President Trump Signs Executive Order Seeking to Expand Availability of Alternative Assets in 401(k) Plans
On August 7, 2025, President Donald Trump signed an Executive Order titled “Democratizing Access to Alternative Assets for 401(k) Investors” (the “Order”), which encourages the US Department of Labor (“DOL”) and other federal agencies to create a pathway for more defined contribution retirement plans to offer participants exposure to “alternative assets,” including private equity, real estate, and digital assets. The Order emphasizes that such assets “are an increasingly large portion of the portfolios of public pension and defined-benefit retirement plans and offer competitive returns along with diversification opportunities.” At the same time, the Order says the “vast majority” of defined contribution plan participants do not have access to the “potential growth and diversification opportunities associated with alternative asset investments.” The Trump Administration attributes this lack of participant access to alternative assets to a “combination of regulatory overreach” by the DOL and “burdensome lawsuits” challenging “reasonable decisions by loyal, regulated fiduciaries.”
The Order directs the DOL and other federal agencies to further the Trump Administration’s policy to provide every American preparing for retirement with “access to funds that include investments in alternative assets when the relevant plan fiduciary determines that such access provides an appropriate opportunity for plan participants and beneficiaries to enhance the net risk-adjusted returns on their retirement assets.”
Scope of “Alternative Assets”
The Order specifically defines “alternative assets” to include the following six categories of investments:
- Private market investments (direct and indirect interests in equity, debt, or other financial instruments not traded on public exchanges);
- Real estate (direct and indirect interests, including debt instruments);
- Actively managed investment vehicles investing in digital assets;
- Commodities (direct and indirect investments);
- Projects financing infrastructure development (direct and indirect interests); and
- Lifetime income investment strategies (including longevity risk-sharing pools).
Directives to the Department of Labor
The Order directs the Secretary of Labor, Lori Chavez-DeRemer, to take actions to further its objectives by February 2026, including re-examining guidance on fiduciary duties around investment options under Section 404 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (29 U.S.C. § 1104). In response to this directive, on August 12, 2025, the DOL rescinded its December 2021 guidance, which suggested that most plan fiduciaries lack the experience to adequately evaluate private equity instruments.
The Order also directs the Secretary to clarify DOL’s position on alternative assets in defined contribution plans as well as the fiduciary process and criteria that plan fiduciaries should use to balance the potentially higher fees associated with alternative assets “against the objectives of seeking greater long-term net returns and broader diversification.” Finally, the Order provides that DOL shall “propose rules, regulations, or other guidance clarifying the duties that a defined contribution plan fiduciary owes to participants when deciding whether to offer an asset allocation fund that includes investments in alternative assets.” The DOL may include safe harbors in any new rules and regulations.
The Order is clear that ERISA breach of fiduciary duty litigation has “stifled investment innovation” in defined contribution plans, and instructs Secretary Chavez-DeRemer to seek to curb burdensome litigation that “constrains fiduciaries’ ability to apply their best judgment in offering investment opportunities to relevant plan participants.”
Interagency Cooperation Required
Because defined contribution plan investments are regulated by multiple federal agencies, the Order acknowledges the need for DOL to collaborate with those agencies and directs Secretary Chavez-DeRemer to consult with the Treasury Secretary (Scott Bessent), the Securities and Exchange Commission (SEC), and other federal regulators to carry out the Order’s policy objectives, including with respect to any parallel regulatory changes. The Order also instructs the SEC to consider ways to facilitate access to investments in alternative assets by participants in defined contribution plans, including through revisions to existing SEC regulations and guidance regarding accredited investor and qualified purchaser status
Key Takeaways
The Order does not change existing law regarding the types of investments that may be offered in a defined contribution plan. Investment products that include private market assets have been around for nearly two decades.1 Nor does the Order suggest that private market assets should be offered as standalone investments in plan investment lineups. Rather, the Order recognizes that private market assets are typically offered as part of a custom target-date fund, a multi-asset class fund, or as part of an account that is managed by a sophisticated investment manager. The intent of incorporating private market assets into these products is to provide greater diversification, achieve enhanced returns, and protect participants from public market downturn risk. The Order recognizes that retirement investing appropriately considers the long-term time horizon, and that private market assets can provide advantages over the long term.
The Order also directly addresses the ongoing wave of ERISA excessive fee litigation, which has “stifled innovation” in defined contribution plans. The Order opens the path for DOL to issue new regulations and guidance that may help curb some of this litigation, including providing certain protections for plan sponsors and fiduciaries who consider private market assets. It likewise instructs DOL to help plan sponsors and fiduciaries comply with their fiduciary obligations under ERISA when navigating alternative investment products.
With respect to the federal securities laws, the SEC has historically limited how participant-directed defined contribution plans have been able to access most privately offered alternative investment vehicles. Specifically, many of these alternative investment vehicles rely on the exceptions to the definition of “investment company” under the Investment Company Act of 1940 (“ICA”) provided in Sections 3(c)(1) and 3(c)(7), which respectively are available to privately offered funds that are owned by fewer than 100 beneficial owners or solely by “qualified purchasers.” Historically, SEC staff has provided guidance that these funds must generally treat an investment by a participant-directed defined contribution plan as an investment by the participants of such plan, unless certain requirements are satisfied. Practically speaking, this guidance made it impracticable for any such fund to allow investment by participant-directed plans unless they complied with those requirements.2 The Order expressly contemplates the need for the SEC to revisit its existing guidance to facilitate access to alternative investments by defined contribution plans. Depending on what action, if any, the SEC takes in response to the Order, we may see asset managers develop new products that facilitate investments in alternative funds in defined contribution plans relying on the ICA exceptions in ways that were not previously available.
Ultimately, the Order is a statement of the Trump Administration’s policy objectives. It is not self-executing and, as described above, we need to wait and see what affirmative actions the DOL, SEC, and other federal regulators take in response to the Order. The DOL has already started the process by rescinding its December 2021 guidance, explaining that the guidance “marked a departure from previous department norms, which dictate a neutral, principled-based approach to fiduciary investment decisions, consistent with the requirements of Employee Retirement Income Security Act.”3 We anticipate there will be more developments in the coming days.
1 According to a joint survey issued by DCREC (Defined Contribution Real Estate Council), NAREIM (National Association of Real Estate Investment Managers), NCREIF (National Council of Real Estate Fiduciaries) and PREA (Pension Real Estate Association), there was approximately $36 billion of real estate in defined contribution plans as of December 31, 2023.
2 See, e.g., H.E.B. Investment and Retirement Plan, H.E. Butt Grocery Company, SEC Staff No-Action Letter (May 18, 2001); Standish, Ayer & Wood, Inc. Stable Value Group Trust, SEC Staff No-Action Letter (Dec. 28, 1995); The PanAgora Group Trust, SEC Staff No-Action Letter (Apr. 29, 1994).
3 The DOL’s explanation mirrored its reasoning for rescinding Compliance Assistance Release 2022-01, which had discouraged plan fiduciaries from offering cryptocurrencies in their 401(k) plans. See Mayer Brown, A Return to Investment Neutrality? DOL Rescinds Guidance Discouraging Plan Fiduciaries from Considering Cryptocurrencies (June 13, 2025).
