On August 7, 2025, President Trump issued an Executive Order1 (Order) aimed at easing the path for ERISA fiduciaries to make "alternative asset" investments available to participant-directed defined contribution plan participants.
In addition, on August 12, 2025, the Department of Labor (DOL) rescinded its December 21, 2021 Supplemental Statement2 (issued under President Biden) that warned fiduciaries that at least one type of alternative asset, private equity investments, is likely not suitable for individual account defined contribution (DC) plans such as 401(k) plans.
The Order follows the DOL's guidance of May 28, 2025,3 discussed in our memo, Crypto in and ESG out—DOL changes to 401(k) plan governance, in which the DOL sought to provide comfort to plan fiduciaries considering digital assets such as cryptocurrency as an investment option.
The impact of the Order on defined contribution investment options remains to be seen, but the speed at which the DOL rescinded its 2021 Supplemental Statement following the issuance of the Order underscores the Administration's determination to give retail retirement investors access to historically institutional asset classes.
The Order
The Order requires that, within 180 days of August 12, the Secretary of Labor review the DOL's past and present guidance regarding making available to participants an asset allocation fund that includes investments in alternative assets and seek to clarify the DOL's position on the appropriate fiduciary process associated with making available these investment options.
In implementing the Order, the Secretary will need to identify the criteria that fiduciaries should use to prudently balance potentially higher expenses against the objectives of seeking greater long-term net returns and broader diversification of investments. In addition, the Secretary is directed to propose rules, regulations, or guidance, as well as appropriately calibrated safe harbors, that 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. To these ends, the Secretary is instructed to prioritize actions that may curb ERISA litigation that the administration believes results in only traditional retail asset classes being made available to plan participants for investment.
Recognizing that the securities laws (including the accredited investor requirements) also are an impediment to the offering of alternative assets under DC plans, the Order directs the Securities and Exchange Commission (SEC) to consider ways to facilitate access to alternative assets by participant-directed DC plans.
Definition of Alternative Assets
Although many expected the Order to be limited to private equity investments, the Order intentionally casts a wider net, defining "alternative assets" to include the following six asset clusters:
- 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;
- Real Estate: direct and indirect interests in real estate, including debt instruments secured by direct or indirect interests in real estate;
- Digital Assets: holdings in actively managed investment vehicles that are investing in digital assets;
- Commodities: direct and indirect investments in commodities;
- Infrastructure: direct and indirect interests in projects financing infrastructure development; and
- Lifetime Income Strategies: lifetime income investment strategies, including longevity risk-sharing pools.
The Order's breadth signals a deliberate policy decision: the Administration is not merely promoting private equity; it is seeking to expand available DC plan asset classes to include the spectrum of non-traditional risk-return profiles that may lead to greater diversification than the public equities and core fixed income investment alternatives that are commonplace in DC plans today.
Potential Impact
Investment Products Industry
If fully implemented, the Order could fundamentally reshape the product ecosystem for DC plans, trigger new fiduciary best practices, and ultimately allow America's 90-plus million 401(k) participants to obtain exposure—directly or indirectly—to asset classes long utilized by public pension funds, endowments, and other large institutional investors to enhance diversification and achieve potentially greater long-term investment returns.
The potential impact on the investment products industry could be substantial. By opening the door for alternative assets in 401(k) plans, the Order creates new opportunities for asset managers, private equity sponsors, real estate funds, infrastructure funds, and digital asset managers to develop and market products specifically tailored to the approximately USD12 trillion DC plan market.4 This could lead to the creation of new fund structures, such as collective investment trusts and hybrid vehicles, designed to accommodate the liquidity, transparency, and fee requirements of retirement plans.
Litigation Risk
Over the past decade, a proliferation of class action lawsuits alleging excessive fees or imprudent investment options has led many DC plan fiduciaries to adopt a "plain vanilla" investment lineup. Plaintiffs' firms have often claimed that low-cost index funds are the de facto prudent benchmark, deterring the use of higher-fee but potentially higher-return strategies. This litigation environment has been a major barrier to the adoption of alternative assets in DC plans, as fiduciaries have feared the risk of costly lawsuits and regulatory scrutiny.
The Order implicitly challenges this narrative by:
- potentially giving fiduciaries governmental backing when making a reasoned decision to pursue alternatives, and signaling that prudent diversification and risk-adjusted returns are legitimate objectives under ERISA, which may help shift the focus of ERISA litigation away from fee-only comparisons and toward a more holistic assessment of investment prudence: and
- possibly limiting plaintiffs' ability to pursue lawsuits where fiduciaries follow prescribed procedural checklists and best practices and providing greater certainty for plan sponsors and service providers.
The plaintiffs' bar has already expressed opposition to the Order and has indicated there will likely be court challenges to any rulemaking that seeks to limit participants' and beneficiaries' rights to pursue private actions under ERISA. Nonetheless, until the DOL issues final rules with concrete regulatory text and safe harbors, plan sponsors should expect plaintiffs' counsel to continue scrutinizing alternative asset additions.
Footnotes
1. Democratizing Access to Alternative Assets for 401(K) Investors – The White House.
4. Investment Company Institute, "Retirement Market Data, First Quarter 2025," Statistical Report, available at: https://www.ici.org/statistical-report/ret_25_q1_data.xls (last accessed August 18, 2025).
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