🗞️ Unlocking the Vault: DOL Proposes to Open 401(k)s to Alternative Investments

The U.S. Department of Labor moved Monday to reshape the landscape of American retirement savings, proposing a rule that would give 401(k) plan managers a clearer legal path to offer workers access to private equity, real estate, cryptocurrency, and other alternative assets that have long been the province of pension funds and wealthy investors.

The proposal, titled "Fiduciary Duties in Selecting Designated Investment Alternatives," follows Executive Order 14330, which President Trump signed in August 2025 directing the Labor Department and the Securities and Exchange Commission to expand the investment menu available to the roughly 90 million Americans enrolled in defined contribution retirement plans.

At the heart of the rule is a process-based safe harbor under the Employee Retirement Income Security Act. Under the framework, fiduciaries who methodically evaluate investments across six factors — performance, fees, liquidity, valuation, benchmarking, and complexity — would receive a legal presumption of having met their duty of prudence. Crucially, the rule takes no position on which asset classes belong in a retirement plan; it is designed to govern how fiduciaries make decisions, not what decisions they make.

The proposal represents a deliberate break from the Biden administration, which in 2022 issued guidance specifically warning plan managers against including cryptocurrency in 401(k) offerings, a position the Labor Department formally rescinded last year. Officials pointed to a surge in fiduciary litigation as a key driver of the new rule, noting that more than 500 fee-related class action lawsuits have been filed since 2016, producing over $1 billion in settlements and making plan sponsors deeply reluctant to stray from conventional index funds and mutual funds.

The announcement drew endorsements from Treasury Secretary Scott Bessent and SEC Chairman Paul Atkins, signaling unusually broad interagency alignment. The proposal also drew swift criticism from Sen. Elizabeth Warren, who argued that the rule would expose workers' retirement savings to undue risk at a time when private credit markets are under stress, private equity returns have fallen to multi-decade lows, and cryptocurrency prices remain volatile. Supporters of the rule, including the Council for a Safe and Secure Retirement, countered that pension funds in states such as Massachusetts have generated strong long-term returns from alternative assets for decades, and that the rule simply extends the same opportunities to 401(k) savers.

Legal analysts cautioned that the rule's practical impact may be limited, at least in the near term. Courts, not the Labor Department, will have the final word on whether the safe harbor insulates fiduciaries from litigation, and several structural obstacles remain unresolved. Private market investments are not designed for the daily redemptions that 401(k) participants expect, and existing SEC rules restrict direct access to some private funds for investors who do not meet accreditation thresholds. Most experts expect alternatives, if they appear in 401(k) plans at all, to arrive embedded within target-date funds or managed accounts rather than as options employees can select directly.

The proposed rule is open for public comment through June 1, 2026, and a final version could be issued before the end of the year, though the Labor Department may revise the rule substantially based on what it hears.

Key Points

• The DOL proposed a safe harbor giving 401(k) plan fiduciaries legal protection when following a six-factor investment selection process
• The rule is asset-neutral and does not favor or restrict any asset class, including private equity, real estate, crypto, or infrastructure
• Alternative assets are already technically permitted in 401(k)s, but fear of litigation has kept nearly all plan sponsors on the sidelines
• The proposal reverses Biden-era guidance that specifically discouraged cryptocurrency in employer-sponsored retirement plans
• Broad cross-agency support from the DOL, Treasury Secretary Scott Bessent, and SEC Chairman Paul Atkins
• Skeptics, including some lawmakers and legal analysts, question whether the safe harbor will hold up in court and note real-world adoption could take years
• Practical barriers remain, including liquidity mismatches, valuation complexity, SEC accreditation rules, and ERISA nondiscrimination provisions
• Alternatives are most likely to appear in plans through target-date funds or managed accounts, not as standalone menu options
• Public comments are due June 1, 2026, with finalization expected by the end of 2026

Primary Source Author: U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

Primary Source: US Department of Labor proposes landmark rule to democratize access to alternative investments in 401(k) plans

Primary Source Link: https://www.dol.gov/newsroom/releases/ebsa/ebsa20260330

Supplemental Links

• Full proposed rule text (PDF)
• Executive Order 14330: Democratizing Access to Alternative Assets for 401(k) Investors
• CNBC: 401(k) alternative asset rule proposed by Labor Department
• CNN Business: Employers that want to offer 401(k) participants access to private equity get new rule
• Gibson Dunn: DOL Proposes Safe Harbor for Selection of Designated Investment Alternatives
• Ogletree: DOL Unveils Proposed Rule to Remove Restrictions on Alternative Investments in 401(k) Plans
• Winston & Strawn: DOL Proposes Safe Harbor for Alternative Investments in 401(k) Plans
• Financial Planning: DOL rule could reshape 401(k) access to alternatives
• ERISA Practice Center: DOL Issues Proposed Rule and Safe Harbor for Alternative Assets in 401(k) Plans