What Is the Executive Order and What Does It Seek to Do?
On August 7, 2025, an Executive Order titled “Democratizing Access to Alternative Assets for 401(k) Investors” was signed. At a high level, the order is intended to expand the types of investments that may be available in 401(k) plans.
Traditionally, most 401(k) plans have offered a fairly narrow menu of options, typically centered on mutual funds and bonds. While those investments remain foundational, the Executive Order reflects a view that retirement savers may benefit from access to a broader range of asset classes.
Specifically, the order points toward expanding access to alternative investments such as:
- Private equity and private debt
- Real estate
- Commodities and infrastructure projects
- Digital assets, including cryptocurrency
The underlying idea is simple: more than 90 million Americans participate in 401(k) plans, yet many of the investment strategies used by institutional investors and public pension funds have historically been out of reach. By opening the door to these alternatives, the order suggests that participants could potentially improve long-term, risk-adjusted returns.
Timeline and Implementation
It is important to note that the Executive Order does not immediately change the rules. Instead, it directs federal agencies to review existing regulations and consider updates.
The Department of Labor (DOL) plays a central role in this process. The order gives the DOL 180 days, through early February 2026, to revisit guidance under the Employee Retirement Income Security Act (ERISA), particularly as it relates to fiduciary responsibilities and alternative assets.
During this period, the DOL may also propose new rules or guidance. For example, it could introduce “safe harbors” designed to reduce litigation risk for plan sponsors that choose to offer alternative investments. In addition, the DOL is expected to coordinate with the Securities and Exchange Commission (SEC) and other regulators to ensure a consistent approach.
As an early step, the DOL’s Employee Benefits Security Administration (EBSA) submitted draft regulations titled “Fiduciary Duties in Selecting Investment Alternatives” to the Office of Management and Budget (OMB) on January 14, 2026. While this signals momentum, the final rules have not yet been issued.
The Decision Plan Sponsors May Need to Make
For plan sponsors, the Executive Order ultimately presents a decision—not a mandate.
Sponsors are not required to add alternative investments to their plans. Instead, they are being given the option to consider them. Whether that option makes sense will depend on each plan’s specific circumstances.
Before making any changes, sponsors should carefully evaluate whether these more complex investments align with the needs of their participants and whether they can be offered prudently within the plan’s existing structure.
Your Fiduciary Duty and Responsibility Under ERISA
Plan sponsors remain fiduciaries under ERISA, and the Executive Order does not change that. Core duties of prudence and loyalty still apply.
That said, alternative assets introduce additional considerations compared to traditional investments. As a result, fiduciaries need to approach these options with heightened care.
Key Fiduciary Considerations
To start, sponsors must thoroughly evaluate any alternative investment under consideration. This includes understanding how the investment works, the risks involved, and how fees are structured.
Fees deserve particular attention. Many alternative investments carry significantly higher costs than traditional mutual funds. A common example is the “2 and 20” model used by some hedge funds, which includes a 2% management fee and 20% of profits. Fiduciaries should be prepared to assess whether the potential upside justifies these expenses.
Operational challenges also come into play. Alternative assets can raise issues around valuation and liquidity, especially when investments are not easily bought or sold. Sponsors must consider whether their plan can support daily pricing, participant loans, distributions, and investment changes.
In addition, fiduciaries must follow a prudent process when selecting investment managers and continue to monitor performance over time. Clear and ongoing oversight is critical.
Just as important is participant communication. Participants should receive clear, understandable information about how these investments work and the risks involved so they can make informed decisions.
Special Considerations for Digital Assets
Digital assets, such as cryptocurrency, receive special treatment under the Executive Order. The order limits their inclusion to actively managed investment vehicles. Participants would not be able to invest directly in individual cryptocurrencies. Instead, a professional manager would make allocation decisions, which is intended to provide an added layer of oversight.
There are also audit implications to consider. These assets are not typically covered by a qualified institution under 29 CFR 2520.103-5. As a result, plans that currently rely on an ERISA 103(a)(3)(C) audit may need to transition to a full-scope audit, potentially increasing both time and cost.
Potential Benefits and Risks for Your Plan
Deciding whether to include alternative investments requires a careful balancing of potential benefits and risks.
Potential Benefits
Alternative assets can improve diversification because they often do not move in lockstep with public stock and bond markets. This may help reduce overall portfolio volatility.
Certain alternatives, such as private equity, may also offer access to high-growth companies that are not publicly traded. Over time, this exposure could enhance long-term returns.
In addition, assets like real estate and commodities may help protect against inflation. Finally, expanded access allows everyday retirement savers to participate in investment strategies that were once limited to large institutions.
Potential Risks
At the same time, these investments come with meaningful risks. Fee structures can be complex and expensive, which may reduce net returns.
Volatility is another concern, particularly with digital assets, where sharp price swings are common. Losses can occur quickly and may be difficult for participants to absorb.
Illiquidity also presents challenges. Many alternative investments cannot be easily sold, which can complicate plan operations and participant transactions.
Transparency may be limited as well. Compared to publicly traded securities, private investments often provide less insight into underlying holdings and valuation methods. Finally, the added complexity of these assets may increase litigation risk if outcomes fall short of expectations.
Final Thoughts
This article is intended for informational purposes only and should not be viewed as investment advice. Adding alternative assets to a 401(k) plan is a significant decision that requires careful analysis.
Plan sponsors should work closely with their financial advisors, legal counsel, and third-party administrators before making any changes. As guidance from the Department of Labor and other regulators continues to evolve, we will monitor developments and share updates as they become available. If you have any questions, please reach out to your WG advisor.
