Highlights
- President Donald Trump recently signed an executive order (EO), "Democratizing Access for 401(k) Investors," which is designed to facilitate easier access to alternative asset investments, including cryptocurrency, private equity and real estate, in 401(k) and other defined contribution plans.
- Among its directives, the EO instructs the U.S. Department of Labor to reexamine guidance under the Employee Retirement Income Security Act of 1974 (ERISA) regarding fiduciary duties related to alternative asset investments in 401(k) plans and to consider issuing rules and regulations that include fiduciary "safe harbors" that may curb the risk of fiduciary litigation.
- Plan sponsors and plan fiduciaries should continue to monitor regulatory guidance and legal decisions regarding alternative asset investments and educate themselves on the associated options, risks and benefits.
President Donald Trump on Aug. 7, 2025, signed an executive order (EO), "Democratizing Access for 401(k) Investors," and published a related fact sheet. The EO expresses the policy of the Trump Administration that "every American preparing for retirement should have access to funds that include investments in alternative assets when the relevant plan fiduciary determines that such access provides an appropriate opportunity for plan participants and beneficiaries to enhance the net risk-adjusted returns on their retirement assets."1
The EO directs a number of federal agencies, including the U.S. Department of Labor (DOL), to take steps intended to facilitate increased access to alternative assets in Employee Retirement Income Security Act of 1974 (ERISA)-governed 401(k) and other defined contribution plans. The EO directs the Secretary of Labor to take the following steps within 180 days of the EO:
- reexamine the DOL's past and present guidance on a fiduciary's duties in connection with making alternative asset investments available in employee benefit plans under ERISA
- clarify the DOL's position on alternative assets and the appropriate fiduciary process associated with offering asset allocation funds containing investments in alternative assets
- propose rules, regulations or guidance, potentially including "appropriately calibrated safe harbors," to reduce legal uncertainty and discourage ERISA litigation tactics that constrain a fiduciary's ability to exercise sound judgment when selecting investment opportunities to plan participants
The EO also directs the U.S. Securities and Exchange Commission (SEC) to consider revising the definitions of "accredited investor" and "qualified purchaser" to expand access to alternative assets for plan participants in defined contribution plans. Revisions to these definitions may be needed to expand access to alternative asset investments because current restrictions and requirements of accredited investor and qualified purchasers can create a barrier to offering direct private fund investment options to plan participants, as the participants (as opposed to the plan itself) would need to satisfy the accredited investor or qualified purchaser thresholds.
The DOL Takes Immediate Action
The DOL promptly responded to the directions of the EO and rescinded previously issued guidance that discouraged fiduciaries from considering alternative assets in 401(k) retirement plan investment menus. The now-rescinded Dec. 21, 2021, Supplemental Private Equity Statement was issued to "clarify" its June 3, 2020, Information Letter regarding the use of private equity (PE) investments in defined contribution plans, as Holland & Knight explained in a previous alert. The Information Letter provided that a plan fiduciary would not, in the DOL's view, violate the fiduciary's duties under ERISA solely because the plan offered an asset allocation fund with a PE component as an investment alternative. The Information Letter also identified a list of factors that plan fiduciaries should consider in evaluating whether to include an investment vehicle with a PE component as a designated investment alternative.
After the 2020 Information Letter was published, and in response to stakeholder inquiries and the issuance of an SEC Office of Compliance Inspections and Examinations Risk Alert highlighting potential compliance issues, the DOL issued the 2021 Supplemental Private Equity Statement. The statement indicated that potential benefits of private equity "were not balanced with counter-arguments and research data from independent sources." The Supplemental Statement "caution[ed] against application of the Information Letter outside of the specific context discussed in the 2020 Information Letter" and expressed the DOL's opinion that, in the majority of cases, "plan-level fiduciaries of small, individual account plans are not likely suited to evaluate the use of PE investments in designated investment alternatives in individual account plans."
In an Aug. 12, 2025, announcement, the DOL stated that that the rescission of the Supplemental Private Equity Statement was necessary because it "had a chilling effect on the market and took a dismissive view of alternative assets and the capabilities of plan fiduciaries." The DOL explained that "[t]he 2021 supplemental statement marked a departure from previous department norms, which dictate a neutral, principled-based approach to fiduciary investment decisions, consistent with the requirements of Employee Retirement Income Security Act. When evaluating any particular investment type, a plan fiduciary's decision should consider all relevant facts and circumstances and will necessarily be context specific. The department should not single out particular investments or investment strategies for additional or special scrutiny."
Considerations
The EO does not change the law. Indeed, federal courts and the DOL have previously rejected generalized attacks on hedge funds and private equity funds as a benefit plan investment category.2 However, the EO encourages the ongoing shift toward expanding the investment options for participants of employer-sponsored defined contribution plans, including cryptocurrency, and has already been cited to support rescission of DOL guidance that discouraged fiduciaries from considering alternative assets in 401(k) retirement plan investment menus.3 With that said, this policy shift does not change the scope of any fiduciary duties and could easily add to the ever-evolving list of litigation concerns that plan sponsors and fiduciaries must consider.
The EO's support of alternative asset investments will undoubtedly result in an increase in the amount and availability of alternative asset products offered to defined contribution plans. And though it will take time for regulatory guidance to be issued, plan sponsors and fiduciaries who are interested in providing participants additional access to alternative assets can take certain steps now in order to facilitate offering alternative investments in the future. These steps may include:
- reviewing the plan's investment policy statement to assess whether alternative investments are permitted and to what extent they are permitted under the policy
- obtaining information as to whether the plan's current recordkeeper offers (and/or intends to offer) alternative asset investments and how those investments operate, especially with respect to liquidity
- identifying what alternative investment products are available in the market and gaining an understanding of the fees, volatility risks, valuation methods and liquidity associated with the products
- developing guidelines for determining whether alternative assets are prudent for the plan's investment lineup in light of the plan's demographics
- considering risk mitigation strategies in the event a decision is made to permit participants to invest plan assets in alternative assets, including whether to limit a percentage of a participant's account that can be invested in alternative assets, limit access to alternative asset investment opportunities to self-directed brokerage accounts where participants take on more responsibility for their investment choices, offer only indirect investments that allow investors to benefit from gains in the investment class or market without directly investing in alternative assets, and limit alternative investments to only those available through professionally managed funds such as target date funds
- staying abreast of legal decisions involving the inclusion of private equity and other alternative asset investments in defined contribution plans
Now is the time for fiduciaries to gain a better understanding of how alternative investments operate and how they align with the traditional framework of defined contribution plan investments. Alterative assets present unique considerations that require careful evaluation, and a solid foundation in these concepts will make future guidance on expanding access to alternative investments more actionable.
Conclusion
The EO directs the relevant agencies to pave a path toward inclusion of asset choices not traditionally included in defined contribution plans. Full development of the path will necessarily take time. Regardless of how fast and wide the path becomes in the future, the core fiduciary obligations under ERISA remain the same. Therefore, plan sponsors and investment committees should continue to evaluate all plan investments through the lens of prudence, cost efficiency and participant best interests. Plan sponsors and fiduciaries should also be mindful that the risks associated with alternative assets, including potential limited liquidity, more complex fee structures and unique valuation considerations of private equity, may subject plan fiduciaries who choose to include these types of investments as plan options to increased scrutiny.
For more information about the benefits and risks of plan investments, including understanding alternative investments and better assessing how this EO and future guidance may impact your plan, investment committee decisions and fiduciaries' obligations, please contact the authors or another member of Holland & Knight's Executive Compensation and Benefits Team.
Footnotes
1 The EO defines "alternative assets" broadly to include 1) private market investments, including private equity investments, 2) investments in real estate, 3) holdings in actively managed investment vehicles that invest in digital assets (i.e., cryptocurrency), 4) commodities, 5) interests in projects financing infrastructure development and 6) lifetime income investments strategies including longevity risk-sharing pools.
2 For example, the U.S. Court of Appeals for the Ninth Circuit recently affirmed the dismissal of breach of fiduciary duty claims challenging the inclusion of hedge funds and private equity in employer-sponsored defined contribution plans. See Anderson v. Intel Corp. Investment Policy Comm., 137 F.4th 1015 (2025).
3 For example, on May 28, 2025, the DOL rescinded the Biden Administration's 2022 guidance on cryptocurrency "in full" though a Compliance Assistance Release, as reported in a previous Holland & Knight alert. The 2022 guidance directed plan fiduciaries to exercise "extreme care before they consider adding a cryptocurrency option to a 401(k) plan's investment menu for plan participant," given concerns of potential fraud, among other things. The 2025 Release explained that rescission of the 2022 guidance was warranted because "[t]he standard of 'extreme care' is not found in [ERISA] and differs from ordinary fiduciary principles thereunder."
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