Retirement Plan Advising State of play: Private assets in 401(k)s

In August 2025, President Trump signed an executive order (EO) directing agencies to facilitate access to “alternative assets” in retirement plans. These assets are defined broadly as private equity, private credit, real estate, infrastructure, commodities, digital assets and lifetime income.

As financial professionals prepare for the emergence of alternative assets in defined contribution plans, it’s important to know why this matters, where things stand now and what potential development may be on the horizon.

Why the EO matters

Everyday retirement plan investors have historically had little to no access to alternative assets such as private equity, despite these assets’ potential to provide diversification benefits. Consider that over 84% of U.S. companies with more than $100 million in revenue are private. That’s a sizable untapped opportunity.

Defined benefit plans in the U.S. have invested in private assets for decades, with meaningful allocations. Defined contribution plans may invest in these assets, but adoption has been low due to litigation risk, liquidity concerns and a limited product set of professionally managed solutions such as target date funds that include private market allocations.

Indeed, the EO specifically cites “burdensome lawsuits” and promises to “relieve the regulatory burdens and litigation risk that impede American workers’ retirement accounts.” As such, the Department of Labor (DOL) has been given 180 days to reassess guidance on fiduciary duty as it relates to alternative assets, including whether to establish safe harbors for private assets in 401(k)s. 

Where things stand now

Although the executive order does not carry legal weight, it has effectively signaled to the DOL and Securities and Exchange Commission (SEC) that this matter is a priority.

As a first step following the EO, the DOL withdrew guidance issued during the Biden administration that discouraged plans from offering target date funds with private equity exposure unless the plan sponsor had experience managing private equity. 

What to watch for

In a September news release, the DOL expressed its intention to “issue a notice of proposed rulemaking that clarifies the duties that a fiduciary owes to plan participants under [the Employee Retirement Income Security Act of 1974 (ERISA)] when deciding whether to include alternative assets in a defined contribution plan, including safe harbors.”

One potential route is asset-neutral regulation that treats public and private assets alike and focuses plan fiduciaries on fee-for-value rather than absolute fees. Such regulation would allow fiduciaries to access the diversification benefits of alternative assets with less litigation risk, provided they are able to justify appropriate value in relation to fees.

Because liquidity is important in defined contribution plans, it’s unlikely plan menus will offer direct investment in illiquid private assets. Rather, private assets may make sense through asset allocation funds like a target date fund, where a professional investment manager oversees private asset investments and manages liquidity.

Where plans are comfortable with private asset exposure, allocations to private assets in target date funds should be thoughtful and measured. It is also important that the total allocation to private assets be consistent with liquidity in all market environments.

Start preparing

As new investment options emerge in the retirement plan market, fiduciaries should evaluate them as they always have, by assessing risk, return and diversification characteristics. That may include liquidity needed to support redemptions and reporting transparency. For most fiduciaries, the expectation is that little would change beyond the litigation risk, as the key principles influencing fiduciary investment decisions would remain unchanged.

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