Overview
- The Employee Benefits Security Administration, which published the proposal Monday, set out a process-based safe harbor for picking 401(k) investment options called designated investment alternatives.
- The rule is asset-neutral and says ERISA does not bar alternative assets, naming private equity, digital assets, infrastructure and lifetime income products as permissible if evaluated through a prudent process.
- Fiduciaries would document six factors when selecting options, covering performance, fees, liquidity, valuation, benchmarking and complexity, with their judgments given significant deference if that process is followed.
- For non‑public assets, the draft requires conflict‑free, independent valuations at least quarterly using fair value standards, and it clarifies that an employer who prudently hires an ERISA investment manager is not liable for that manager’s specific trades.
- A 60‑day comment window will run from Federal Register publication, and analysts say the move could reshape product design and due diligence for 401(k) menus, while critics warn it may weaken workers’ lawsuits over high fees or poor performance.