On August 7, 2025, President Donald Trump signed an Executive Order (EO) (Democratizing Access to Alternative Assets for 401(k) Investors) that aims to allow 401(k) retirement accounts and other defined contribution plans to invest in private equity, real estate, cryptocurrency, digital assets, and other alternative assets. By clearing the path for defined contribution plans to invest in alternative assets, which defined benefit pension plans can already do, this EO could potentially provide alternative asset managers with access to new sources of capital and is expected to further fuel the growth of the private capital industry.
Though the Employee Retirement Income Security Act of 1974 (ERISA) does not explicitly prohibit defined contribution plans from investing in alternative assets, an emphasis on a plan manager’s fiduciary duty to offer the best possible investment options with the lowest possible fees has historically led plan managers to largely avoid investments in alternative assets due to potential lawsuits and suitability concerns for plan participants, since such alternative assets have been associated with higher cost, higher risk, and lower liquidity.
In 2020, the Department of Labor (DOL) issued guidance stating that private equity investments could be made by defined contribution plans as part of a multi-asset investment strategy, such as a target-date product, stating that a plan fiduciary would not violate the fiduciary’s duties under Sections 403 and 404 of ERISA “solely because the fiduciary offers a professionally managed asset allocation fund with a private equity component.” However, this guidance was later narrowed under the Biden Administration. The new EO reverses that policy trend by directing the Secretary of Labor to consider whether to rescind the Biden-era guidance and encourage broader access to private equity, as well as other alternative asset investments that had not been permitted nor addressed in previous guidance (e.g., cryptocurrency and digital assets). Specifically, the EO:
- Directs the Secretary of Labor to reexamine the DOL’s guidance on what assets are allowed in retirement accounts by outlining its position on the fiduciary duties of employers who provide access to alternative investments in their retirement accounts and by enacting “appropriately calibrated safe harbors” to seemingly curb ERISA litigation risk.
- Asks the Securities and Exchange Commission (SEC) to revisit relevant regulations, including those related to accredited investor and qualified purchaser status, to allow investors access to alternative assets into retirement plans the agency monitors.
- Instructs the DOL to work with the Department of the Treasury, the SEC, and other federal agencies to evaluate whether these agencies should make any additional changes to rules and regulations to facilitate defined contribution plans’ access to alternative asset investments.
Key Takeaways and Implications
- The EO does not immediately change the existing regulatory framework regarding private equity and digital asset investments. Instead, the DOL and SEC must take further action to clarify regulations that may reduce hurdles for plan sponsors to take action in the future. As of August 12, 2025, the DOL formally withdrew the Biden-era guidance urging caution in private equity investments.
- Defined contribution plans represent an estimated $12.2 trillion source of funding, and 401(k) plans make up an estimated $8.7 trillion of that. Largely, according to the Investment Company Institute, this capital has not been accessed by private markets. By providing additional regulatory guidance, this EO could signify a substantial boon for fund sponsors looking to raise capital from retail investors and obtain access to additional sources of capital.
- Asset managers and investment advisers have already begun marketing products with private markets exposure that target retirement vehicles and retail investor investment. This EO will likely only accelerate the creation of such products tailored to retirement plans and retail investors, further expanding the interval and tender offer funds registered under the Investment Company Act that employ alternative strategies, most notably target date mutual funds and collective investment trusts with allocations to private market investments in their portfolios.
- This EO is the latest in a line of actions taken by the Trump Administration to reduce regulatory hurdles and further open digital asset markets to investors, including an EO to establish a bitcoin and digital assets reserve as well as eliminating the Department of Justice’s crypto enforcement team. Following the passage of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act and the Digital Asset Market CLARITY Act of 2025, this EO further clarifies the regulation of digital assets in the United States.
Timeline
Since the EO directs federal agencies to start to review and revise relevant rules and regulations regarding the inclusion of alternative assets in defined contribution plan portfolios, we will first see advisory opinions and rules attempt to provide regulatory guidance before defined contribution plans begin to incorporate alternative assets into their portfolios. It may be advisable for plan sponsors with experience in evaluating private equity investments in defined benefit pension plans to first incorporate these options into their defined contribution plans.
Recommended Actions
Providing alternative asset investment exposure to defined contribution plans presents an opportunity to all parties involved but also poses increased financial and liability risk. Asset managers, placement agents, and investment sponsors and platforms should closely monitor evolving fiduciary and disclosure obligations related to including alternative asset investments in defined contribution plans. Plan sponsors and their fiduciary investment advisers should continue to review potential plan investments in light of their existing ERISA fiduciary duties, keeping in mind that the EO is not an endorsement of alternative asset allocations.
Upcoming regulatory guidance will inform the appropriate level of due diligence and disclosure, as well as what steps may be necessary to ensure operational readiness, to facilitate these kinds of transactions.
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Alston & Bird's multidisciplinary Executive Order, Action & Proclamation Task Force advises clients on the business and legal implications of President Trump's Executive Orders.
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