"[Technical Release 2026-01] represents a notable expansion of the Department's engagement with the evolving state-law landscape surrounding ESG-related proxy voting regulation.... The Release creates a challenge for proxy advisory firms because, in arguing that these state rules are not preempted by ERISA, the Department suggests that any firm that makes a disclosure of nonfinancial proxy voting under a state law with respect to ERISA assets would be violating ERISA." MORE >>
17 pages. "[ARA recommends] that the Department: [1] Provide additional context to clarify how the proposed rule aligns with the existing prudence regulation ... [2] Clarify the interaction of a fiduciary's plan menu strategy decision and a fiduciary's selection of a DIA ... [3] Further mitigate frivolous ERISA litigation by addressing monitoring in the final rule and more explicitly defining certain key concepts ... and [4] Refine certain provisions relating to the safe harbor[.]" MORE >>
"The SPARK Institute offers the following recommendations. [1] Clarify safe harbor provisions are only a safe harbor ... [2] Clarify scope of presumption and deference ... [3] Clarify impact of factors beyond the six safe harbor factors ... [4] Do not add safe harbor factors ... [5] Reconsider emphasis on benchmarks ... [6] Reconsider guidance that artificially incentivizes mutual funds over other investments ... [7] De-emphasize conflict-free valuations ... [8] Consider example covering stable value fund selection." MORE >>
19 pages. "[It] is essential for DOL to make clear that there is no one prudent process, and any factors listed in a final regulation are not the exclusive means by which fiduciaries may meet their prudence obligations.... The language in the preamble and the repeated reference to an ERISA section 3(21)(A) fiduciary in the examples could be interpreted to mean DOL prefers that type of assistance rather than other types, and any other equally appropriate assistance (or lack of assistance if not needed) would not satisfy the requirements in a final regulation." MORE >>
"The proposed rule will reduce regulatory uncertainty by providing clarity to plan fiduciaries as they consider new plan investments that can help retirement savers invest for a successful retirement.... Fiduciaries should not be forced to operate under the fear that offering a particular asset class will invite hindsight second-guessing and costly, often meritless litigation, even where exposure to these assets can be prudently made available in a DC plan through a professionally managed, diversified investment option." MORE >>
"A disciplined approach to uncovering hidden costs in portfolios can be critical to understanding the Total Cost of Ownership (TCO), improving governance, and fulfilling fiduciary responsibilities.... TCO addresses cost drivers across the investment value chain, from management fees to trade execution, settlement, and custody costs. Plan sponsors can achieve this with a bottom-up analysis of all cost elements and operational processes that prioritize risk management, transparency, and contract compliance." MORE >>
"Among the nearly 40,000 comments through May 29, were hundreds, if not thousands, of identical messages from individuals both supporting and decrying the proposal as either a great opportunity for retirement plan investors, or a great danger to them." MORE >>
"CFA institute warns that the DOL pathway allowing alternatives needs stronger Guardrails especially around target date funds.... [F]iduciaries must evaluate not only the Target Date Fund itself, but each underlying investment component individually.... [I]ncreasingly, Target Date Funds are being moved into weakly regulated state-bank Collective Investment Trusts (CITs) ... The fiduciary obligation therefore requires substantially enhanced due diligence." MORE >>
19 pages. "[T]he Proposed Regulation is a crucial step in restoring balance, limiting meritless litigation, and reducing uncertainty and improving outcomes for retirement savers.... Certainty and predictability in legal standards are absolutely essential to our retirement system, and the NPRM is an important step.... We strongly support the NPRM because it generally adopts the framework the retirement community has recommended and because it has the potential to meaningfully improve the ability of tens of millions of Americans to save for retirement." MORE >>
"The [DOL's] proposed regulation on selecting designated investment alternatives ... reflects an effort by the DOL to bring greater structure and clarity to how fiduciary decisions are evaluated under ERISA. For plan committees and advisors, that shift creates a number of practical opportunities.... [1] A clearer playbook for fiduciary decisions ... [2] Stronger documentation and defensibility ... [3] More confidence to evaluate broader investments ... [4] Reduced pressure to default to lowest cost ... [5] Better alignment with participant outcomes." MORE >>
"The Proposed Rule does not by itself resolve all of the structural questions that private funds and other nonregistered products face in DC plans. It does, however, offer a clearer framework for fiduciaries' prudent process and highlights where the operational features of these products (particularly liquidity, valuation, benchmarking, fees, and complexity) may have to evolve. For managers and sponsors, the near-term focus is likely to be both on vehicles such as target date funds, balanced funds, and CITs and other delivery structures that can satisfy the Safe Harbor's expectations, and on targeted comments aimed at ensuring that the final rule can be applied to nonregistered structures on workable terms." MORE >>
"While about 84% of respondents to a recently released ACA Group survey reported using AI, they also reported that 'active AI use' occurred, on average, in only two of 20 compliance and operations sub-functions. Only 18% of firms that responded said they used AI in compliance tasks, compared with 5% in operations." MORE >>
39 pages. "Aon conducted a study of the investment policy statements of the 50 largest U.S. public pensions.... There is no single 'right' way to write an IPS, but it should be structured and worded with intention to provide clear guidance for implementation Especially with an evolving investment environment -- it is important that IPS documents evolve with the markets while maintaining appropriate risk management." MORE >>
"[This] article examines how multi-layer asset allocation ranges can help institutional investors close unintended risk gaps in their investment policy statements. Aon's review of public pension investment policy statements found an even split between single-layer and multi-layer asset allocation ranges, despite the fact that single-layer approaches can allow significant risk drift without violating policy." MORE >>
"Although rooted in an executive order on alternative assets, the proposal addresses more than just alternative assets and outlines a new process-based safe harbor for fiduciary decision-making. This LawFlash outlines key themes and implications from the proposal." MORE >>
"Among participants who were 100% invested in TDFs at year-end 2016, 85% remained fully invested in TDFs through year-end 2022. When moving away from TDFs, participants in their 60s were the most likely to completely exit TDFs. In contrast, when moving away from TDFs, younger participants were more likely to reduce their TDF holdings rather than exit completely. When moving away from TDFs, older 401(k) participants typically made larger adjustments to their equity allocations than younger participants." MORE >>
"[In] its pursuit of a fiduciary safe harbor, the DOL is making the following mistakes: [1] Applying the standards of very large companies, with their substantial resources, to the small and mid-market plan sponsors and their fiduciaries; [2] Giving examples that appear to be imposing mandatory rules, which is inconsistent with a principles-based standard -- the prudent person standard of ERISA." MORE >>
"Plan committees should evaluate whether their current fiduciary process, including investment review and selection framework, generally aligns with the proposed six‑factor analysis, particularly with respect to the rationale documented in committee minutes. Plan fiduciaries should consider with their ERISA counsel and investment advisor what preparatory steps, if any, may be appropriate in anticipation of the proposed regulations being finalized, including with respect to fiduciary process, committee documentation, and investment policy statements." MORE >>
"The U.S. Chamber of Commerce and the American Benefits Council filed a joint amicus brief ... asking the U.S. 4th Circuit Court of Appeals to set aside the ERISA class certification approved by a district court in a lawsuit involving the 401(k) pension plan of the National Rural Electric Cooperative Association....[The lawsuit was filed] by two current plan participants, representing a class of more than 77,000 participants.... The plaintiffs accuse NRECA and its fiduciary committee of breaching obligations under [ERISA] and charging the multiple employer plan's participants excessive administrative fees." [Mullins v. NRECA, No. 25-0994 (E.D. Va. Mar. 13, 2026; on appeal to 4th Cir. No. 26-0165)] MORE >>
"Yet another set of 401(k) plan fiduciaries have been targeted with a fiduciary breach suit regarding “massive underperformance relative to that of well-established, prudently managed, comparable funds that Defendants could have selected for the Plan.”" [Clayton v. Aon Corp., No. 26-6026 (N.D. Ill. complaint filed May 22, 2026)] MORE >>
"[The lawsuit] challenged the decision to invest in the Equitable Fixed Income Fund, which allegedly had investments in nine synthetic GICs offered by several large American banks and insurance companies.... Complicating matters was a contract with Alight Financial Solutions, LLC to provide recordkeeping services for the plan for which the plaintiff alleged received 'millions of dollars in indirect compensation from investments within the Plan' in addition to direct fees paid by Equitable." [Tedford v. Equitable Financial Life Ins. Co., No. 25-2180 (D.N.J. May 19, 2026)] MORE >>
"Updating PTE 77-4 would better align the exemption with today's marketplace. It would give managers greater flexibility to offer plan participants diversified, professionally managed strategies -- including those with private market exposure -- within the familiar and well-understood ERISA compliance framework of PTE 77-4.... [E]xpanding the exemption ... would provide access to a broader range of investment options. More choice when paired with strong fiduciary oversight can support better diversification and long-term investment opportunities." MORE >>
"The plan's qualified default investment alternative -- a suite of custom target-date funds spanning vintages from 2025 through 2060 -- allegedly underperformed its benchmarks and was invested largely in other challenged funds, effectively compounding the harm." [Rivetti v. American Express Co., No. 26-4082 (S.D.N.Y. complaint filed May 15, 2026)] MORE >>
"[O]nce the regulation is finalized, there [is likely to] be a challenge to the DOL's authority to grant a regulatory safe harbor of this type. The key question is whether this regulation limits the scope of the prudent person rule of ERISA.... [S]ection 505 was not broad enough to allow the DOL to write a new regulation defining fiduciary advice, so it may not be broad enough to allow a grant of a fiduciary safe harbor." MORE >>
"[O]nly about one-third of DC plan advisors are familiar with PEPs ... About 17% of occasional advisors are familiar with PEPs ... These occasional advisors don't focus on defined contribution, they don't focus on workplace, and they only generate up to 20% or so of their practice income from their defined contribution advising." MORE >>
