A hotly anticipated August 7, 2025, executive order, "Democratizing Access to Alternative Assets for 401(k) Investors" ("EO"), aims to reduce regulatory barriers and significantly expand access to "alternative assets"—including private equity, real estate, digital assets, commodities, and infrastructure—for investors in 401(k) and other defined contribution plans ("DC Plans").
DOL Directed to Address Fiduciary Concerns and Litigation Risk
While the Employee Retirement Income Security Act ("ERISA") does not prohibit alternative assets in DC Plans, uncertainty around fiduciary duties and concomitant litigation risk has constrained inclusion of such assets on DC Plan investment platforms.
Citing barriers created by regulatory overreach and opportunistic lawsuits, the EO directs the Department of Labor ("DOL") to propose rules, regulations, or guidance within 180 days to ease these concerns and facilitate access to alternative assets by clarifying fiduciary duties in offering asset allocation funds including alternative assets to DC Plan participants. In particular, the DOL's efforts:
- Must clarify appropriate fiduciary processes and reexamine existing guidance, including the DOL's December 21, 2021, Supplemental Private Equity Statement, and aim to identify criteria to prudently balance potentially higher expenses against projected returns and broader diversification;
- May include appropriately calibrated safe harbors; and
- Must be developed in consultation with the Securities and Exchange Commission ("SEC"), the Secretary of the Treasury and other federal regulators as appropriate, including as to parallel regulatory changes.
The DOL is instructed to prioritize actions that may curb ERISA litigation that could otherwise constrain fiduciary best judgment.
Acting remarkably quickly, on August 12, 2025, the DOL rescinded the December 21, 2021, Supplemental Private Equity Statement, stating that it departed from the requirement to follow a neutral, principled-based approach to fiduciary investment decisions.
SEC to Consider Revising Investor Qualification Rules
SEC qualification requirements are a common concern for DC Plan fiduciaries considering alternative assets. The EO directs the SEC to consider, in consultation with the DOL, ways to facilitate such access, including potentially revising regulations and guidance relating to accredited investor and qualified purchaser status.
While the EO has long been anticipated, its practical impact will depend on the actions of the DOL, SEC, and other regulatory agencies over the coming months. We expect proposed rules, guidance, or safe harbors addressing the EO's stated goals by early 2026.
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