On August 7, 2025, President Trump signed an Executive Order to open the door for everyday 401(k) savers to access the kinds of alternative investments that large pensions and high-net-worth investors have long enjoyed, such as private credit, private equity and infrastructure. The order directed the U.S. Department of Labor (DOL) and the U.S. Securities and Exchange Commission (SEC) to facilitate access to alternative assets for defined contribution and instructed the DOL to clarify what a fiduciary should consider when deciding whether to make available to plan participants an asset allocation fund that includes investments in alternative assets. The order focused on providing alternatives through an asset allocation fund and did not envision offering dedicated alternative asset funds in an investment menu.
The DOL responded this spring. In March 2026, it issued a proposed regulation confirming that there is no per se prohibition on including alternative investments in defined contribution (DC) plans, and that this holds true even when those assets sit inside a Qualified Default Investment Alternative (QDIA) such as a target date fund. In essence, the DOL has acknowledged that alternative investments can play a legitimate role in retirement plans when fiduciaries follow a sound process. The significance is as much about tone as substance: After years in which DOL suggested a cautious approach to alternatives, the regulatory environment is beginning to move from hesitant to supportive.
Where are we in the timeline of the DOL alternatives rule?
Although some may refer to it as the DOL alternatives rule, the guidance actually would apply to all investment options, even those that do not include alternatives. The proposal issued in March 2026 carried a sixty-day comment period, which closed on June 1, 2026, and drew a large number of comments from the asset management industry. The Department is now working through the feedback it received.
We don’t expect a re-proposal. The next milestone is the final rule, which the DOL will issue after it digests the comments. There is no definitive timeframe, but we expect to see the final rule by the end of 2026 or early 2027.
What does the proposed DOL alternatives rule say?
While the rule applies generally to all investment options, it focuses specifically on alternative investments in asset allocation funds (such as target date funds) or managed accounts. At its core, the guidance accomplishes two things. First, it is deliberately asset-neutral. It does not favor active over passive, or public over private, and it rejects the notion that fiduciary prudence requires defaulting to the lowest-cost option. That represents a meaningful shift in emphasis.
Second, it introduces a process that plan fiduciaries can follow when considering offering an investment option. Under this framework, the Department will treat fiduciaries as having acted prudently if they can demonstrate that they appropriately considered six specific factors when evaluating and selecting investment options, including those that contain alternatives. The framework does not require fiduciaries to reach any particular conclusion. It is about the quality of the process, not the outcome. The guidance is framed as a safe harbor but it’s not a checkbox entirely protecting plan fiduciaries from potential liability. Instead, its significance is primarily in the message it sends to courts that alternative investments may be appropriate holdings in an asset allocation fund.
The six factors of the proposed rule
- Expected risk-adjusted performance. Does the inclusion of the investment option improve the expected risk-return profile of the portfolio?
- Fees. Are the fees reasonable relative to the expected benefits, and has the fiduciary evaluated the total cost to participants?
- Liquidity. Are there sufficient provisions to meet participant liquidity needs, including daily transactions, distributions and plan-level events?
- Valuation. Are the investment option’s assets subject to a robust, independent valuation process that supports fair daily pricing?
- Benchmarking. Can the performance of the fund be measured and monitored against appropriate benchmarks?
- Complexity. Has the fiduciary evaluated whether the complexity of the investment is manageable within the plan’s governance framework?
How might the proposed DOL alternatives rule impact target date funds?
The overall direction of travel is a tailwind for alternative investments in target date strategies. The regulatory environment has moved from ambiguous to supportive, and there is now a clear, documented process a fiduciary can follow to establish prudence. That said, two specific elements of the proposal could shape product design and the way fees are communicated.
A. The first is liquidity considerations, particularly for collective investment trusts (CIT), which are not subject to the 40 Act’s liquidity risk management rules. The proposal offers an example in which a fiduciary is deemed prudent if the CIT operates a liquidity risk management program substantially similar to the one already required of open-end mutual funds. In practice, that framework would impose a 15% cap on illiquid investments. As drawn, the cap would apply at each individual vintage. This imposes a direct constraint on how much alternatives exposure a target date product can ultimately have — including for younger participants with longer time horizons for whom larger alternatives exposure might be appropriate. This is precisely why the final rule matters so much for the eventual design.
B. The second is the treatment of "carry," the performance fees charged by many alternative investment managers. Rather than passing those fees directly to participants, the proposal appears to favor a single all-in fee charged that would absorb “carry.” The goal is to make fees more predictable and easier for participants to understand by shifting the complexity and uncertainty of performance fees to the provider. A potential consequence is that providers may need to build those costs into their fee structures, which could result in higher or wider disclosed fee ranges.
What does the proposed DOL alternatives rule mean for litigation risk?
The guidance improves the legal landscape, but it does not create an absolute shield. What it does is establish a clear framework that, if followed, puts the plan fiduciary in a stronger position than one who simply adds alternative investments without a clear process. We expect the proposal to give many plan sponsors the comfort to move forward, though those with an especially conservative litigation posture or a higher litigation profile may still prefer to wait for case law to develop.
Will the proposed DOL alternatives rule survive a change in Administration?
A change in Administration or future DOL leadership is always a consideration, but it is important to separate regulatory uncertainty from the underlying investment case. Alternative investments have never been prohibited in DC plans, and the proposal does not create a new right to invest in them. Rather, it clarifies the fiduciary process for evaluating investments that include alternatives exposure and explicitly confirms there is no per se prohibition on their use.
Where do we see things heading?
Ultimately, the significance of the proposal lies less in any single provision than in the signal it sends. After years of hesitation, the DOL has articulated a path for fiduciaries to evaluate alternative investments within DC plans. The final rule will determine how much flexibility plan sponsors and target date providers ultimately have, but the broader trajectory appears clear: alternative investments are increasingly being viewed not as an exception requiring special justification, but as one of many tools fiduciaries may consider when seeking better outcomes for retirement savers.
