On 7 August 2025, President Trump signed an executive order intended to modernize the 401(k) investment universe, directing the Secretary of Labor to clarify the US Department of Labor's (DOL) position on fiduciary duties in connection with offering products containing exposure to alternative assets to defined contribution plans, such as 401(k) plans, potentially establishing "appropriately calibrated safe harbors" for such investments.The order also directs the Securities and Exchange Commission (SEC) to ease access to alternative assets for such plans by revisiting applicable regulations and guidance, including that related to accredited investor and qualified purchaser status.
Because of fiduciary liability concerns, as well as various legal and operational issues, 401(k) plan fiduciaries have been reluctant to include products containing exposure to alternative investments in plans' investment lineups.The order specifically directs the Labor Secretary to prioritize actions that may curb litigation that "constrains fiduciaries' ability to apply their best judgment in offering investment opportunities to plan participants."If the DOL issues a formal regulation establishing a "safe harbor" intended to provide protection for plan fiduciaries when selecting investment products with an alternatives component, plan fiduciaries should have an easier time providing alternatives exposure to plan participants.
The executive order–and DOL and SEC guidance and rulemaking that will follow–marks a pivotal moment for private equity sponsors and other managers of alternative investments, including private real estate, infrastructure, and credit who have long sought ways to access the 401(k) plan market. The growing surge in product development of retirement solutions with private market exposure, such as custom target date funds and managed accounts with private equity and private credit exposures, shows no signs of slowing down.
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