On August 7, 2025, President Trump signed an Executive Order directing the Department of Labor (“DOL”) and the Securities and Exchange Commission (“SEC”) to ease regulatory barriers to alternative assets in defined contribution plans that provide for participant-directed investments, such as 401(k) plans. The agencies are tasked with reviewing current guidance and proposing new rules to support broader participant access to private equity, cryptocurrency, real estate, and other nontraditional investments.
Clearing the Way for Alternative Assets in 401(k) Plans. The Executive Order directs the DOL, within 180 days, to (i) re-evaluate fiduciary guidance under ERISA related to offering asset allocation funds that include alternative assets, and (ii) help reduce the risk of plaintiffs’ firms challenging these investments through litigation. DOL action is to include (i) reconsidering the DOL’s prior guidance regarding private equity investments, (ii) clarifying how fiduciaries should balance higher fees against potential long-term returns, and (iii) potentially introducing safe-harbor provisions to protect plan fiduciaries. The SEC is similarly tasked with reviewing its rules, including definitions of “accredited investor” and “qualified purchaser,” to align with the DOL’s efforts and remove barriers to participant-directed investments in alternative assets.
The Executive Order defines “alternative assets” broadly, to include:
- Private equity and debt not traded on public exchanges;
- Real estate (including debt secured by property);
- Digital asset vehicles (which seems to include cryptocurrency);
- Infrastructure project financing; and
- Lifetime income products, such as longevity risk-sharing pools.
The Executive Order follows the DOL’s rescission on May 28, 2025, of the agency’s 2022 Biden-era guidance directing plan fiduciaries to exercise “extreme care” before adding cryptocurrency investment alternatives to their plans, investments the DOL then warned were imprudent.
Safe Harbors and Potential Litigation. The Executive Order also encourages the creation of safe-harbor rules intended to reduce fiduciary litigation risk. However, based on the 2024 U.S. Supreme Court decision in Loper Bright Enterprises et al. v. Raimondo, Secretary of Commerce et al. (see our prior Client Alert), courts are now required to “exercise their independent judgment” when evaluating whether federal agencies, such as the DOL and the SEC, have acted within their statutory authority. Therefore, it is unclear whether such “safe harbors” or other permissive provisions are within the agencies’ authority and would withstand potential litigation from plaintiffs challenging alternative investments.
Implications for Plan Fiduciaries. The Executive Order signals the current administration’s support for including alternative assets in defined contribution plan investment offerings. Advocates say that these alternative investments offer diversification and the potential for significant returns. On the other hand, critics warn of high fees, volatility, and illiquidity. While there is no action to take at the current time, any permissive guidance issued by the DOL will have to be scrutinized carefully to ensure the use of alternative investments are in participants’ best interests and do not enhance plan fiduciary exposure.
If you have any questions about the prudent selection of investment alternatives in defined contribution plans or fiduciary responsibility under ERISA more generally, please contact your SGR benefits counsel.