The U.S. Department of Labor (DOL) has proposed a new rule to clarify the steps employers should take when deciding whether to include investments that hold alternative assets in their 401(k) plans. Alternative assets include private equity, private credit, digital assets, and other investments typically reserved for high-net-worth and institutional investors, such as college endowments and traditional pension plans.
The proposal does not directly encourage employers to add these potentially high-risk investment vehicles to plans. Rather, it explains the steps plan decision-makers — also known as fiduciaries — should take in evaluating investment funds that contain them. The goal is to give fiduciaries clearer guidance under applicable federal law, the Employee Retirement Income Security Act (ERISA).
“While managers of defined contribution plans have always had the authority to consider alternative assets, historically, almost none have done so,” the Department said.1 The reason, according to industry insiders, is the fear of lawsuits triggered by potential losses associated with these asset classes.2
The context
In 2022, under President Biden, the DOL issued a Compliance Assistance Release specifically about cryptocurrencies and other digital assets, cautioning fiduciaries to “exercise extreme care” before adding these alternative assets to a 401(k)’s investment line-up. The release detailed the “prudence and loyalty obligations” fiduciaries have in acting on behalf of plan participants, describing these duties as the “highest known to the law.” The release then reminded fiduciaries that they can be held personally liable for losses resulting from a breach of those duties.3
In May 2025, the Trump Administration rescinded that release, stating, “The standard of ‘extreme care’ is not found in ERISA, and differs from ordinary fiduciary principles.”4 In August of that same year, the president issued an executive order giving the DOL 180 days to clarify the department’s position on alternative assets and the appropriate fiduciary process for selecting funds that contain them, and to propose rules, regulations, or guidance that clarify a fiduciary’s duties in this arena. The DOL’s current proposal is the result of that executive order.5
The proposed rule
Put simply, the proposed rule explains the process fiduciaries must follow before selecting a fund that includes alternative assets. It cites six factors that should be considered: performance, fees, liquidity, valuation, performance benchmarks, and complexity.6 In effect, the DOL is trying to help employers, plan advisors, and others who manage the plan understand and document the due-diligence process, while offering them a “safe harbor,” or a certain level of protection in the event of litigation.7
Backers and detractors
Supporters argue that broader access to alternative asset classes could help workers diversify their retirement savings and participate in parts of the market that historically have been available only to institutional and so-called “accredited” investors — those permitted by the SEC to invest in unregistered, high-risk securities due to their wealth, income, or financial sophistication. According to the Securities Industry and Financial Markets Association, “Policy changes to expand access to private market investments could serve to improve diversification, democratize access, and offer more investment choices to the benefit of everyday retirement savers.”8
In a recent Wall Street Journal column, former director of the U.S. Pension Guaranty Corporation Charles E.F. Millard argued that allowing alternatives in 401(k)s, especially when paired with lifetime-income products (which were also addressed in the proposed rule), could make such plans function more like traditional pensions. He cited a Georgetown study finding that “modest use of alternative asset classes in a diversified target date fund has the potential to improve a participant’s retirement income.”9
Still, critics raise several concerns. They note that alternative investments tend to experience more extreme volatility than traditional 401(k) investments and are often less liquid, harder to value, and more expensive as well. The combination of higher volatility and less liquidity means that they could be difficult to sell in a market downturn. Funds that include private assets typically carry higher fees, which affect net returns.10 In addition, recent headlines warning of strain in private credit markets — just one type of alternative asset — highlight the unusual level and types of risk these investments could bring to a retirement savings plan.11
Finally, the Private Equity Stakeholder Project, a consumer watchdog group, criticized the safe harbor specifically, noting it could “limit the ability of consumers to sue if private equity managers or 401(k) managers or providers make recommendations that are contrary to their fiduciary duty to retirement savers.” Lending credibility to this fear, industry observers expect a reduction in lawsuits over time.12
The outlook
Despite the safe harbor protection, adoption of these investments may still be slow. Although the proposal offers more guidance, it leaves the core decision — whether the investments are appropriate for a particular workforce, at a reasonable cost, and in a form employees can understand — with employers and their advisors. Many may decide that the administrative burden, education challenge, and litigation risk remain too high.
The DOL is accepting public comments on the proposed rule through June 1, 2026.
Diversification and asset allocation are strategies used to help manage investment risk; they do not guarantee a profit or protect against investment loss.
All investing involves risk, including the possible loss of principal, and there is no guarantee that any investment strategy will be successful.
Each alternative asset type involves its own unique risks and may not be suitable for all investors. Because of the complexities of these various assets, it would be wise to seek guidance if you want to include alternative assets in a portfolio.
The principal value of a target date fund is not guaranteed at any time, including at the target date. There is no guarantee that a target date fund will meet its stated objectives. The return and principal value of target date funds fluctuates with changes in market conditions. Shares, when sold, may be worth more or less than their original costs.
Funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.
1, 6) U.S. Department of Labor, March 30, 2026
2, 7, 14) PLANSPONSOR, March 30, 2026
3) U.S. Department of Labor, March 10, 2022
4) U.S. Department of Labor, May 28, 2025
5) The White House, August 7, 2025
8) ThinkAdvisor, March 30, 2026
9) The Wall Street Journal, April 2, 2026
10) CNBC, March 30, 2026
11) The Wall Street Journal, March 30, 2026
12) 401(k) Specialist, March 30, 2026
Prepared by Broadridge Advisor Solutions. © 2026 Broadridge Financial Services, Inc.