President Trump issues Executive Order instructing DOL to clarify guidance on use of alternatives in DC plans

On August 7, 2025, President Trump issued an Executive Order (EO), “Democratizing Access to Alternative Assets for 401(k) Investors,” instructing the Department of Labor to take action to clarify the ways in which the fiduciary of a participant directed defined contribution plan may include in the plan’s fund menu an asset allocation fund that includes alternative investments.

In this article we briefly review the EO.

Background

In 2020, the (Trump) DOL issued an information Letter with respect to the inclusion of private equity investments in a “designated investment alternative” in a participant directed defined contribution plan (e.g., a 401(k) plan), concluding that, as a general matter, “a plan fiduciary would not … violate [ERISA fiduciary rules] solely because the fiduciary offers a professionally managed asset allocation fund with a private equity component as a designated investment alternative for an ERISA covered individual account plan in the manner described in [the] letter.”

In 2021, the (Biden) DOL issued a “Supplemental Statement” with respect to the 2020 Information Letter, qualifying and limiting its application in some respects and raising certain concerns with respect to private equity investments in participant directed defined contribution plans.

President Trump’s EO instructs DOL to review this guidance and take appropriate action to: (1) remove any regulatory stigma attached to the inclusion of “alternative assets” in an asset allocation fund (e.g., a target date or balanced fund); and (2) relieve any litigation risk with respect to appropriately structured investments in alternative assets.

What are alternative assets?

The EO defines alternative assets as:

Private market investments, including direct and indirect interests in equity, debt, or other financial instruments that are not traded on public exchanges, including those where the managers of such investments, if applicable, seek to take an active role in the management of such companies;

Direct and indirect interests in real estate, including debt instruments secured by direct or indirect interests in real estate;

Holdings in actively managed investment vehicles that are investing in digital assets;

Direct and indirect investments in commodities;

Direct and indirect interests in projects financing infrastructure development; and

Lifetime income investment strategies including longevity risk-sharing pools.

Particularly interesting is the inclusion of “investment vehicles that are investing in digital assets” (this presumably includes funds investing in crypto assets) and of “lifetime income investment strategies including longevity risk-sharing pools.” This considerably expands the concept of alternatives beyond those contemplated in DOL’s 2020 Information Letter on private equity investments.

Actions to be taken by DOL

The EO instructs DOL, within 180 days, to:

“[R]eexamine [DOL’s] past and present guidance regarding a fiduciary’s duties under [ERISA] in connection with making available to participants an asset allocation fund that includes investments in alternative assets,” including whether to rescind the Biden DOL’s 2021 Supplemental Private Equity Statement.

To the extent it “deems appropriate and consistent with applicable law, seek to clarify the [DOL’s] position on alternative assets and the appropriate fiduciary process associated with offering asset allocation funds containing investments in alternative assets under ERISA. Such clarification must aim to identify the criteria that fiduciaries should use to prudently balance potentially higher expenses against the objectives of seeking greater long-term net returns and broader diversification of investments.”

To the extent it deems appropriate “propose rules, regulations, or guidance … that clarify the duties that a fiduciary owes to plan participants under ERISA when deciding whether to make available to plan participants an asset allocation fund that includes investments in alternative assets, which rules, regulations, and guidance may include appropriately calibrated safe harbors.” (Emphasis added.)

Finally, the EO states that “In carrying out [these] directives … the Secretary shall prioritize actions that may curb ERISA litigation that constrains fiduciaries’ ability to apply their best judgment in offering investment opportunities to relevant plan participants.” (Emphasis added.)

We’ve highlighted language above that targets the issue of possible litigation exposure – probably the fundamental underlying obstacle to the inclusion of alternatives in DC plans.

Next steps

While, for sponsors considering including in their 401(k) plan fund menu (conceivably as the default investment) an asset allocation fund that includes alternatives, guidance from of the sort contemplated by the EO would be welcome. Much will depend, however, on whether and how DOL will implement it.

In that regard, we note that, while President Trump’s nominee for Assistant Secretary of Labor for the Employee Benefits Security Administration (EBSA), Daniel Aronowitz, has been favorably reported out of the Senate Health, Education, Labor, and Pensions (HELP) Committee, he has not yet been confirmed by the Senate. Based on his published comments, Mr. Aronowitz is likely to be a vigorous supporter of the guidance recommended in the EO.

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We will continue to follow this issue.