The Department of Labor plans to provide a safe harbor of prudential obligations for 401(k) alternative asset investments.

PANews reported on March 30 that, according to a proposed rule document released by the U.S. Department of Labor, the Employee Benefits Security Administration (EBSA) has proposed a new draft rule, "Fiduciary Duties In Selecting Designated Investment Alternatives," which aims to clarify and provide a safe harbor for the "prudential duty" of trustees under ERISA when selecting designated investment options for participants' self-managed individual account plans (such as 401(k)). The draft clarifies that ERISA itself remains neutral on investment types, and trustees can include asset allocation funds containing "alternative assets" such as private equity, hedge funds, real estate, digital assets, commodities, infrastructure, and lifetime income strategies, provided that prudential procedures are followed. It also introduces six key considerations: performance, fees, liquidity, valuation, benchmarks, and complexity. Furthermore, it emphasizes that, when safe harbor procedures are met, courts should give a high degree of judicial respect to the trustee's judgment to reduce litigation risk and encourage plans to allocate alternative assets under reasonable circumstances.