The DOL anticipates this risk and grounds the proposal in existing trust‑law concepts and its statutory authority under Section 505 of ERISA, which the DOL asserts supports its authority to establish fiduciary safe harbors.
The Safe Harbor Framework
At the core of the Proposed Regulation is a process‑based safe harbor. A fiduciary that objectively, thoroughly, and analytically evaluates relevant factors when selecting an investment is entitled to a presumption of prudence and significant judicial deference.
The Proposed Regulation identifies six non‑exclusive factors that would ordinarily be central to the analysis:
Performance: Fiduciaries must consider risk‑adjusted expected returns over an appropriate time horizon, net of fees. The rule expressly rejects any requirement to select the highest‑returning option over short periods.
Fees: There is no requirement to choose the lowest‑cost investment. Fees are evaluated relative to value, services, and expected performance; and fiduciaries are not required to scour the entire marketplace. Performance‑based and incentive fees may be appropriate when justified.
Liquidity: Plans are not required to offer fully liquid investments. Fiduciaries may select investments with liquidity restrictions, including illiquid assets, when liquidity tradeoffs are reasonably balanced against potential diversification or risk‑adjusted returns, so long as participant‑ and plan‑level liquidity needs are responsibly addressed.
Valuation: Designated investment alternatives must be capable of timely and accurate valuation. For non‑public assets, the Proposed Regulation generally anticipates at least quarterly valuation using independent, conflict‑free methods consistent with a certain specified accounting standard (FASB ASC 820).
Performance Benchmarking: Each investment should be evaluated against a meaningful benchmark with comparable strategy, objectives, and risk profile. Importantly, the Proposed Regulation states that new or innovative investments are not disfavored merely because they lack long performance histories.
Complexity: Complexity alone does not render an investment imprudent. Consistently with the notion that ERISA fiduciaries must be “prudent experts” (a phrase informally used by many ERISA practitioners when referring to ERISA fiduciaries), the Proposed Regulation highlights that fiduciaries must themselves understand the investment or must prudently engage qualified professionals to assist with evaluation and oversight.
The proposal includes 20 detailed examples illustrating how fiduciaries may satisfy these factors in practice.
Presumption of Prudence and Judicial Review
If the safe harbor process is satisfied, the fiduciary’s judgment is presumed reasonable. The DOL envisions courts applying a deferential, abuse‑of‑discretion‑type review, with plaintiffs bearing the burden of proof.
It is noted that, in Loper Bright Enterprises v. Raimondo, the U.S. Supreme Court rejected the doctrine it had previously adopted in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., and dramatically generally narrowed or possibly even eliminated the extent to which the courts need to defer to agency regulations in interpreting federal statutes. Anticipating questions about judicial authority, the DOL grounded the Proposed Regulation in Section 505 of ERISA and framed the Proposed Regulation as deserving of deference established by the Supreme Court in Skidmore v. Swift & Co, a pre-Loper Bright case under which an agency’s interpretation is entitled to deference by a court in proportion to its power to persuade.
Scope and Limitations
The Proposed Regulation would:
Apply only to the selection of designated investment alternatives.
Not apply to brokerage windows or self‑directed brokerage accounts.
Not address menu construction (which the DOL referred to as “curation”) or ongoing monitoring (although the DOL has signaled forthcoming guidance built on the same principles).
Not alter ERISA’s duty of loyalty or the prohibited‑transaction rules.
Practical Implications
If finalized as proposed and upheld by the courts, the Proposed Regulation would potentially, among other things:
Reduce litigation risk for fiduciaries that document a prudent selection process.
Encourage innovation in plan menus, particularly within professionally managed vehicles such as target-date funds and managed accounts.
Reaffirm fiduciary flexibility to consider alternative assets thoughtfully.
It should be noted that the Executive Order also called upon the Securities and Exchange Commission (the “SEC) to take action with respect to the definitions of accredited investor and qualified purchaser, but the SEC was not given a specific deadline to do so. It is possible that coordination with the SEC could be critical in addressing non-ERISA practical impediments to the use of alternative investments under participant-directed plans, and the Executive Order (which by its nature is at the presidential level), unlike certain previous DOL sub-regulatory guidance, expressly calls for inter-agency coordination in this context. Any SEC guidance would be issued separately, as would any companion guidance from the Department of the Treasury.
Conclusion
The Proposed Regulations represents a decisive shift back towards ERISA’s fundamental underlying principles: discretion, process, and deference. While legal challenges may well be likely, the Proposed Regulation, if finalized as proposed, would materially strengthen fiduciary confidence in making reasoned, well‑documented investment decisions and could meaningfully expand the range of prudent options available to retirement plan participants.
We will continue to monitor developments and provide updates as the rulemaking progresses. If you have any questions about the Proposed Regulation, or any questions about ERISA’s fiduciary provisions, please feel free to contact us.]]>by The Wagner Law Group<![CDATA[DOL’s Push to Curb 401(k) Suits Could Face Court Challenges]]>https://www.wagnerlawgroup.com/?p=680532026-04-01T13:41:32Z2026-03-31T13:38:03ZDOL's Push to Curb 401(k) Suits Could Face Court Challenges - Andrew Oringer, Law360, March 31, 2026 (PDF)]]>by The Wagner Law Group<![CDATA[A Retirement Saver Protection Rule Has Died — for the Second Time. What it Means for Investors]]>https://www.wagnerlawgroup.com/?p=680332026-04-01T13:34:19Z2026-03-30T18:38:09ZA Retirement Saver Protection Rule Has Died — for the Second Time. What it Means for Investors - Andrew Oringer, CNBC, March 30, 2026 (PDF)]]>by The Wagner Law Group<![CDATA[401(k) Alternative Asset Rule Proposed by Labor Department]]>https://www.wagnerlawgroup.com/?p=680472026-04-01T13:37:12Z2026-03-30T13:23:51Z401(k) Alternative Asset Rule Proposed by Labor Department - Andrew Oringer, CNBC, March 30, 2026 (PDF)]]>by The Wagner Law Group<![CDATA[Should You Plan to Address “Plan Assets” Questions Under ERISA?]]>https://www.wagnerlawgroup.com/?p=679762026-03-27T15:48:50Z2026-03-27T20:04:18ZPowell v. Ocwen Financial Corporation, a case emanating from the sub-prime crisis circa 2010, is on detailed facts in the context of what are known as securitization transactions (and, more specifically, securitization transactions under the so-called “underwriter exemptions”), so the case might not have direct applicability for the general market. Nonetheless, Ocwen (which, for people who care about such things, is Newco spelled backwards) presents a cautionary tale for those who wonder whether the courts will ever be ready, as a practical matter, to delve into the intricacies of the Department of Labor regulation that defines when an entity’s assets are considered plan assets (the “Regulation”).
The court embarked on a learned exploration of the application of the Regulation to distinctions between debt and equity that even addressed the nuances surrounding notes as compared with trust certificates. And the court also addressed, even if preliminarily, not only the plan-assets question but also the question of whether, in the face of plan assets, a service provider might have fiduciary authority. The case now goes back to the district court for further exploration.
A possible object lesson here is that the fundamental plan-assets analysis, however arcane, may really matter. When one considers the risks surrounding unresolved or otherwise close questions, there may be an understandable tendency to wonder whether there have been actual circumstances in which a technical ERISA analysis has had genuine practical implications. While sometimes the answer may appear to be “no,” perhaps the better response may now be “not yet.”
We at The Wagner Law Group stand ready to advise on plan-assets inquiries or any other matters arising under the fiduciary provisions of ERISA.
[author] [author_image timthumb='on']https://www.wagnerlawgroup.com/wp-content/uploads/sites/1104921/2022/12/andrew-oringer.png[/author_image] [author_info]Andrew Oringer heads the firm’s New York office and serves as its General Counsel. His expertise extends to a broad array of issues relating to ERISA and executive compensation. He advises clients regarding their pension and welfare plans and arrangements, benefits-related tax matters and fiduciary issues arising in connection with the investment of plan assets, and has extensive experience with executive compensation representing employers as well as individual executives.[/author_info] [/author]]]>by The Wagner Law Group<![CDATA[How Retirement Fiduciaries Can Help Health Plan Fiduciaries]]>https://www.wagnerlawgroup.com/?p=680402026-04-01T13:15:55Z2026-03-27T13:08:32Z
]]>by The Wagner Law Group<![CDATA[Appeals Court Ruling Upends Path for ERISA Class Actions]]>https://www.wagnerlawgroup.com/?p=679432026-03-19T14:52:58Z2026-03-17T14:45:01ZAppeals Court Ruling Upends Path for ERISA Class Actions - Andrew Oringer, PLANSPONSOR, March 17, 2026 (PDF)]]>by The Wagner Law Group<![CDATA[Dead Yet! – The NeverEnding Story of the Amended Fiduciary Rule Has Ended . . . for Now]]>https://www.wagnerlawgroup.com/?p=679362026-03-16T16:16:17Z2026-03-16T16:16:17Zhere, here, here,here, and here. Because of the extensive background laid out in our prior Alerts, it is not repeated here.
When we last left what looked like it could be a NeverEnding Story that started at least three presidential administrations ago, the DOL had filed a motion with the Fifth Circuit "to dismiss its appeals" in Federation of Americans for Consumer Choice, Inc. v. U.S. Department of Labor and American Council of Life Insurers v. U.S. Department of Labor. Last week, on March 12, 2025, the District Court for the Eastern District of Texas expressly approved the unopposed motion in the FACC case to vacate the Retirement Security Rule.
So there you have it. When we reported in November 2025 on the DOL's motion to dismiss its appeals, we stated that "[t]he Never-Ending Story may well have ended." Well, it now indeed definitively has.
But the impact of the DOL's initiative may live on. As examples, the "best interest" regulation of the Securities and Exchange Commission draws significantly from the now-defunct Amended Fiduciary Rule; various states have pursued and may continue to pursue best-interest initiatives regarding the conduct of financial-services organizations; and the market for investment services may have shifted in some quarters to a more fiduciary-based model, which is a trend that may continue here and there even in the absence of the Retirement Security Rule.
In addition, indications (including in the DOL's Regulatory Agenda) are that the DOL may propose further revisions. However, it would not be surprising if any upcoming activity is not in furtherance of, and may even be in some ways contrary to, prior regulatory efforts.
There are now decisions to be made by financial services institutions about next steps. Will some institutions want to continue complying with the conditions of whatever is left of Prohibited Transaction Class Exemption 2020-02, whether out of concern about fiduciary status or an affirmative willingness to act as a fiduciary? And, for those institutions that do not believe they are fiduciaries and do not wish to be fiduciaries, maybe, just maybe, it will finally be time to consider whether to dismantle the compliance procedures they have laboriously constructed, if they have not already started that consideration.
As one further cautionary note, we do not know for sure what will happen under future administrations. Maybe, just maybe, the NeverEnding Story will find its way to a sequel.
We at The Wagner Law Group stand ready to advise on these or any other matters arising under the fiduciary provisions of ERISA.
[author] [author_image timthumb='on']https://www.wagnerlawgroup.com/wp-content/uploads/sites/1104921/2022/12/andrew-oringer.png[/author_image] [author_info]Andrew Oringer heads the firm’s New York office and serves as its General Counsel. His expertise extends to a broad array of issues relating to ERISA and executive compensation. He advises clients regarding their pension and welfare plans and arrangements, benefits-related tax matters and fiduciary issues arising in connection with the investment of plan assets, and has extensive experience with executive compensation representing employers as well as individual executives.[/author_info] [/author]]]>by The Wagner Law Group<![CDATA[4th Circ. Genworth Ruling Raises Bar For ERISA Class Actions]]>https://www.wagnerlawgroup.com/?p=679472026-03-19T15:01:24Z2026-03-13T14:57:56Z4th Circ. Genworth Ruling Raises Bar For ERISA Class Actions - Andrew Oringer, Law360, March 13, 2026 (PDF)]]>by The Wagner Law Group<![CDATA[Exxon Cements Texas As Delaware’s Emerging Rival]]>https://www.wagnerlawgroup.com/?p=679502026-03-19T15:11:08Z2026-03-11T15:03:31ZExxon Cements Texas As Delaware's Emerging Rival - Andrew Oringer, Law360, March 11, 2026 (PDF)]]>