On August 7, 2025, President Trump issued an executive order encouraging expanded access to private equity and other alternative investments in 401(k) plans. The Order directs the Department of Labor (DOL), in coordination with the Securities and Exchange Commission (SEC) and the Treasury, to facilitate greater availability of these asset classes to 401(k) investors. While the Order does not change ERISA’s substantive requirements, it signals a significant policy shift and opportunity for asset managers.
Five Immediate Action Items for Managers, according to Ropes & Gray LLP
1. Act Now, Don’t Wait for Further Guidance:
The Order is a call to action for rapid innovation. Managers should begin product development immediately to capitalize on the momentum, remaining flexible to adapt as further guidance emerges.
2. Assess and Build Capabilities:
Managers must evaluate their current capabilities and identify what needs to be developed to serve 401(k) investors, such as establishing or partnering with trust companies for collective investment trusts (CITs) and sourcing ongoing investment opportunities.
3. Address Liquidity and Valuation Challenges:
401(k) plans have unique liquidity needs. Managers must create products that can handle frequent participant transactions and provide consistent daily net asset value (NAV) reporting, especially when alternatives are included as a sleeve in target date funds (TDFs).
4. Leverage TDF Provider Relationships:
Asset managers should form or strengthen relationships with TDF providers or design products that can integrate into multiple TDFs, enabling broader exposure to alternatives for plan participants.
5. Prioritize Fiduciary Compliance:
All product structures must ensure ERISA fiduciary compliance at every level, supporting plan fiduciaries in making prudent and well-documented investment decisions.
Five Key Takeaways from the Executive Order
1. Affirmative Stance on Alternatives:
The Order reframes access to alternatives as an affirmative right for plan participants, urging fiduciaries to consider these options rather than avoid them due to novelty or perceived risk. It may also lead to rescinding prior guidance that discouraged alternatives.
2. Focus on Reducing Litigation Risk:
The Order acknowledges litigation risk as a barrier and instructs the DOL to prioritize actions that may curb ERISA litigation, aiming to make plan sponsors more comfortable with offering alternatives.
3. Neutral Approach to Asset Types:*
The Order is agnostic regarding types of alternative assets, allowing for a wide range of investments—private funds, real estate, cryptocurrencies (via actively managed vehicles), commodities, infrastructure, and lifetime income products—so long as fiduciary processes are followed.
4. Potential for Safe Harbors:
The DOL is directed to consider new safe harbors for offering alternatives, which could provide additional comfort to managers and fiduciaries, though managers are encouraged to move forward without waiting for these to materialize.
5. DOL in the Lead, with SEC and Treasury Support:
While the SEC and Treasury are to collaborate, the DOL will take the lead in regulatory guidance, potentially accelerating the process for bringing new alternative products to the 401(k) market.
The Order is expected to spur innovation and expand investment options in 401(k) plans, while providing a more supportive regulatory environment for plan sponsors and asset managers considering alternatives. It signals a shift toward broader acceptance of alternative assets in retirement plans, provided fiduciary standards are maintained.
Read the full article at Ropes & Gray LLP https://www.ropesgray.com/en/insights/alerts/2025/08/planning-to-take-advantage-of-executive-order-on-alternatives-in-401k
Disclaimer: This article is an analysis intended for informational purposes only and does not constitute investment advice.
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