Plan sponsors who’ve been waiting for clearer regulatory guidance on alternative investments just got the signal they’ve been looking for. The Department of Labor’s Employee Benefits Security Administration (EBSA) has officially rescinded its Biden-era supplemental statement that cautioned fiduciaries against considering alternative assets in 401(k) investment portfolios.
The move comes just days after President Trump signed his executive order titled “Democratizing Access to Alternative Assets for 401(k) Investors.” According to a recent BenefitsPro article, the DOL’s swift action removes what many viewed as a significant regulatory barrier that had discouraged plan sponsors from exploring alternatives, such as private equity, real estate, and other non-traditional investments.
The rescinded 2021 Biden administration guidance had warned that most plan fiduciaries would be “not likely suited to evaluate the use of [private equity] investments in designated alternatives in individual account plans.” According to the DOL, this assertion created a chilling effect on the market and took a dismissive view of both alternative assets and the capabilities of plan fiduciaries.
Secretary of Labor Lori Chavez-DeRemer didn’t mince words about the previous administration’s approach. “This is just another example of how the Biden administration put their thumb on the scale to pick winners and losers,” she said. “Instead of allowing Washington bureaucrats to call the shots, we believe plan fiduciaries should decide which retirement investment options are best for hardworking Americans.”
Deputy Secretary Keith Sonderling echoed this sentiment, emphasizing the broader implications for American workers. “Retiring with dignity is a key part of the American Dream, but far too few Americans have the opportunity to realize that dream today due to unnecessary government overreach,” he said. “By repealing the Biden administration’s stifling guidance, we look forward to a future where innovative retirement products can deliver increased upside, diversification, and security to the American worker.”
The Investment Company Institute (ICI) praised the DOL’s quick response to Trump’s executive order. The organization called it “a welcome return from the Department to the principles-based approach that fiduciaries have always followed under ERISA.” They noted that the speed of the department’s action “is an encouraging sign of its commitment to implementing the order in full and offering millions of American retirees the chance to participate in private market offerings through their professionally managed workplace retirement plans.”
However, the move hasn’t been without critics. Senator Elizabeth Warren (D-MA), ranking member of the Senate Banking, Housing, and Urban Affairs Committee, has voiced concerns that the executive order will expose Americans’ retirement savings to risky investments with little transparency and weak protections, particularly when it comes to highly volatile crypto assets.
The executive order does more than just remove regulatory warnings—it directs both the Labor Secretary and the Securities and Exchange Commission to make it easier for investors to access alternative assets in defined contribution retirement plans. Perhaps more significantly for plan sponsors, it also calls for clarifying or revising rules that could help shield the industry from litigation risk.
This development comes as the SEC is already focusing attention on this area. The Office of the Investor Advocate at the SEC announced in June that it would prioritize the risks and benefits of “Private Market Investments in Retirement Accounts” as an objective for 2026. SEC Investor Advocate Cristina Martin Firvida noted that if more plan sponsors offer participants exposure to private market investments through target date funds or managed accounts, “there may be risks, as well as benefits, for retirement savers that include alternative investments as a component of their retirement accounts.”
For plan sponsors, this regulatory shift provides much-needed clarity and removes a significant deterrent that had been hanging over alternative investment discussions. The DOL has essentially returned to a neutral, principles-based approach that allows fiduciaries to evaluate all investment options based on their merits rather than facing special scrutiny for considering alternatives.
Still, fiduciaries should remember that removing regulatory warnings doesn’t eliminate their fundamental responsibilities under ERISA. Plan sponsors considering alternatives will still need to conduct thorough due diligence, understand the unique risks and characteristics of these investments, and ensure any decisions serve their participants’ best interests.
The path forward for alternative investments in 401(k) plans appears clearer than it has been in years. Plan sponsors now have the regulatory breathing room to explore these options without the previous administration’s cautionary guidance getting in the way of their fiduciary decision-making process.
