Proposed Labor Rule Could Shield Employers from 401(k) Lawsuits While Expanding Alternative Investments

The Department of Labor announced a proposed rule that would make it harder for employees to hold employers liable for 401(k) investment selections, provided the employer follows a documented six-factor analysis. The agency frames the change as a way to broaden access to private-equity, real-estate and cryptocurrency investments while reducing litigation exposure for employers acting in good faith. Critics such as Monique Morrissey argue the rule could erode protections for retirees, whereas experts like Bonnie Treichel say it does not compel firms to add risky options.

The proposal, expected to be finalized this year, comes amid concerns about high fees and limited low-cost index fund choices in many plans. Workers are advised to examine their annual fee disclosures, compare expense ratios, and seek advice from fee-only fiduciaries if needed. The rule also encourages employers to document their investment rationale, though past cases show paperwork alone may not guarantee prudent decisions.