New DOL Guidance Suggests Lighter Hand on ESOP Litigation

On April 14, the Employee Benefits Security Administration (EBSA) in the Department of Labor (DOL) laid out its new enforcement priorities in Field Assistance Bulletin 2026-01. The memo states that these priorities will be:

• Focusing enforcement on the most egregious conduct and significant harm;
• Ensuring, whenever possible and consistent with the EBSA's mission, that the EBSA does not regulate by enforcement and instead promotes fairness, prior notice, and clarity to the regulated community;
• Requiring proper review by senior agency officials of all critical enforcement initiatives; and
• Committing to timely and responsive enforcement.

One of the most important aspects of the new focus is a focus on loyalty breaches rather than prudence issues. The memo states that the EBSA “will continue to enforce both the duties of loyalty and prudence under ERISA. Nevertheless, a significant percentage of our enforcement resources must be focused on enforcement of loyalty breaches, or direct evidence of non-exempt prohibited transactions that involve impermissible conflicts of interest. While breaches of the duty of prudence can and do threaten the security of the American worker’s promised benefits, the costliest breaches of the duty of prudence tend to be accompanied by concomitant loyalty breaches. To the extent any enforcement activity is solely based on a prudence breach, and given that ERISA is a law of process and not results, EBSA must avoid cases that unfairly second-guess process-based fiduciary judgments.”

While the majority of ESOP litigation in recent decades has dealt with operational issues, by far the most important and costly litigation has focused on prudence issues related to valuation. The bulletin suggests that the EBSA will take a less aggressive stance on this going forward.

A second key element of the bulletin is that “novel legal theories or interpretations of ERISA should not be first articulated during enforcement actions. Instead, they should be subject to the ordinary regulatory and sub-regulatory processes.” The DOL has resolved a number of prior lawsuits by issuing fiduciary process agreements that outline key principles for how trustees should oversee valuations. These are not regulations and apply only to the trustee involved, but they do state the kinds of principles that normally would appear in regulations.

The bulletin also calls for guidance to be timely and to be reviewed by top leadership before being issued.