Quick question: if your payroll provider's "retirement advisor" tells one of your employees to roll their 401(k) into an IRA, is that advice legally required to be in the employee's best interest? A year ago, the answer was trending toward yes. As of March 2026, the answer is back to "it depends" — and for small business owners sponsoring a 401(k) plan, that shift matters more than it sounds.
The Department of Labor's Retirement Security Rule — the Biden administration's attempt to widen who counts as an ERISA "fiduciary" when giving retirement advice — is dead. Not scaled back, not delayed. Vacated entirely, for the second time in a decade. And two weeks after burying that rule, the DOL proposed something almost opposite in spirit: a safe harbor that would make it easier for 401(k) plans to offer private equity, real estate, and even cryptocurrency as investment options. If you sponsor a retirement plan for your employees, both of these changes land on your desk, whether you asked for them or not.
How We Got Here: A Rule That Never Actually Took Effect
To understand why this matters, it helps to know that the Retirement Security Rule never once applied to a real transaction. It was finalized in 2024, immediately challenged in two federal courts in Texas, and blocked by injunction before its effective date ever arrived. It existed on paper for about two years without ever governing a single rollover recommendation.
When the Trump administration took office in January 2025, the DOL's Employee Benefits Security Administration stopped defending the rule in court. With nobody left to argue for it, the Fifth Circuit dismissed the pending appeal in late November 2025, and the district courts in Texas entered final judgments vacating the rule in mid-March 2026 — March 12 in the Eastern District and March 17 in the Northern District. The DOL published formal notice of the vacatur in the Federal Register on March 20, 2026.
This is the second time a version of this rule has died this way. The Obama-era "fiduciary rule" met a nearly identical fate in 2018, struck down by the Fifth Circuit after a similar multi-year legal fight. Two administrations, two rules, two vacaturs, zero days of actual enforcement. If you're noticing a pattern, you're not wrong — expanding the fiduciary definition through DOL rulemaking has now failed twice in federal court, which is itself useful context for evaluating whatever comes next.
What's the Standard Now? Back to 1975
With the 2024 rule gone, the operative test for who counts as an ERISA investment-advice fiduciary reverts to the "five-part test" the DOL adopted in 1975 — the same standard that predates most of the financial products your employees hold retirement savings in today. Under this test, someone is only a fiduciary with respect to investment advice if they:
- Make recommendations on investing in, purchasing, or selling securities or other plan property
- Do so on a regular basis
- Under a mutual understanding with the plan or plan sponsor
- That the advice will serve as a primary basis for investment decisions
- And the advice is individualized to the plan's particular needs
That's a narrower net than the 2024 rule would have cast. A one-time rollover recommendation, a single conversation at open enrollment, or advice that isn't part of an ongoing relationship generally won't meet this bar — meaning fewer advisors are legally bound to the fiduciary standard when talking to your employees about their retirement money.
What this means practically: two advisors can give your employee nearly identical advice about rolling over an old 401(k), and one may be held to a fiduciary standard while the other isn't — depending entirely on how their relationship with the employee is structured, not on the substance of what they said. That inconsistency is exactly what the 2024 rule tried (and failed) to fix.
What Small Employers Should Actually Do About It
None of this changes your fiduciary duties as a plan sponsor — those come from ERISA itself, not from the vacated rule, and they haven't moved. But it's a good prompt to check three things:
Review your advisor agreements. If your plan works with a third-party advisor, broker, or your payroll provider's "retirement specialist," find out in writing whether they're acting as an ERISA fiduciary or not. The five-part test creates real gaps — a friendly annual check-in call may not meet the "regular basis" or "mutual understanding" prongs, which means that advisor may not be legally obligated to recommend what's actually best for your employees.
Ask about compensation, not just credentials. A title like "financial advisor" tells you nothing about whether someone is a fiduciary. Ask directly: is this person receiving commissions tied to specific fund recommendations, and are they willing to put their fiduciary status in writing? If they hesitate, that's your answer.
Consider whether a Pooled Employer Plan (PEP) makes sense. For employers who'd rather not manage this uncertainty in-house, a PEP shifts most fiduciary responsibility — including investment selection and advisor oversight — to a professional pooled plan provider. It's worth a look if your plan has fewer than a few dozen participants and no dedicated HR/benefits staff to monitor this.
The Other Shoe: Private Equity Is Coming to 401(k) Menus
Ten days after the vacatur notice, on March 30, 2026, the DOL proposed a rule that pulls in a different direction entirely. It would create a formal process-based safe harbor letting 401(k) plan fiduciaries add alternative investments — private equity, private credit, real estate, infrastructure, and digital assets — to plan menus, alongside the usual index funds and target-date funds.
The proposal follows a 2025 executive order directing the DOL, SEC, and Treasury to jointly reduce barriers to alternative assets in retirement accounts. Under the draft rule, a fiduciary who documents consideration of six factors — performance, fees, liquidity, valuation methodology, benchmarking, and complexity — before adding an alternative investment option gets a legal presumption that they satisfied their duty of prudence. The public comment period runs through June 1, 2026, so the final version could still change.
Should a small plan sponsor do anything about this yet? Not urgently. Nobody's 401(k) menu is getting a private equity fund added automatically, and most recordkeepers serving small plans won't build out alternative-asset options for a while even after the rule finalizes — the operational lift (valuation, liquidity windows, participant disclosures) is substantial. But it's worth knowing this is on the horizon, because if your advisor or recordkeeper starts pitching "alternative asset" options to your plan committee in the next year, you'll want to actually apply those six factors rather than take the safe-harbor language at face value.
A Documentation Checklist for the Next Plan Committee Meeting
None of the changes above require you to overhaul your plan. They do give you a good reason to spend twenty minutes updating your files before your next plan review. Concretely, that means pulling together:
- A current copy of every advisor's engagement letter or services agreement, with the fiduciary-status language (if any) highlighted. If it's silent on fiduciary status, that silence is itself worth a follow-up email asking the advisor to clarify in writing.
- A one-page summary of how each advisor or provider is compensated — flat fee, AUM-based fee, commissions, revenue sharing from fund providers, or some combination. If you don't know, that's the first thing to ask for at your next check-in.
- Meeting notes from your last fund-lineup review, including why the current funds were chosen and when they were last benchmarked against comparable options. If you can't find this, treat it as the actual action item — not the rule change itself.
- A short internal note (even a few sentences) recording that you're aware of the five-part test reinstatement and have confirmed your advisor relationships accordingly. This is the kind of contemporaneous documentation that matters far more after the fact than before it.
None of this needs a lawyer to produce, and none of it takes more than an afternoon. But it's the difference between "we reviewed this and made a documented decision" and "we didn't think about it," which is exactly the distinction that matters if a participant complaint or DOL inquiry ever asks what your plan committee actually did in 2026.
Why This Matters Even for a Five-Person Company
It's tempting to file federal fiduciary rulemaking under "not my problem" if you run a business with a handful of employees. But every 401(k) plan — regardless of size — operates under the same ERISA fiduciary framework, and plan sponsors carry personal liability for prudent oversight, not just the advisors they hire. Litigation over excessive 401(k) fees and imprudent fund lineups has increasingly reached small and mid-sized plans, not just Fortune 500 401(k)s. A five-minute conversation with your plan's advisor about their fiduciary status costs nothing and closes a real gap.
The bigger lesson from watching this rule die twice in eight years: retirement-plan compliance obligations shift with every administration, but the paper trail you keep — advisor agreements, fee disclosures, meeting notes documenting why you chose a particular fund lineup — is what actually protects you when a regulator or a plaintiff's attorney comes asking. That's true whether the fiduciary standard is broad or narrow.
Keep Your Compliance Paper Trail as Clean as Your Books
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