U.S. retirement plans hold roughly $13.8 trillion in assets, with 401(k)s alone accounting for an estimated $8.7 trillion. For decades, that money has been almost entirely confined to public markets. That may be changing.
Last August, President Trump signed Executive Order 14330, “Democratizing Access to Alternative Assets for 401(k) Investors.” The order directs the Department of Labor and SEC to clear regulatory and litigation barriers that have kept private equity, private credit, real estate, infrastructure, and digital asset funds out of 401(k) lineups. Five days later, the DOL rescinded Biden-era guidance warning fiduciaries against private equity in defined contribution plans.
On March 30, 2026, the Department of Labor (DOL) issued a proposed rule establishing safe harbors for fiduciaries selecting alternatives. The comment period closes June 1, 2026. A final rule could be published by year-end, with implementation more likely in 2027.
Old News for IRAs, New Ground for 401(k)s
Alternatives have been permitted in IRAs for years. However, 401(k) plans are governed by ERISA, the 1974 federal law that imposes strict fiduciary duties on plan sponsors and creates participant litigation risk. IRAs are governed by the Internal Revenue Code, which prohibits certain holdings and self-dealing but does not impose ERISA’s fiduciary framework. Through a self-directed IRA, an individual can already own private equity, real estate, and private debt. The current shift is about clearing the path inside employer-sponsored 401(k) plans.
Can the DOL Allow Alts in Retirement Plans Without Congress?
Potentially. ERISA does not prohibit alternative assets in 401(k)s, rather it requires fiduciaries to act prudently. What has historically kept these assets out is federal agency guidance, fear of lawsuits, and the difficulty of fitting illiquid assets into a plan valuation structure.
The DOL can rescind old guidance, issue safe harbors, and clarify the fiduciary process…all without Congress. What it cannot do is change ERISA’s fiduciary standard, eliminate the right to sue, or amend SEC investor thresholds beyond what rulemaking allows. Those changes require legislation. A bill from Representative Troy Downing (R-Montana) was introduced in October to codify the executive order, but it has not yet passed.
Lowering the Threshold for Investors
Access to alternatives has historically been gated by two SEC qualification standards (AC and QP) designed to keep these strategies in the hands of financially sophisticated investors – those presumed better equipped to evaluate investments that operate outside the disclosure and reporting requirements of public markets. An accredited investor (AC) is generally an individual with $1 million in net worth, excluding primary residence, or $200,000 in annual income ($300,000 jointly). A qualified purchaser (QP) is a higher bar – generally $5 million in investments. Expanding access to alternatives in 401(k)s effectively brings these strategies to participants who would not meet either threshold on their own. The proposed DOL rule effectively bypasses these protections by routing access through an employer-sponsored plan, where the plan fiduciary, not the individual participant, is responsible for evaluating the investment.
Reasons for Caution
Availability and appropriateness are not the same thing. The below concerns about alternatives in retirement accounts deserve consideration.
Liquidity: Many private market strategies require seven to ten years to actualize returns. Retirement savers, especially those without other significant savings, often need funds sooner – through hardship withdrawals, job changes, or RMDs at age 73. For instance, in early 2026, Blue Owl Capital recently closed redemptions on its $1.6 billion OBDC II fund – a vehicle marketed to retail investors – after withdrawal requests surged 200%. The firm ultimately moved to a liquidation plan returning roughly 30% of capital over a 45-day window. That structural mismatch becomes far more dangerous inside a retirement account.
Fees: Alternatives may carry materially higher expense ratios than the index funds dominating 401(k) menus. Over a multi-decade horizon, fees compound against returns in ways that are easy to underestimate.
Valuation: Private investments are marked less frequently and less transparently than public securities. Smoother reported returns are not the same as lower risk – a point that has drawn fresh SEC scrutiny.
Sequence-of-returns risk: Illiquidity windows of seven to ten years are structurally mismatched to the back end of the savings lifecycle, when 401(k) balances are largest and the runway to retirement is shortest. A participant planning to retire in a few years cannot afford to have a meaningful slice of their portfolio locked up through a drawdown.
Diligence burden on the plan sponsor: Vehicle selection would fall to an employer’s benefits committee, not a sophisticated institutional allocator. Quality could vary widely across plans, and participants may not have no ability to opt into a different manager if their plan’s choice underperforms.
Rollover complications: Leaving an employer usually involves a routine rollover to an IRA. If part of the balance sits in an illiquid private fund with quarterly or annual redemption windows, that process becomes operationally messy and can strand assets in a former employer’s plan.
This is a genuine policy shift in motion, and if alternatives do land in 401(k) lineups, asset location will matter more than ever. The rules are still being written, and any allocation decision should be made with caution alongside the specifics of your personal portfolio. Stay tuned for new developments on this front, and please reach out to your Wealth Manager with any questions in the meantime.
