DOL’s Private Market Rule Expected to Focus On ‘Process’

The Department of Labor’s proposed rule addressing fiduciary duties when dealing with alternative investments in defined contribution plans will focus on process, rather than results, experts say.

“If we could predict the outcome of investments, we’d all pick the right ones—but we can’t,” says Richard Nowak, a partner in law firm Mayer Brown who co-leads the firm’s practice on litigation related to the Employee Retirement Income Security Act. “That’s why ERISA focuses on process, not results. If fiduciaries can point to a process consistent with DOL regulations, it makes it much harder for plaintiffs to win—and that may curb some of the litigation we’re seeing.”

Litigation concerns have long hindered the adoption of alternative investments in defined contribution plans. Despite being available for decades, these investments have seen little uptake. The DOL’s proposed rule, which is still in the administration’s review process is expected to be made public soon. It follows an August 2025 executive order directing the agency to provide guidance and aims to provide plan fiduciaries a clear regulatory framework for including these investments in DC plan menus.

The rule, submitted to the White House in mid-January, could be presented for public comment as soon as early February. Retirement industry experts and Republican senators have asked the DOL to include safe harbors in the guidance, and many legal experts expect them to be included.

But as the rule approaches release and as asset management and recordkeeper firms across the retirement industry develop products featuring alternative investments, Jane Kirkland, head of asset management regulatory communications at Broadridge Financial Solutions, says the rule will enable more plan sponsors to consider alternative investments as legitimate options and adopt products that incorporate them.

“DOL officials emphasized returning to—and applying—the core principles of ERISA: Plan sponsors need prudent processes to evaluate investment options,” Kirkland says. “Private assets bring new dimensions and complexity that require sponsors to apply those principles in new ways.”

Litigation Risk Likely to Persist

Even with new guidance, experts caution that litigation may remain unavoidable.

David Kaleda, a partner in law firm Eversheds Sutherland, says anticipation of the order has generated significant interest from financial services firms exploring new product opportunities. However, plan sponsors remain cautious due to fiduciary liability concerns and litigation risk, even though some alternative investments, like real estate funds, are already included in retirement plans.

To achieve broader adoption, Kaleda says the DOL needs to provide safe harbors and make crystal clear what a prudent process looks like.

“If you are trying to be a good fiduciary, then exposing the participants to various markets and different types of asset classes—I think a case can be made that this is prudent,” Kaleda says.

A Long-Term Framework

Though the rule will likely detail a process that fiduciaries can use and can later reference if they face litigation, experts say it is more than likely that the inclusion of alternative assets in DC plans will attract litigation.

However, Erin Cho, a Mayer Brown partner who advises financial institutions on structuring and offering investment vehicles in ERISA plans, says she believes the DOL will craft a rule to provide a long-term framework, rather than a temporary solution.

“There’s no magic pill to eliminate ERISA litigation,” Cho says. “But if plan sponsors follow the Department of Labor’s guidance, it can help establish an affirmative defense with respect to their duties of prudence. I expect the rule to be drafted with flexibility—guidance that can stand the test of time, not something that becomes obsolete in a few years as products evolve.”