Now that regulatory and legislative priorities are taking shape, it’s time to look at potential developments for the rest of 2025-2026. Draft versions of the One Big Beautiful Bill Act didn’t include changes to retirement plan contributions or taxation. However, permissible investments in defined contribution plan menus are an issue to watch, specifically alternative investments and values-based investment strategies.

Fiduciary Duty Under ERISA

The duty of prudence under the Employee Retirement Income Security Act (ERISA) requires employee benefit plan fiduciaries to evaluate the risks of an investment. A fiduciary must act prudently and solely in the interests of participants and beneficiaries and for the exclusive purpose of providing benefits to participants and beneficiaries and defraying the reasonable expenses of administering the plan. Within the context of ERISA, this blog covers investment topics that are most relevant to plan sponsors right now.

Sub-Regulatory Guidance on Investments

Regulatory clarity

Department of Labor leaders signal priorities that plan sponsors should be aware of. During a Senate hearing on June 5, 2025, as the nominee for Assistant Secretary of Labor for the Employee Benefit Security Administration, Daniel Aronowitz stated that one of his top goals in was providing regulatory clarity on issues including modernizing defined contributions plans to include alternative investments, such as private equity and cryptocurrency; and the consideration of environmental, social and governance (ESG) factors.

The Senate Health, Education, Labor and Pensions Committee is scheduled to consider Aronowitz’s  nomination on June 26.

Cryptocurrency

On May 28, 2025, DOL announced its neutral approach toward cryptocurrency in 401(k) plans as with any particular investment type.  Compliance Assistance Release No. 2025-01: Restoring Neutral Approach to Cryptocurrency in 401(k) Plans rescinded a compliance release issued in 2022 that directed plan fiduciaries to exercise “extreme care” before they consider adding a cryptocurrency option to a 401(k) plan’s investment menu for plan participants because the standard of “extreme care” is not found in the ERISA.

Prior to the 2022 release, the Department had usually articulated a neutral approach to particular investment types and strategies. DOL’s approach neither endorses nor disapproves of plan fiduciaries who conclude that the inclusion of cryptocurrency in a plan’s investment menu is appropriate. When evaluating any particular investment type, a plan fiduciary’s decision should consider all relevant facts and circumstances and the specific context.

Some Senators raised concerns with DOL’s neutral approach, pointing to cryptocurrency’s potential volatility and risks of fraud or theft to participants’ retirement accounts.

Environmental, Social and Governance Considerations on DOL Spring Regulatory Agenda

Regulatory activity regarding ESG factors, the role of tie breakers in investment decision making and proxy voting are tentatively expected in Spring 2026. ERISA requires plan fiduciaries to put financial considerations first when evaluating investments. When selecting plan investments that have equal pecuniary (financial) factors, tie breaker refers to allowing plans to consider nonpecuniary (nonmonetary) factors as a tiebreaker when selecting between equally prudent plan investments. ESG factors are generally considered nonpecuniary. Regulations have gone back and forth on what financial factors could be equal and the extent of disclosure (explanation of decision making) was required.

ESG-related proxy voting likely discouraged

Proxy voting enables investors in public entities to advocate for a company’s adoption of proposals that may improve shareholder value through the companies’ policies and practices on ESG issues that are evaluated by financial markets. A plan fiduciary has the duty to monitor whether investment managers vote on behalf of plan participants’ financial best interest including ESG-related voting.

Regulations could bring clarity for plans wondering what their fiduciary responsibilities are with respect to proxy voting.

Private equity could be permitted

Private equity is considered an alternative investment class and consists of debt and equity investments in privately held companies and assets that are not listed on a public exchange. These investments come with high risk in the hope of a high reward. Based on informal guidance during the first Trump administration, some analysts predict that DOL could allow defined contribution plans to include private equity investments. Regulations could bring clarity for plan sponsor considerations about private equity including diversification, fees, liquidity and valuation.

Legislation Introduced in Congress

While news stories indicate the budget reconciliation bill doesn’t contain retirement plan-related provisions, some bills have been introduced in Congress that would amend ERISA and/or change permissible investments in defined contribution retirement plans. Highlights from the U.S. Legislative Tracker are below.

Retirement Fairness for Charities and Educational Institutions Act of 2025 (HR 1013)(S 424) which would amend securities law to allow 403(b) plans to invest in collective investment trusts (CITs) was advanced by the House Committee on Financial Services. Currently, most 403(b) plans cannot invest in vehicles other than annuities and mutual funds. CITs are pooled investments that are similar to mutual funds, but available only to institutional investors. Investment management fees are typically lower than those of mutual funds. This has led 401(k) plan fiduciaries to choose CIT investments over mutual funds, and advocates say that 403(b) plans should have the same cost-effective investment options. This bill follows up on steps taken under the Secure Act 2.0 Act to create parity for 403(b) plans in the tax code, but this bill is still needed to implement the necessary changes to securities law, according to Representative Frank Lucas’ press release. 

Financial Freedom Act (HR 2544)(S 1222) would amend ERISA to prohibit the Secretary of Labor from constraining the range or type of investments that may be offered to participants of a retirement plan that provides individual retirement accounts who exercise control over the assets in such accounts. The bill would add the following language:

• Nothing requires a fiduciary to select, or prohibits a fiduciary from selecting, any particular type of investment alternative, provided that a fiduciary provides the participant an opportunity to choose, from a broad range of investment alternatives, the manner in which some or all of the assets of the participant’s or beneficiary’s account are invested
• Nothing requires that any particular type of investment be either favored or disfavored, other than on the basis of the investment’s risk-return characteristics, in the context of the plan fiduciary’s objective of providing investment alternatives suitable for providing benefits for participants and beneficiaries.

Protecting Americans’ Retirement Savings Act (PARSA)((HR 2067)(S 928) would amend ERISA to prohibit retirement plans from investing in companies based in foreign adversary countries, including China, Russia, North Korea, and Iran. Further, ERISA plan fiduciaries would be required to report all assets invested in sanctioned entities, including their identities and reasons for sanctions, the total value of investments in foreign adversary companies, a detailed list of specific investments in these companies, and justifications for retaining such investments in retirement plans.

Protecting Prudent Investment of Retirement Savings Act (HR 2988) includes the Increase Retirement Earnings Act which would amend ERISA to specify requirements about the consideration of pecuniary and non-pecuniary factors

• A fiduciary would be considered to act solely in the interest of the participants and beneficiaries of the plan with respect to an investment only if the fiduciary’s action with respect to such investment is based solely on pecuniary factors. The fiduciary may not subordinate the interests of the participants and beneficiaries in their retirement income or financial benefits under the plan to other objectives and may not sacrifice investment return or take on additional investment risk to promote non-pecuniary benefits or goals. The weight given to any pecuniary factor by a fiduciary shall reflect a prudent assessment of the impact of such factor on risk and return.
• If a fiduciary would be unable to distinguish between or among investment alternatives or investment courses of action on the basis of pecuniary factors alone, the fiduciary may use non-pecuniary factors as the deciding factor if the decision making is documented
• Pecuniary factor means a factor that a fiduciary prudently determines is expected to have a material effect on the risk or return of an investment based on appropriate investment horizons consistent with the plan’s investment objectives and the funding policy. 

Cryptocurrency, brokerage windows, ESG, proxy voting, private equity, CITs, foreign countries…What’s next?

In conclusion, as we wait for more regulatory guidance or Congressional action, fiduciaries should evaluate investment options under ERISA fiduciary standards, like prudence and loyalty, following the investment policy statement and documenting decision-making processes.

Developed by International Foundation Information Center staff. This does not constitute legal advice. Please consult your plan professionals for legal advice.