The Department of Labor’s proposed rule that would give 401(k) plan fiduciaries a clearer path for considering alternative investments is fraught with challenges for the plan managers, according to lawyer Tim Collins.
The recently-issued rule lays out the steps that managers of 401(k) plans should take when considering alternative assets as part of their investment lineups. Part of the Trump administration’s broader push to open up access to alternative investments, it also establishes a set of “safe harbors” for plan fiduciaries to use when selecting designated investment alternatives.
But Collins, who is a partner at Duane Morris, warns that the rule could actually increase the pressure on plan managers. “We fear that it will be ‘open season’ from the plaintiffs’ bar on plan fiduciaries who are early adopters of alternative investments,” he told InvestmentNews. “Under the guise of mitigating litigation risk, the DOL’s proposed rule presents a number of significant ongoing risks to plan fiduciaries.”
In particular, Collins notes that, while the DOL is seeking to codify a process-driven fiduciary process, a number of the rule’s components are ripe for attack. “In requiring that plan fiduciaries identify a ‘meaningful benchmark,’ the DOL emphasized that prudence requires the fiduciary to have ‘read, critically reviewed, and understood’ the benchmark’s explanation,” he said. “Questions will undoubtedly be raised against plan fiduciaries as to whether they complied with this requirement.”
“In short, the bar for a prudent fiduciary has been raised under the proposed rule,” he added.
Supporters of the proposed rule have described it as an important move that will increase the options available to advisors and their clients.
But Collins warns that the DOL’s emphasis on prudence will trigger further allegations regarding defects in the fiduciary process. “This is expected to result in the argument that more discovery is necessary and appropriate to bring light to the process that was undertaken, which will reduce the likelihood of the court granting motions to dismiss in favor of plan fiduciaries,” he said.
Collins also points to the Supreme Court’s 2024 Loper Bright decision, which overturned the 40-year-old “Chevron deference,” and gave federal courts the authority to interpret otherwise ambiguous federal statutes.
“In light of the Loper Bright decision and the end of Chevron deference, the DOL was limited in how far it could go in establishing any ‘safe harbor’ that the courts would honor,” he said. “The law in this area will continue to be developed in the courts and we expect robust challenges that attempt to turn the DOL’s proposed rule against plan fiduciaries.”
Data from the Investment Company Institute show that total U.S. retirement assets climbed to $49.1 trillion at the end of December, an increase of 11.2% for the year, and a 2.1% hike from the end of September.
Assets held in defined contribution plans were $14.2 trillion at the end of the fourth quarter, up 1.7% from Sept. 30, 2025, while private sector defined benefit plans held $3.1 trillion in assets, essentially flat from the end of the prior quarter.
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