The Bottom Line
- Be Proactive, Not Reactive. The Order initiates a 180-day review, but plan fiduciaries can begin preparing now by engaging ERISA counsel and investment consultants to understand the challenges associated with alternative assets, as well as developing a strategy on whether to offer those investment options.
- Focus on Target Date Funds. Many 401(k) plans hold a substantial portion of their assets in target date funds. Once guidance under the Order is released, plan fiduciaries should determine whether those funds intend to include alternative investments and carefully assess the potential implications of that change.
- Plan Governance. If a committee determines that it is prudent to include alternative investments within the plan's investment lineup, the plan's investment policy statement may need to be amended to reflect this change. In addition, committees should consider whether related governance documents, such as committee charters or plan documents, also require updates to ensure consistency and demonstrate a thoughtful, well-documented fiduciary decision-making process.
On August 7, 2025, President Trump signed an Executive Order titled "Democratizing Access to Alternative Assets for 401(k) Investors" (the Order). The Order directs the Department of Labor (DOL), in consultation with the Securities and Exchange Commission, to review existing fiduciary guidance under the Employee Retirement Income Security Act of 1974 (ERISA) and issue updated regulations that expand access to alternative investments in defined contribution plans. The Order specifically identifies private equity, real estate, digital assets, commodities, infrastructure and lifetime income products.
Key Objectives of the Order
In addition to expanding access to alternative investments, the Order establishes two principal policy objectives.
- It directs that retirement plan participants should be afforded investment opportunities comparable to those available to institutional investors and public pension systems.
- The Order seeks to curtail regulatory overreach and mitigate litigation exposure that have historically deterred plan fiduciaries from considering alternative investments.
Alignment with Other Regulatory Actions
The Order is consistent with other regulatory action taken by the Trump administration. For example, earlier this year, the DOL rescinded a 2022 compliance release that previously discouraged 401(k) plan fiduciaries from including cryptocurrency investment options under their plans.
Additionally, just five days after the Order was signed, the DOL rescinded its Supplemental Statement issued December 21, 2021, which cautioned fiduciaries against offering private equity investments to participants under their plans. The rescission of these pronouncements signals that the DOL is already taking a more neutral stance toward alternative investments.
Implications for 401(k) Investment Design
While the Order itself does not change any legal requirements, it begins a regulatory process that could materially reshape the landscape for 401(k) investment design. It directs the Secretary of Labor to clarify, within 180 days of the Order, the DOL's position on the inclusion of alternative assets in defined contribution plans, as well as the fiduciary process for evaluating those investments. This clarification is expected to address the higher risks and expenses associated with alternative investments, along with their potential for greater returns and broader diversification of investments.
Ideally, the DOL will establish safe harbors to insulate plan sponsors from liability when offering these types of investments and provide guidance that clearly defines a due diligence framework under which the fiduciary duty of prudence may be satisfied.
Even if the DOL's new guidance offers a more favorable regulatory framework, ERISA's core fiduciary standards are certain to remain unchanged – and therefore plan fiduciaries must continue to act prudently and solely in the interest of plan participants when evaluating such investments. Legal uncertainties will also likely remain. Fiduciaries will need to consider whether the DOL's guidance is truly sufficient to reduce the risks of offering alternative investments, given that broader litigation reform may ultimately be necessary to limit lawsuits. It is also unclear whether any DOL safe harbor would provide meaningful protection in light of the Supreme Court's decision in Loper Bright Enterprises, which eliminated the so-called Chevron defense.
Actions for Plan Fiduciaries
Although the DOL has not yet issued formal guidance implementing the Order, plan fiduciaries (e.g., 401(k) plan committees) should consider including this Order as an agenda item for an upcoming committee meeting to discuss the potential merits and risks of offering alternative investments. Thereafter, committees should receive periodic updates from their ERISA counsel and investment advisor to keep informed about developments in this area.
Committees that are considering adding alternative investments will face a range of challenges. They will need to determine how to monitor the new investments, how to educate participants effectively, and whether it provides adequate liquidity, transparent fees and reliable performance data. In addition, committees may need to evaluate the role of brokerage windows in 401(k) plans — both where such options are already offered and where they are not.
Even if a plan does not add a dedicated "core" investment option focused on alternatives, committees will need to keep an eye on whether existing options — such as target date funds — begin to allocate a portion of their investments to these asset classes. Fiduciaries should work with their investment advisors to understand how these exposures impact their existing options.
Plan fiduciaries should consult with ERISA counsel to assess the DOL's guidance in light of the risks discussed above. If alternative investments are to be added to their plan, fiduciaries will also need to work with their ERISA counsel to address fiduciary governance practices, including reviewing and revising their investment policy statement, as well as possibly their committee charter and plan document. The impact on fiduciary liability insurance and related costs should also be considered.
Taking a proactive approach now — before DOL regulations are issued — can help fiduciaries stay ahead of evolving standards and mitigate future risks. This is especially true as class action lawyers may closely scrutinize plan fiduciary decisions to include alternative assets, particularly if these assets have high investment costs or underperform. Committees will need to act cautiously, whether they choose to adopt these types of investments or ignore them entirely.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
