President Donald Trump signed an executive order on August 7, 2025, aimed at expanding access to alternative investments in employer-sponsored defined-contribution retirement plans, such as 401(k)s. Most Americans investing in such plans currently have access to traditional investments such as stocks, bonds, and mutual funds only. This new directive is intended to open the floodgates to a wider universe of investments—like private equity, real estate, cryptocurrency, commodities, and infrastructure investments—that would affect over 90 million workers. While this move would offer greater diversification opportunity, it poses important issues about investment risk, fees, and plan sponsor fiduciary responsibility.
Important provisions of the executive order
The executive order, “Democratizing Access to Alternative Assets for 401(k) Investors,” requires a number of important guidelines. It defines in broad terms “alternative assets” as encompassing both debt and equity investments in the private markets, real estate, digital assets like cryptocurrencies, commodities, infrastructure financing programs, and lifetime income solutions like longevity-risk pools. Within 180 days, the Secretary of Labor shall review, and potentially rescind, the December 2021 guidance discouraging the use of alternative investments in retirement plans. The review shall clarify fiduciary duties under the Employee Retirement Income Security Act (ERISA) and offer safe-harbors to reduce litigation risk for plan sponsors.
The order also calls for coordination between the Department of Labor, Treasury Department, Securities and Exchange Commission (SEC), and other federal agencies to identify what regulatory adjustments need to be made. The SEC, specifically in conjunction with the DOL, is responsible for amending rules and guidance such that alternative assets will be accessible, particularly to participant-directed plans. The aim is to modernize the regulatory framework around 401(k) plans to permit new types of investment while still safeguarding the savers.
Diversification and potential for higher returns
The supporters of this executive order mention the extra value that can be added through alternative assets to retirement portfolios. Large public pension funds and defined-benefit plans also have had huge exposures to private equity and real estate investments for decades, both of which have traditionally achieved competitive returns with fortitude in down markets. By making available to defined-contribution (DC) plans the same strategies, the executive order seeks to help alleviate the retirement savings shortage of the majority of Americans and help make more secure and comfortable retirements possible.
Senior asset managers like BlackRock view the change as means for staff to build more diversified and diversified portfolios beyond the traditional index funds. Such investment opportunities can provide entry into improved risk-adjusted returns, which can translate into potentially improved retirement outcomes for millions of Americans, who have fewer investment options in their 401(k) plans currently.
Concerns and challenges
Despite the overhyped benefits, financial professionals and policymakers have grumbled that alternative investments present challenges to the average retirement saver. The assets typically have more costs, less liquidity, less transparency, and more prolonged horizons than stocks or bonds, which can render them inappropriate for the average 401(k) investor. Plan fiduciaries and employers must navigate convoluted due-diligence rules to ascertain whether alternative assets exist in their plans. ERISA’s “prudent-man” standard requires fiduciaries to weigh the risks and costs against the potential gains in order to safeguard participants’ funds.
Further, critics warn that regulatory risk and litigation risk will persist even after rule reforms, delaying broad access to non-traditional assets in 401(k)s until 2026 or later as agencies finalize new rules. Top policymakers like Senator Elizabeth Warren raised concerns about systemic risk broadly regarding private credit and the volatility of cryptocurrency and called for close monitoring to prevent potential harm to retirement savers.
Implementation timeline and next steps
Since executive orders do not carry the authority to immediately alter ERISA law, this order initiates a comprehensive rulemaking and regulatory consideration process. The Department of Labor will initiate its 180-day review of the prior guidance first, where it can rescind or amend existing rules, shed light on fiduciary responsibilities, and recommend safe-harbors. Concurrently, interagency consultations with the DOL, Treasury, SEC, and others will strive to harmonize regulations in order to enable the new investment options.
In the second phase, the SEC is expected to amend rules to permit qualified status definitions of alternative assets and amend disclosure requirements for DC plans. Post-regulatory guidance, employer plan sponsors will need to review new investment products, appoint fiduciary advisers to perform due diligence, and negotiate fee and liquidity terms with asset managers. Regulation amendments and plan-level adoptions are projected by regulatory sources not to occur prior to late 2025 or possibly early in 2026.
What participants need to watch
For plan participants, future changes in 401(k) plans will come with new notices from their employers. These will include updated plan documents and participant notices that explain the new investments, associated fees, and liquidity terms. Employers will also be required to disclose their fiduciary due diligence processes, for instance, comparisons of alternative-asset strategies with more traditional funds and assessments of manager track records, fees, redemption policies, and risk profiles.
Recordkeepers and consultants will seek to develop educational products aimed at placing participants on notice with respect to both the potential benefit and unique risks involved in such new asset classes. As alternative investments become more mainstream, heightened transparency and participant education will be required to help employees make informed decisions about their retirement portfolios.
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