The Trump administration is moving quickly to implement the president’s Aug. 7 executive order (EO) to expand retirement savers’ access to alternative investments in private markets through defined contribution (DC) plans, such as 401(k)s. This EO represents an historic policy shift that could fundamentally reshape how Americans save for retirement. Our team is well positioned to help clients engage with the regulators implementing the EO and lawmakers in Congress considering related legislation to expand access to private markets. As regulators align policy changes to the EO, we will work closely with industry players seeking to offer new alternative asset investment options, helping them navigate the shifting regulatory landscape and prepare for the potential of increased scrutiny from critics in Congress and beyond.
BACKGROUND AND INITIAL IMPLEMENTATION EFFORTS
As discussed in our Aug. 12 Client Alert, with the EO, “Democratizing Access to Alternative Assets for 401(k) Investors,” President Trump is building on and accelerating efforts across the administration, Congress and the financial services industry to provide everyday Americans access to the benefits of private investments that historically have been reserved for institutional investors, government workers and high-net-worth individuals. In this alert, we discuss the swift action by the administration, in the week following the EO, to begin executing the president’s vision that “every American preparing for retirement should have access to funds that include investments in alternative assets.”
- On Aug. 12, the Department of Labor (DOL) rescinded its December 2021 supplemental statement warning fiduciaries against including alternative assets among 401(k) options.
- The same day, the President’s Council of Economic Advisers (CEA) released a report on the “significant benefits” of the EO’s policies for retirement savers and private companies, including small businesses.
- Additionally, on Aug. 15, the Securities and Exchange Commission (SEC) published new Accounting and Disclosure Information containing updated staff views that are broadly consistent with the EO. In ADI 2025-16, the SEC clarified that registered closed-end funds investing 15% or more of assets in private funds will no longer have to limit access to investors who qualify as “accredited investors” or meet minimum investment requirements.
The DOL, SEC and the Treasury Department will need to work through important issues as they develop new policies directed by the EO. In addition to the work being done by the agencies, there is momentum in Congress to pass legislation that is aligned with certain portions of the EO, including several bills that were recently advanced by the House Financial Services Committee.
Finally, market participants working to expand retirement savers’ and retail investors’ access to alternative investment options will need to continue resolving operational risks involved with developing new products, while also preparing for potentially increased scrutiny from those opposed to the administration’s policy of opening private market investments to retirement savers. For instance, Senate Banking Committee Ranking Member Elizabeth Warren (D-MA) criticized the EO as exposing Americans’ retirement savings to “risky investments” and has recently sent letters raising concerns with private markets to the Treasury Department secretary, credit rating agencies and a retirement services provider.
EXECUTIVE ORDER: EXPANDING ACCESS TO ALTERNATIVE INVESTMENTS
President Trump’s Aug. 7 EO directs the DOL, Treasury Department, SEC and other federal regulators to “relieve the regulatory burdens and litigation risk” that restrict DC retirement plans like 401(k)s from accessing funds that include investments in alternative assets. The EO defines alternative assets broadly to cover private equity and private credit, real estate, digital assets, commodities, infrastructure and lifetime income strategies. Importantly, the EO conditions its relief of regulatory and litigation risk upon “the relevant plan fiduciary [determining] that such access provides an appropriate opportunity for plan participants and beneficiaries to enhance the net risk-adjusted returns on their retirement assets.”
Within 180 days, the EO directs the DOL secretary to reexamine all guidance under the Employee Retirement Income Security Act of 1974 (ERISA) related to retirement plans’ fiduciary duties and offerings that provide exposure to alternative assets through asset allocation funds. Also, the secretary must clarify the DOL’s position on alternative assets and a fiduciary’s duties associated with determining whether to offer asset allocation funds containing alternative investments. Such clarity may come through new rules or guidance—including “appropriately calibrated safe harbors”—and it must aim to identify fiduciaries’ criteria for balancing potentially higher expenses against the goals of increased long-term net returns and portfolio diversification.
In implementing these policies, the EO directs the DOL secretary to prioritize actions to curb the risk of ERISA litigation that undercuts fiduciaries’ use of their best judgment and to consult with the Treasury Department secretary, the SEC and other federal regulators as necessary. Additionally, the EO directs the SEC to consider regulatory changes that would facilitate access to alternative asset investments by participant-directed DC retirement plans, including potential revisions to existing regulations and guidance related to accredited investors and qualified purchaser status.
RATIONALE AND PROMISE OF THE EO: REPORT FROM THE CEA
On Aug. 12, the president’s CEA released a report, “Retail Access to Alternative Investments Via Defined Contribution Plans,” examining two major structural shifts in the U.S. financial and retirement systems that helped lead to the EO: the growth in private markets relative to public markets and the rise of 401(k)s and other DC plans relative to defined benefit (DB) plans.
From 1997 to 2024, total private companies rose 67% to 35 million and public companies declined 55% to 4,000. Not only are more companies staying private, but those that go public are waiting to initiate an IPO until they are larger. This gives private firms higher growth potential, and research shows private equity buyout funds consistently outperform the S&P 500 net of fees. At the same time, DC plans have become the most popular retirement-savings vehicle. Between 1985 and 2023, DB plan participants declined from 80% to 11% of full-time private sector employees and DC plan assets are nearly triple those in DB plans ($30 trillion vs. $12 trillion).
Federal regulations have not kept pace with these structural shifts. Legal risks under ERISA and the SEC’s accredited investor definition are major deterrents that prevent DC plan fiduciaries from including alternative assets as investment options. As a result, alternative investments account for roughly 30% of assets in DB plans but only 0.1% in DC plans. These legal impediments have locked out the millions of retirement savers in DC plans from the higher return potential and diversification of alternative investments.
The CEA report estimates the significant benefits that the regulatory relief and clarity called for in the EO will provide. Specifically, enabling private equity allocations in DC plans would enhance risk-adjusted returns of retirement savers’ portfolios, with an increase of around 2.5% in annuitized lifetime income for the youngest groups. Also, allocating 5% to 30% of DC plan assets to alternative investments would provide $1.5 to 8.7 trillion of capital to private companies, with a 20% allocation resulting in the addition of an extra $35 billion to U.S. GDP.
EARLY AND POTENTIAL FUTURE STEPS ALIGNED WITH THE EO
Within a week of President Trump signing the EO, the DOL moved quickly to fulfill one of its directives when it rescinded the December 2021 Supplemental Private Equity Statement that had stifled DC plan fiduciaries from offering alternative assets as investment options for 401(k)s. The DOL stated that this rescission marked a return to historical department norms that “dictate a neutral, principled-based approach to fiduciary investment decisions,” consistent with ERISA. The DOL provided the same rationale in May when it rescinded a 2022 compliance release that had discouraged fiduciaries from offering cryptocurrency options in 401(k) plans.
The SEC has also signaled its intention to quickly implement the president’s EO. In May, SEC Chairman Paul Atkins announced plans to revise an informal staff policy that caused “many retail investors [to] have missed out on opportunities to invest in closed-end funds that invest in private investment funds, like hedge funds and private equity funds.” And on Aug. 15, staff of the Division of Investment Management published their updated views that investors no longer need to meet the accredited investor definition or minimum investment requirements in order to access registered closed-end funds investing 15% or more of their assets in private funds.
While the SEC is likely to be considering other revisions to its accredited investor policies to help facilitate access to investments in alternative assets, lawmakers in Congress are working to pass several related bills that would expand and modernize the accredited investor definition. The House Financial Services Committee advanced three such bills with bipartisan support in a markup on May 20: the Fair Investment Opportunities for Professional Experts Act (H.R. 3394); the Equal Opportunity for All Investors Act of 2025 (H.R. 3339); and the Accredited Investor Definition Review Act (H.R. 3348). Senate Banking Committee Chairman Tim Scott (R-SC) is expected to reintroduce a capital formation legislative package, but it is not yet clear whether it will adopt any of the House’s approaches to the accredited investor definition.
NEXT STEPS
Despite the significant regulatory and litigation risk that this EO seeks to eliminate, there have been some efforts by the financial services industry to provide retirement savers in DC plans with access to alternative assets. For example, asset managers have begun offering limited exposure to private markets through pooled, professionally managed products such as target-date funds, collective investment trusts and exchange-traded funds. We expect market participants to continue innovating in this space, which provides an opportunity to engage with federal regulators as they seek to refine the policy initiatives contemplated by the president’s EO, following their swift initial steps last week.
Our team’s close connections with senior leaders at the DOL, SEC, Treasury Department and across the administration position us well to assist clients in navigating the intersection of regulatory and industry environments as they continue to evolve. We will also remain closely engaged with key members of Congress, carefully monitoring developments in the House and Senate.
