Participants in 401(k) plans and other defined contribution retirement plans may soon have the opportunity to invest their plan accounts in a variety of high-risk and potentially high-return assets. Touted as an effort to “democratize” access to these types of investments, President Trump’s Executive Order 14330 (published August 7, 2025) (the “EO”) directs the Secretary of Labor to “clarify the Department of Labor’s position on alternative assets and the appropriate fiduciary process associated with offering asset allocation funds containing investments in alternative assets under ERISA.” The EO gives Secretary Chavez-DeRemer 180 days to do this, so retirement plan investment fiduciaries potentially could begin adding alternative assets to investment menus early next year.
What are “alternative assets,” and why is the EO potentially controversial for defined contribution retirement plans?
As explained in the EO, the term “alternative assets” means:
(1) private market investments, including direct and indirect interests in equity, debt, or other financial instruments that are not traded on public exchanges, including those where the managers of such investments, if applicable, seek to take an active role in the management of such companies;
(2) direct and indirect interests in real estate, including debt instruments secured by direct or indirect interests in real estate;
(3) holdings in actively managed investment vehicles that are investing in digital assets;
(4) direct and indirect investments in commodities;
(5) direct and indirect interests in projects financing infrastructure development; and
(6) lifetime income investment strategies, including longevity risk-sharing pools.
Regarding the last category, one may wonder whether “longevity risk-sharing pools” is just a euphemism for a tontine. Financial history buffs will recall that “last man standing” tontines have been viewed with disfavor in the U.S. since the early 1900s. But the Cato Institute, a think tank, has written approvingly of longevity risk-sharing pools as retirement investments and observed that TIAA-CREF’s “variable annuity” product for 403(b) plans is effectively a tontine. Policymakers in the executive branch appear to have embraced the Cato Institute’s view.
Many of the listed alternative assets – including hedge funds, private equity, real estate, derivatives, and cryptocurrencies – have long been held by defined benefit pension plans whose investment fiduciaries apply sophisticated asset allocation strategies. So why might the policy direction established by the EO be controversial for defined contribution retirement plans?
First, certain types of alternative assets (such as interests in arrangements promoted by private equity firms) may be difficult to value using traditional benchmarks and may also be relatively illiquid (with minimum holding periods or penalties for early withdrawal). Second, a typical plan participant may be less capable than a well-advised plan investment committee in evaluating the risks associated with investing in an alternative asset. As a policy matter, the EO posits that defined contribution plan participants should have the same rights to alternative assets that “wealthy Americans” have. But, under federal securities laws, many of those wealthy Americans are “accredited investors” who often have investment advisors and can afford to absorb investment losses that rank-and-file 401(k) plan participants are less able to withstand. These concerns compel plan investment fiduciaries to engage in a thoughtful process that carefully considers plan demographics before concluding that alternative assets are appropriate for their plan participants.
What does the EO mean for investment fiduciaries?
One may question whether alternative assets should be available for investment by participants in 401(k) plans and other defined contribution plans. But now that the EO green-lights them as a policy matter, the key question becomes: will investment fiduciaries add any of them to a plan’s investment menu? Recognizing this, the EO directs Secretary Chavez-DeRemer to: “clarify the duties that a fiduciary owes to plan participants under ERISA when deciding whether to make available to plan participants an asset allocation fund that includes investments in alternative assets, which rules, regulations, and guidance may include appropriately calibrated safe harbors.” Moreover, to provide additional protections to investment fiduciaries, the EO directs the Secretary to “prioritize actions that may curb ERISA litigation that constrains fiduciaries’ ability to apply their best judgment in offering investment opportunities to relevant plan participants.” Whether the DOL guidance will be sufficient to encourage investment fiduciaries to add alternative assets to the diversified investment choices already available in most defined contribution plans remains to be seen.
One thing is clear, however: investment fiduciaries will have to focus even more intently on engaging in a prudent process and documenting that process when evaluating the merits of alternative assets for participants in ERISA defined contribution retirement plans.
For now, retirement plan investment fiduciaries should stay tuned for the forthcoming guidance, consider whether alternative assets would be a prudent addition to the investment menu, and engage with their investment advisors and legal counsel to determine whether their current investment policy statements would require revision to accommodate riskier investment options.
