Investment options for defined contribution retirement plans, such as 401(k) savings accounts, will expand to include alternative investments like private equity, real estate, cryptocurrency, and more, subject to final approval of a new Department of Labor rule. 

Current limitations

Today, 401(k) investments are generally limited to publicly traded securities, including stocks, mutual funds, some index funds, ETFs, and annuities. As defined-benefit pensions continue to decline among employers, 401(k) accounts have become the most common employer-sponsored retirement benefit. More than 90 million American workers participate in these plans. 

Most 401(k) participants have little or no access to alternative investment options such as private equity, real estate, collectibles, cryptocurrency, and similar private investments. The only exception is when the alternative is included in a target-date fund managed by a professional investment manager. 401(k) and similar plan managers have a fiduciary responsibility to their participants. 

Policy shift

In August 2025, President Trump issued an executive order titled “Democratizing Access for 401(k) Investors,” which directed the Department of Labor to reexamine guidance under ERISA about fiduciary duties related to alternative asset investments and consider issuing regulations that would include fiduciary “safe harbors” to curb litigation risks for plan sponsors. 

This order would allow 401(k) participants to invest in private equity, real estate, and digital assets (including cryptocurrency and similar options), subject to their plan sponsor's decision to incorporate these investments.

The Council of Economic Advisers then published a report stating that allowing defined contribution plans to permit alternative investments would benefit “plan participants (retail investors), fund managers, private companies (including small businesses), financial markets, and the real economy.” The CEA estimated the economic benefit at $35 billion. 

The DOL rescinded a Biden-era statement that cautioned 401(k) fiduciaries about the risks of including private equity investments in 401(k) plans, clearing the way for further action. 

Proposed safe harbor process

In March 2026, the DOL’s Employee Benefits Security Administration (EBSA) released a proposed rule titled “Fiduciary Duties in Selecting Investment Alternatives.” The proposed rule provides a process-based safe harbor to shield plan sponsors from ERISA violations when they add alternative assets to their 401(k) menus. The public comment period for this proposed rule change closed on June 1, 2026. The next step will be for the EBSA to review the comments received and draft the final rule, which could be published and take effect in late 2026 or early 2027. 

The rule makes the duty of prudence under ERISA neutral with respect to asset class, giving fiduciary sponsors maximum discretion, provided they comply with a strict evaluation framework. The safe harbor presumption of prudence requires the plan sponsor to evaluate and document six factors:

• Performance

• Fees

• Liquidity

• Valuation

• Benchmarking

• Complexity

If the fiduciary can prove that it has adequately vetted these six factors for alternative assets included as investment options in its plan, it would receive a presumption of prudence under ERISA, reducing litigation risk if outcomes are challenged.

Market implications and timeline

Today, the global private equity market is approximately $7.5 trillion, significantly smaller than the public equities market. However, the potential impact of this order on the global private equity market could be substantial, potentially leading to increased investment and growth. Alternative assets historically offer higher return potential, albeit with higher volatility. 

In anticipation of this potential change, private fund managers are actively developing new products tailored to the specifics of defined contribution plans, such as greater liquidity, clearer fee structures, and transparent valuation protocols. 

Next, it is up to employers and plan sponsors to decide whether to include these alternative investments in their defined contribution plans. For those who choose to do so, asset managers will develop new products for participating programs. After that, both sponsors and participants will need education concerning the risks. 

Both fund administrators and individual employers will have the option to expand their investment choices for 401(k) plans, or not to do so. Plan administrators are fiduciaries and must weigh the overall suitability of options for investor needs when making choices. 

Adoption will likely be:

• uneven across employers

• initially concentrated in large plans

• implemented via managed solutions rather than direct retail access

Conclusion

The Trump executive order marks a pivotal moment for American retirement savers, promising greater choice and diversification by opening the door to private equity, real estate, and other alternative assets within 401(k) plans. While supporters praise new opportunities for non-accredited investors to participate in higher-return markets, critics warn that fee structures, liquidity constraints, and investment complexity could expose plan participants and fiduciaries to new risks. Regulatory guidance and industry response, combined with careful fiduciary oversight, will determine how transformative this policy shift becomes—and whether it delivers the promised boost to retirement security.