From Prudence and Loyalty to Maximum Discretion: How US Fiduciary Duty Just Changed Shape

02 April 2026

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On 31 March 2026, the United States Department of Labor (DOL) published a proposed rule that quietly but decisively rewrites the language of fiduciary duty under the Employee Retirement Income Security Act of 1974 (ERISA). The rule, Fiduciary Duties in Selecting Designated Investment Alternatives (91 FR 16088), does not announce a philosophical break. It does something more consequential. It deletes, replaces, and reframes the words that have defined what a prudent fiduciary process looks like since 2022.

The Department presents the proposal as a clarification. In practice, it redraws the boundaries of fiduciary discretion, narrows what counts as a protected decision‑making process, and severs investment selection from stewardship. The effects will be felt well beyond US retirement plans.

 

What the Rule Says it Does

Formally, the proposal creates a process‑based safe harbour for fiduciaries selecting designated investment alternatives in participant‑directed plans, including 401(k)s. If fiduciaries document consideration of six factors: performance, fees, liquidity, valuation, benchmarking, and complexity; their judgment is “presumed to be reasonable” and entitled to “significant deference”.

The rule implements Executive Order 14330, Democratizing Access to Alternative Assets for 401(k) Investors, directing the DOL to reduce regulatory and litigation risk perceived to be discouraging access to alternative assets. It also claims to be asset‑neutral, stating that ERISA “does not require or restrict any specific type of designated investment alternative”.

What has been Removed from the Biden‑Era Framework

The most important changes are deletions. The 2022 Biden‑era rule was titled Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights. Both “loyalty” and “shareholder rights” have vanished from the new rule’s title and scope. The disappearance is not cosmetic.

The 2022 rule treated investment selection and the exercise of shareholder rights as inseparable fiduciary acts and removed the 2020 Trump‑era rule’s special monitoring obligations widely seen as discouraging proxy voting. This new, 2026 Trump-era proposal is entirely silent on proxy voting. Read alongside the 11 December 2025 executive order on proxy advisers (EO 14366), there is a structural push to place investment selection in a litigation safe harbour, while leaving stewardship vulnerable.

The 2022 rule required fiduciaries to base decisions on “factors that the fiduciary reasonably determines are relevant to a risk and return analysis”. The DOL explicitly confirmed that those factors could include the economic effects of climate change and other environmental, social, and governance considerations, where financially material. Fiduciary discretion was broad, but anchored in relevance to risk and return.

In the new rule, relevance is prespecified. The six factor list contains no reference to systemic risk, climate exposure, transition risk, environmental considerations, or governance quality. It also does not speak to time horizons, intergenerational risk, or portfolio wide externalities. That absence is factual. It does not require interpretation.

A third deletion is quieter but significant. The 2022 rule explicitly allowed fiduciaries to consider participant preferences when constructing plan menus. The new proposal contains no equivalent provision. Taken together, these removals narrow what counts as a protected fiduciary process; some considerations are not prohibited, but they are no longer sheltered.

What the Rule Adds: Safe Harbour, Asset Agenda, Litigation Shield

What replaces that broader standard is a framework calibrated to a particular category of decision.

The proposal also emphasises “maximum discretion” for fiduciaries, repeating that ERISA “does not require or restrict any specific type of designated investment alternative”.

The six safe harbour factors map closely to recurring features of private markets and other illiquid strategies (liquidity, valuation, benchmarking, complexity). The proposal also emphasises “maximum discretion” for fiduciaries, repeating that ERISA “does not require or restrict any specific type of designated investment alternative”.

On its face, that is symmetrical. In operation, the rule builds process protection around decisions to include alternative assets, without offering a comparable safe harbour for decisions to exclude an asset class on climate-, governance-, or system level risk grounds.

The political rhetoric embedded in the text is unusually direct. The rule states that its goal is to ensure “ERISA gives fiduciaries (not opportunistic trial lawyers) the discretion and flexibility” to select investments that offer the opportunity to maximise risk adjusted‑ returns. The phrase “opportunistic trial lawyers” appears in the Federal Register without commentary or qualification.

The most powerful addition is the presumption of prudence. Where fiduciaries follow the six‑factor process, “its judgment regarding the factor or factors is presumed to be reasonable and is entitled to significant deference”. The rule explicitly invokes Firestone Tire & Rubber Co. v. Bruch, and in practice raises the bar for participant litigation once process compliance is established.

The proposal also formally rescinds the DOL’s 2021 supplemental statement cautioning fiduciaries about private equity in typical 401(k) plans. The Department says the statement “deviated from the Department’s historically neutral and principles‑based approach” and created a “potentially costly chilling effect on the market”.

The irony is deliberate but unstated. “Chilling effect” was the phrase used by the Biden‑era DOL to describe the impact of the Trump‑era 2020 rule on ESG consideration. The same metaphor now justifies the removal of caution in the opposite direction.

Finally, the rule operationalises the EO 14330 asset class agenda. The list includes private equity, real estate, commodities, infrastructure, lifetime income strategies, and “holdings in actively managed investment vehicles that are investing in digital assets”. Crypto exposure in 401(k) plans now has a defined regulatory pathway with presumptive litigation protection.

The Neutrality Claim and its Limits

The Department says the safe harbour is framed broadly to avoid implying that any asset class is favoured or disfavoured. In effect, however, it protects one category of decision more than others.

 The safe harbour is calibrated to the risks fiduciaries face when adding illiquid, non‑publicly‑traded, structurally complex investments. There is no equivalent calibration for assessing climate exposure, stranded asset risk, biodiversity loss, or governance failures that manifest over long horizons.

A fiduciary who documents liquidity management for private credit receives deference; a fiduciary who excludes thermal coal on transition risk grounds receives no comparable shield. The rule does not prohibit either decision. It simply protects one.

The UK Comparison: Fiduciary Duty Contested from the Opposite Direction

Across the Atlantic, fiduciary duty is being contested in the opposite direction at the same moment.

In March 2026, the Government of the United Kingdom (UK Government) tabled amendments to the Pension Schemes Bill to provide statutory guidance on fiduciary duty. The ShareAction‑backed Byrne amendment would clarify that trustees may consider system‑level considerations, reasonably foreseeable impacts on members’ standards of living, and members’ views.

At the same time, the House of Lords voted 217 to 113 to strip mandation powers from the Bill. The arguments will sound familiar to US readers: fiduciary duty belongs to trustees, not politicians, and government should not override fiduciary judgment. Baroness Bowles of Berkhamsted captured the concern succinctly, arguing trustees would be placed “under a new adjudicator of fiduciary duty that has no fiduciary responsibility itself”. The fiduciary duty argument cuts both ways. In both jurisdictions, it is being used to police the boundary of discretion, even as the content of that boundary differs.

The divergence is sharpened by the United Kingdom Stewardship Code 2026 published by the Financial Reporting Council (FRC). The Code explicitly links stewardship to fiduciary duty and requires outcomes‑based reporting. The US rule contains no reference to stewardship at all.

For global asset managers, this is not theoretical. The same firm may be required to demonstrate stewardship outcomes as part of its fiduciary obligations in the UK, while operating under a US framework that has severed stewardship from protected fiduciary process.

What this Means for Non‑US Investors and Managers

By redefining what counts as a prudent process in the world’s largest retirement market, the Department sets a reference point. Decisions aligned with the six‑factor safe harbour will be easier to defend internally and legally; decisions grounded in systemic risk analysis including factors such as climate change will require firmer justification, without regulatory cover.

For non‑US investors partnering with US plan capital, this matters. Product design, disclosure, and governance structures will increasingly reflect the incentives embedded in ERISA, even where local rules point in a different direction.

What Happens Next

Comments on the proposed rule are due by 1 June 2026. The DOL has framed the proposal as a clarification rather than a departure, but the language changes are real and consequential.

For fiduciaries, asset managers, and advisers operating across jurisdictions, the task now is not to argue about intent, but to read the text closely. The words that have been removed matter as much as the ones that remain.

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US Fiduciary Duty: Biden (2022) vs Trump (2026)

The table below compares the Biden-era rule (“Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” 87 FR 73822, effective 30 January 2023) with the Trump administration’s proposed replacement (“Fiduciary Duties in Selecting Designated Investment Alternatives,” 91 FR 16088, published 31 March 2026, comment period closing 1 June 2026).

Dimension	Biden DOL Rule (2022)	Trump DOL Rule (2026)
Rule title	Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights (87 FR 73822, 1 December 2022)	Fiduciary Duties in Selecting Designated Investment Alternatives (91 FR 16088, 31 March 2026)
Implementing authority	Executive Order 14030, “Climate-Related Financial Risk” (May 2021)	Executive Order 14330, “Democratizing Access to Alternative Assets for 401(k) Investors” (August 2025)
Core fiduciary standard	Fiduciary must base decisions on “factors that the fiduciary reasonably determines are relevant to a risk and return analysis.” Climate change and other ESG factors explicitly included as potentially relevant factors.	Six-factor safe harbour: performance, fees, liquidity, valuation, benchmarking, complexity. No reference to climate, ESG, environmental, systemic risk, or transition risk anywhere in the rule.
Scope	Covers both investment selection and the exercise of shareholder rights, including proxy voting. Both treated as core fiduciary responsibilities.	Covers investment selection only. Proxy voting, shareholder rights, and stewardship are entirely absent from the rule.
Climate / ESG language	Explicitly states factors “may include the economic effects of climate change and other environmental, social, and governance considerations.” The DOL confirmed ESG factors are part of ordinary risk-return analysis.	The words climate, ESG, environmental, sustainable, stewardship, transition risk, Paris, net zero, carbon, and emissions do not appear in the 57-page document.
Participant preferences	New provision allowing fiduciaries to consider participant preferences when constructing plan investment menus, provided options remain prudent.	No equivalent provision. The rule solicits comment on whether “participant profiles or characteristics” should be a factor, but does not include them.
Private equity	2021 supplemental statement cautioned fiduciaries against selecting private equity components for typical 401(k) plans without relevant experience.	Rescinded the 2021 caution (August 2025), stating it “deviated from the Department’s historically neutral and principles-based approach” and created a “chilling effect.” Multiple safe harbour examples demonstrate how to include private equity.
Digital assets / crypto	Not addressed. DOL issued Compliance Assistance Release No. 2022-01 expressing “serious concerns” about crypto in retirement plans.	Executive Order 14330 includes “holdings in actively managed investment vehicles that are investing in digital assets” in the definition of alternative assets. The safe harbour framework applies.
Litigation framing	Removed Trump 2020 rule’s special monitoring obligations for proxy voting, which were perceived as discouraging shareholder engagement through compliance burden.	Frames litigation as the primary problem: fiduciaries must be protected from “opportunistic trial lawyers.” Safe harbour creates a “presumption of prudence” with “significant deference” for fiduciaries who follow the process.
“Chilling effect” usage	Used to describe the Trump 2020 rule’s impact on ESG consideration: the prior rule created a “chilling effect” that discouraged fiduciaries from weighing ESG factors.	Used to describe the Biden-era caution on private equity: the 2021 supplemental statement created a “potentially costly chilling effect on the market.” Same metaphor, opposite application.
Asset class neutrality	Stated ESG factors should be treated like any other investment consideration. Neutrality framed as: ESG is neither special nor prohibited.	States ERISA “does not require or restrict any specific type of designated investment alternative.” Neutrality framed as: no asset class is per se imprudent. But the safe harbour factors are calibrated to alternative assets (illiquidity management, private valuation, complexity). No equivalent calibration for climate exposure or stranded asset risk.
Proxy voting / shareholder rights	Restored proxy voting as a core fiduciary duty. Removed the 2020 rule’s enhanced monitoring requirements and record-keeping obligations that had been perceived as chilling shareholder engagement.	Silent. Must be read alongside the 11 December 2025 executive order targeting proxy advisers, which calls for SEC/FTC/DOL action on proxy adviser “accountability, transparency, and competition.” Investment selection and shareholder rights have been severed: one has a litigation shield, the other is under regulatory attack.
Deference standard	Standard ERISA fiduciary analysis. No special presumption of reasonableness.	Safe harbour creates a presumption that fiduciary judgment “is presumed to be reasonable and is entitled to significant deference.” Explicitly invokes Firestone deference for investment selection decisions.
Stewardship	Implicitly supports stewardship through restoration of proxy voting as fiduciary duty and removal of barriers to shareholder engagement.	The word “stewardship” does not appear. No reference to engagement, monitoring of investee companies, or the governance dimension of ownership.

Sources: Federal Register 87 FR 73822 (1 December 2022); Federal Register 91 FR 16088 (31 March 2026); Executive Order 14030 (20 May 2021); Executive Order 14330 (7 August 2025); Executive Order on proxy advisers (11 December 2025). 

Prepared by Minerva Analytics Ltd. For internal/blog use. 

Last Updated: 2 April 2026