The August Monthly Minute brings you the latest guidance on ERISA retirement plan investment in alternative assets and highlights a recent ruling in mental health parity nonquantitative treatment limitation (NQTL) litigation.
(Not-So) Private Equity: Executive Order Opens Door to 401(k) Investment in Alternative Investments
Earlier this month, President Trump signed an Executive Order to allow 401(k) investors to access alternative assets for better returns and diversification. Per the White House Fact Sheet, the Executive Order directs the Secretary of Labor to reexamine guidance addressing a fiduciary’s duties regarding alternative asset investments in ERISA plans and instructs the Secretary of Labor to clarify the DOL’s position on alternative assets and the appropriate fiduciary process associated with offering asset allocation funds containing alternative asset investments. Underpinning the interest in alternative asset investment is the view that assets such as private equity, real estate, and digital assets, may offer competitive returns and enhanced diversification. In line with the Executive Order, this month the DOL rescinded 2021 guidance that had discouraged fiduciaries from considering alternative assets in 401(k) retirement plan investment menus. This rescission is consistent with Compliance Assistance Release No. 2025-01, wherein the DOL rescinded stringent 2022 guidance regarding 401(k) plan investments in cryptocurrencies, as reported in the June 2025 Monthly Minute.
KMK Comment: The Executive Order opens the door for ERISA plans to further diversify their investment lineups with access to alternative assets which some investors may see as a boon. However, certain assets, like private equity and digital assets, present novel complexities and can be illiquid. For these reasons, they may or may not be suitable for all populations, particularly those without a full understanding of these investment vehicles. As more definitive guidance is released in the future, fiduciaries will want to consider whether expanding their plan’s investment options is appropriate.
Mental Health Litigation Heats Up Despite (Limited) Nonenforcement Relief
United HealthCare (UHC) is in the hot seat for mental health coverage claim denials that implicate the plan’s nonquantitative treatment limitations (NQTLs). In William H. v. United Healthcare Ins. Co., a Utah district court recently denied UHC’s motion to dismiss by finding that plaintiffs adequately pleaded a claim under the Mental Health Parity and Addiction Equity Act (MHPAEA). Specifically, 1. plaintiffs asserted that the plan was subject to the MHPAEA; 2. plaintiffs identified the relevant treatment limitations as the criteria used to evaluate "medical necessity" and "facility eligibility"; 3. plaintiffs identified care provided at "[inpatient] skilled nursing facilities, inpatient hospice care, and rehabilitation facilities" as medical care analogous to claimant’s mental health treatment at a wilderness therapy center and mental health inpatient treatment center; and, 4. plaintiffs plausibly alleged disparities between the treatment limitations applied to mental health benefits compared to those applied to analogous medical benefits.
KMK Comment: As reported in the May 2025 Monthly Minute, the DOL, HHS, and IRS are reconsidering the 2024 mental health parity regulations and set forth a temporary nonenforcement policy with respect to certain regulatory requirements. Notwithstanding this temporary nonenforcement relief, the MHPAEA's statutory requirements, as amended by the Consolidated Appropriations Act, continue to apply. The UHC litigation serves as a reminder that compliance with mental health parity requirements is a primary concern, despite the limited nonenforcement relief with respect to certain NQTL comparative analysis requirements.
