Executive Order Seeks to Expand Access to Crypto and Private Investments in Defined-Contribution Plans

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On August 7, 2025, President Trump issued an executive order (the Order) instructing federal agencies to expand access to alternative asset investments for participants in defined-contribution retirement plans such as 401(k) and 403(b) plans. The Order proposes to offer plan participants access to digital assets (more commonly known as “cryptocurrency”), equity and debt of private companies, and direct investments in real estate, among other alternative investments. This Advisory provides a high-level summary of the new policy directive.

Background

Plan fiduciaries are required under the Employee Retirement Income Security Act of 1974 (ERISA), as amended, to act prudently and in the sole interest of plan participants when evaluating the potential risk, return, and expense of each investment option. In a plan that offers participants the ability to direct the investment of their accounts (like most 401(k) and 403(b) plans), fiduciaries must offer participants a prudent menu of investment options.

President Trump’s Order cites overregulation and heightened litigation risk as major roadblocks to innovation in defined contribution retirement planning, limiting participant access to more diverse investment opportunities and the potential for higher returns. The Trump administration seeks to remove these obstacles by directing agencies to take steps that will give plan participants access to the benefits of alternative asset investments, noting that these options are already available to institutional investors and some pension plans. The full list of alternative assets identified in the Order includes private market investments, direct or indirect interests in real estate, actively managed investment vehicles investing in digital assets, commodities, infrastructure project financing, and lifetime income investment strategies such as longevity risk-sharing pools.

While offering the possibility for greater returns, these alternative investments are generally more difficult to value and charge higher fees. Additionally, the Order does not discuss the unique liquidity needs of defined contribution plans. As employees come and go from such plans and retain broad discretion to change the manner in which their account is invested, or to request a plan distribution or rollover, most current plan investments are liquid and can be converted to cash almost immediately. To fulfill the intent of the Order, the applicable federal agencies will likely be required to consider creative options for either imposing liquidity restrictions on plan assets invested in alternative investments or creating new funds or investment vehicles that bundle similar types of alternative investments, allowing for greater liquidity.

Agency Directives

The Order sets a 180-day deadline for the Secretary of Labor and the Securities and Exchange Commission (SEC), in consultation with the Secretary of the Treasury and other federal agencies, to carry out its directives.

The Secretary of Labor is directed to reexamine past guidance on fiduciary duties related to alternative asset allocations under ERISA. For example, the Department of Labor (DOL) is instructed to reconsider its 2021 Supplemental Private Equity Statement, which cautions that private equity is not generally appropriate for typical 401(k) plan investment menus because most plan-level fiduciaries lack the expertise needed for evaluating the prudence of such investments. On August 12, 2025, the DOL rescinded its 2021 Supplemental Private Equity Statement, stating that the Department should not single out particular investments or investment strategies for additional or special scrutiny.

The DOL also may consider issuing new guidance clarifying how fiduciaries should weigh potentially higher fees against diversification benefits when evaluating alternative assets. This could mean issuing new safe harbors to assist plan sponsors in meeting fiduciary compliance standards. A key focus for the DOL will be taking steps intended to reduce ERISA litigation risk that might otherwise prevent fiduciaries from exercising sound judgment when making investment decisions about alternative assets.

The DOL likely also will need to revisit its long-standing plan asset regulations, which treat the underlying assets of most private market funds as plan assets subject to the ERISA fiduciary duties. If the DOL were to create new safe harbors that would enable fiduciaries to offer funds investing in private market assets without causing the underlying assets of those funds to be plan assets subject to the ERISA fiduciary rules, plan fiduciaries may be more likely to consider such private market funds as 401(k) or 403(b) investment options.

In addition, the SEC is directed to consider changes to the “accredited investor” or “qualified purchaser status” standards in order to broaden access for participants in 401(k) and 403(b) plans.

Next Steps

Ballard Spahr’s Employee Benefits and Executive Compensation Group is closely monitoring developments following this Order and will provide additional analysis once additional guidance is issued. Plan fiduciaries who are interested in offering 401(k) and 403(b) plan participants access to the types of alternative assets referenced in the Order should tread carefully until additional guidance, and potentially relief from some aspects of the ERISA fiduciary rules, is issued. It will be particularly important for fiduciaries to understand the practical implications of offering investments with a different liquidity profile, and fiduciaries may need to balance potential participant demand for expanded investment opportunities against increased compliance costs and heightened fiduciary litigation risk.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Attorney Advertising.

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