The Department of Labor’s Employee Benefits Security Administration (“EBSA”) recently issued Field Assistance Bulletin (“FAB”) 2026-01, a guidance document signaling a fundamental shift in how the agency approaches ESOP investigations and enforcement actions, among other things.
FABs are directives from EBSA leadership to EBSA employees designed to provide official policy clarification and direction on conducting investigations and enforcement actions. While these directives impact all plans under EBSA’s enforcement authority, the policy changes announced in FAB 2026-01 are particularly noteworthy for the ESOP community.
At a high level, the FAB announces policies that will restore fairness to EBSA investigations, focus regulatory and enforcement actions on curtailing disloyal conduct rather than second-guessing reasonable fiduciary decisions, and eliminate the “regulation by litigation” approach to which the ESOP community has grown accustomed. Among other things, the FAB requires EBSA to:
- focus enforcement resources on cases involving substantial participant harm, fraud, self-dealing, or other serious fiduciary misconduct tied to disloyal conduct;
- conduct investigations more efficiently;
- exercise enforcement discretion fairly and transparently, and promote consistency across regional offices;
- end “regulation by litigation”—i.e., the pursuit of novel legal theories not grounded in ERISA’s text, published guidance, or clearly established case law; and
- avoid conduct that could create the appearance of improper coordination with private plaintiffs’ counsel.
While the FAB does not alter underlying fiduciary standards, the guidance explains that the agency will distinguish more carefully between intentional misconduct and good-faith fiduciary decision-making, prioritizing the former and deemphasizing the latter. As ESOP practitioners are well aware, ESOP investigations over the past two decades have frequently centered on disputes regarding valuation methodology, financial projections, transaction structure, and fiduciary process. In many cases, industry participants viewed the governing legal standards as uncertain or evolving. The FAB’s emphasis on established legal authority and fair notice should reduce the likelihood that EBSA will pursue aggressive valuation theories lacking clear legal and industry support.
The FAB dovetails with a broader policy shift across both Congress and the U.S. Department of Labor (“DOL”) to curtail the litigation risks and eliminate the regulatory burdens that have made it challenging for plan sponsors and fiduciaries to operate retirement plans, including ESOPs. Members of Congress, for example, have introduced legislation that would essentially end EBSA’s past practice of entering into common interest agreements with plaintiffs’ law firms, require EBSA investigators to conduct investigations on a reasonable (not indefinite) timeframe, and reverse the Supreme Court’s Cunningham v. Cornell University decision, which announced a plaintiff-friendly pleading standard for ERISA prohibited transaction claims, including claims that an ESOP overpaid for employer stock. For its part, DOL has removed ESOPs from the national enforcement project list, proposed a process-centric safe harbor for alternative investment options in retirement plans, and intends to issue a proposed regulation interpreting “adequate consideration” (the exemption governing ESOP stock purchase transactions).
