On August 7, 2025, President Trump issued an executive order entitled “Democratizing Access to Alternative Assets for 401(k) Investors” (the “Executive Order”),1 requiring the Department of Labor (“DOL”) and the Securities and Exchange Commission (“SEC”) to review and examine regulatory guidance to allow defined contribution plans (e.g., 401(k) plans) to invest in alternative investments. At the end of the first quarter in 2025, defined contribution plans held approximately $12.2 trillion in assets.2 The Executive Order presents potential investment opportunity for both retirement plan participants and investment managers.
Background. As Americans increasingly rely on savings in their 401(k) plans for retirement instead of traditional pension plans, many in the financial sector have argued that 401(k) plan participants should be able to invest in a diversified portfolio of assets. Historically, plan fiduciaries have been reluctant to include certain alternative investments within the investment menu for 401(k) plans. This reluctance is often attributed to alternative investments being less liquid and riskier, having less disclosure and charging higher investment-related fees than more traditional, publicly offered investments.
The unique cash flow characteristics of 401(k) plans have also created barriers. Specifically, contributions are made to a 401(k) plan every pay period. Plan participants are accustomed to being able to change investment allocations frequently, given that historically investment menus have included options to invest in registered investment companies (e.g., mutual funds) or collective investment trusts that provide daily liquidity. Additionally, there are regular outflows from such plans as a result of hardship distributions, loans, withdrawals and rollovers. As a result, investment menus have historically prized liquidity. More recently, alternative investments have been offered as a small piece of a broader portfolio, where marketable holdings (e.g., publicly traded stocks or bonds) provide liquidity.
Further, plaintiffs’ attorneys have sued defined contribution plan fiduciaries under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). These attorneys have regularly alleged that plan fiduciaries breached their fiduciaries duties by failing to monitor under-performing investments or not appropriately reviewing and limiting investment-related fees with respect to more traditional investments. This litigation is time consuming and expensive to defend. The litigation risk has undoubtedly stymied investment innovation, as suggested by the Executive Order. While recent cases, such as Anderson v. Intel Corporation Investment Policy Committee3 (affirmed by the Ninth Circuit in May 2025), illustrate that fiduciary duties are process-based, focusing on evaluation rather than outcomes, this litigation risk persists and has led to risk-aversion among plan sponsors and plan fiduciaries.
On June 3, 2020, the first Trump administration’s DOL issued an information letter (“Information Letter”) addressing whether private equity investment could be included as a component of a managed fund (e.g., a target date fund) and offered as an investment option for defined contribution plan participants.4 In that Information Letter, the DOL clarified that inclusion of private equity as a component of a managed fund is not a per se violation of ERISA fiduciary duties. In that Information Letter, the DOL set forth issues that a fiduciary should consider when adding private equity investments, including (i) diversification, (ii) fees and costs, (iii) fiduciary expertise, (iv) liquidity, (v) valuation, and (vi) disclosure.5
On December 21, 2021, the Biden administration’s DOL issued a supplemental letter (“Supplemental Letter”) to the Information Letter specifying that the Information Letter was not an endorsement of private equity investments. The Supplemental Letter emphasized certain fiduciary concerns relating to private equity investments, focusing specifically on issues relating to diversification and fiduciary expertise. Further, it specified that such investments were likely only appropriate for large defined contribution plans.
In addition, the Biden administration issued advice on investment in cryptocurrency in 20226 that “caution[ed] plan fiduciaries to exercise extreme care before they consider addition a cryptocurrency option” to the investment menu of a 401(k) plan. The guidance focused on volatility of such investments and the lack of legal regulation.7 In Compliance Assistance Release No. 2025-01, the Trump administration rescinded this guidance due to the fact that the standard of “extreme care” is not found in ERISA. The DOL indicated that it was neither endorsing, nor disapproving of, such investments.8 Before the Executive Order, the DOL had already removed an investment barrier to investing in digital assets.
Executive Order. The purpose of the Executive Order is to cause the DOL and SEC to review regulatory guidance to ensure that any such guidance is encouraging access to investments in alternative assets where the relevant fiduciary determines that it is an “appropriate opportunity for plan participants and beneficiaries to enhance the net risk-adjusted returns on their retirement assets.” The Executive Order is not self-executing and does not change existing law or regulations but directs agencies to propose rules, regulations or guidance within 180 days (by February 3, 2026).
For these purposes, “alternative assets” is defined very broadly and means:
- Private Market Investments- direct and indirect interests in equity, debt or other financial instruments that are not traded on public exchanges
- Real Estate Investments- direct and indirect interests in real estate and debt instruments secured by real estate
- Digital Assets- holdings in actively managed investment vehicles investing in digital assets (which would include cryptocurrencies).
- Commodities- direct and indirect investments in commodities
- Infrastructure- direct and indirect interest in projects financing infrastructure development
- Lifetime Income Strategies- investment in lifetime income strategies, including longevity risk-sharing pools
The Executive Order requires the DOL to review past and present guidance relating to alternative assets. In connection with that review, the DOL should consider whether to rescind the Supplemental Letter. If the Secretary of Labor deems it to be appropriate and consistent with applicable law, the DOL will seek to clarify its position on alternative assets. In connection therewith, the DOL should seek to identify the criteria fiduciaries should use when prudently evaluating alternative assets and suggest that regulatory guidance may provide safe harbors. DOL actions could take numerous forms, including information letters or new regulations with safe harbors, though the latter may face challenges post the Supreme Court’s Loper Bright9 decision limiting agency deference. Importantly, the DOL is specifically instructed to take actions to “curb ERISA litigation that constrains fiduciaries’ ability to apply their best judgment in offering investment opportunities to relevant plan participants.”
Further, the Executive Order requires the DOL to consult with Treasury, the SEC, and other federal agencies as necessary to carry out the policies. It specifically requires the SEC to consider additional ways to facilitate access to investments in alternative assets by defined contribution plan participants. Specifically, the SEC is to consider revising how the accredited investor and qualified purchaser-related rules apply to defined contribution plans. The SEC has previously provided guidance relating to when a participant directed plan is required to comply with such rules versus when the underlying participants have to comply with such rules.10 Such reconsideration could significantly expand eligibility of investments offered by 401(k) plans in the private markets.
Commentary. This Executive Order has been met with enthusiasm by ERISA fiduciaries, plan sponsors, and investment managers. ERISA fiduciaries and plan sponsors are eager for additional advice and clarity and welcome any guidance that would stem litigation risk. Investment managers of alternative assets are similarly eager to access the $12.2 trillion dollars in defined contribution plans, as a relatively untapped source for fundraising. The Executive Order could therefore unlock significant capital, potentially boosting the private markets through increased demand for alternative investments and partnerships between traditional asset managers and private market firms.
Whether the policy objective of the Executive Order is satisfied is dependent on whether regulatory guidance can adequately provide safe harbors or other assurances to protect otherwise prudent fiduciaries against litigation risk. Regardless, adoption will likely still be slow due to persistent concerns over higher costs, transparency, complexity, and lack of fiduciary expertise, particularly for smaller plans. Plan fiduciaries are advised to monitor developments and consult experts, as needed, for advice. Alternative asset managers are advised to consider whether their offerings are appropriate for 401(k) plan investment.
1The Executive Order can be found here.
2This amount is based on data from the Investment Company Institute and DOL.
32026 WL 1463295 (9th Cir., May 22, 2025).
4See Department of Labor Information Letter 06-03-2020 (June 3, 2020).
5See Jake Downing and Jennifer Neilsson, “New Developments Pave Way For PE In Retirement Investment”, Law 360 (Feb. 4, 2022), available here.
6Department of Labor, Compliance Assistance Release No. 2022-01.
7Please find our Client Alert on Compliance Assistance Release 2022-01 here.
8Please find our Client Alert on Compliance Assistance Release 2025-01 here.
9603 U.S. 369.
10See, e.g., Securities and Exchange Commission No-Action Letter under Investment Company Act of 1940- Section 3(c)(1), 3(c)(7) to H.E.B. Investment & Retirement Plan and H.E. Butt Grocery Company (May 18, 2001)
