Each year, our Regulatory Update covers regulatory, litigation, and legislative updates and changes affecting plan sponsors and their retirement plans. This year, retirement plan sponsors continue to face a changing landscape shaped by court decisions, Department of Labor and IRS guidance, plan document deadlines, legislative proposals, and new investment products. This update highlights notable developments in 2026 and practical considerations for fiduciary governance and plan administration.
Today, we are covering the Department of Labor update in this year's Update.
Key Takeaway for Retirement Plan Sponsors
The Department of Labor's 2026 retirement plan agenda signals a continued emphasis on fiduciary process, documentation, and prudent governance. The proposed investment selection rule would establish six core evaluation factors (performance, fees, liquidity, valuation, benchmarks, and complexity) and provide a potential safe harbor for fiduciaries who follow a documented process. At the same time, the DOL has taken a sponsor-friendly position in litigation over the use of plan forfeitures, clarified EBSA enforcement priorities, and is expected to revisit ESG investment rules. Plan sponsors should review investment governance procedures, investment policy statements, committee minutes, and fiduciary documentation practices to prepare for potential regulatory changes.
Full Department of Labor Update
Proposed Rule on Selecting Designated Investment Alternatives
Perhaps the most significant action by the DOL this year was the proposed rule “Fiduciary Duties in Selecting Designated Investment Alternatives.” The rule is in response to an August 2025 executive order that focused on increasing access to alternative investments (private equity, private debt, and lifetime income) in retirement plans. While the executive order focused on alternative assets, the proposed rule applies broadly to the selection of any investment offered in a retirement plan. Applying the rule to all investment decisions reflects the DOL’s position that a fiduciary’s responsibilities are the same when selecting an alternative asset product as when selecting any other investment product.
The rule identifies six factors a fiduciary should consider when selecting plan investments and provides several examples of how to apply each factor. When a fiduciary follows the process-based approach, they shall be entitled to a presumed safe harbor for their decision. The six factors are:
- Performance
- Fees
- Liquidity
- Valuation
- Performance Benchmarks
- Complexity
The public comment period for the rule ended in June, and the DOL received over 47,000 comments. Despite the high volume of comments, the DOL has indicated a desire to publish a final rule before the end of this year.
Once a final rule is published, plan sponsors will need to review their investment selection process and likely align it with the new rule. Most fiduciaries follow some, if not all, of these factors in making decisions so that the rule may result in minimal changes to the current selection and review process. However, governing documents such as investment policy statements may need to be updated to specifically identify the six factors. In addition, meeting minutes of future decisions may need to provide some detail on how each factor was used when selecting an investment.
DOL Argues to Dismiss Three “Use of Forfeitures” Cases
The DOL asserted its pro-employer position by testifying in favor of defendants in three cases alleging a breach of fiduciary duty in the employer’s use of forfeitures. In each case, the DOL had previously submitted amicus briefs supporting their position and was then granted five minutes of the defendants’ fifteen minutes of oral argument time.
The three cases are part of a broader litigation trend concerning employers’ use of forfeitures. In these cases, plaintiffs allege a breach of fiduciary duty in which plan forfeitures were used to reduce employer contributions rather than to reduce plan expenses. The use of forfeitures to reduce employer contributions is a long-established practice and clearly permitted by the IRS.
All three cases had been dismissed by lower courts, and the DOL asked the appellate courts to affirm the lower court’s decisions. During oral arguments, the DOL stated that the decision to use forfeitures to reduce employer contributions, without more, does not violate ERISA. The DOL indicated that the decision on how to use forfeitures is a ‘settlor’ decision, not a ‘fiduciary’ decision. The employer is responsible for the formation, design, and funding of the plan, which are ‘settlor’ duties and not subject to ERISA’s fiduciary standards.
The DOL did not dispute that the forfeitures were used to benefit the plan, arguing that each employer complied with its plan's terms in doing so. The DOL also argued that there were no damages or breach of fiduciary duty where plan participants had received all the benefits promised under the plan.
EBSA Enforcement Priorities
The Employee Benefits Security Administration (EBSA), a government agency within the DOL, is responsible for the regulation and enforcement of ERISA. In April, the EBSA issued a field assistance bulletin detailing the agency’s guiding principles and enforcement priorities.[1]
The bulletin details four priorities:
- Prioritize investigations into the most egregious conduct or significant harm. The focus will be on breaches of the duty of loyalty, targeting those who act in bad faith, improperly administer plan benefits, or misappropriate plan assets.
- Avoid regulation through enforcement when possible or the use of enforcement to drive policy, focusing instead on rulemaking and regulatory guidance.
- To ensure consistency, significant enforcement actions must be reviewed by EBSA leadership. Significant actions may include:
- Enforcement must be responsive and timely. Routine investigations should be completed within 18 months, and more complex investigations within 30 months. Quarterly reviews shall be completed for any investigation open longer than the stated timeframes.
ESG Ping Pong Continues
The ESG pendulum continues to swing based on the direction of the political winds. Under the first Trump Administration, the DOL issued a more stringent ESG rule, requiring plan sponsors to only use ‘pecuniary factors’ in selecting plan investments. The rule also restricted the use of ESG funds as the qualified default investment alternative (QDIA). The Biden-era DOL indicated it would not enforce the more stringent rule and issued a new, ESG-friendly rule that allows fiduciaries to consider ESG factors when selecting investments, including the QDIA.
Not surprisingly, the DOL has proposed a replacement rule for ESG investing that is currently under White House review. It is expected that the replacement rule will include many of the provisions included in the previous rule, including the requirement that fiduciaries only consider ‘pecuniary factors’ in making investment decisions.
[1] Source: EBSA Field Assistance Bulletin No. 2026-01 https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2026-01
