I. Introduction
On August 7, 2025, the Trump Administration issued a long-awaited executive order (the "Executive Order") to encourage sponsors of 401(k) and other participant-directed defined-contribution plans that are governed by the Employee Retirement Income Security Act of 1974, as amended ("ERISA") (collectively, "DC plans") to consider offering access to alternative investments, such as private equity, private credit, real estate, funds investing in digital assets, commodities, project financing, and lifetime income investments.1 Specifically, the Executive Order directs the Department of Labor (the "DOL") to take the following steps:
- By February 3, 2026, reexamine the DOL's guidance on a fiduciary's duties regarding alternative asset investments in DC plans.
- By February 3, 2026, clarify the DOL's position on alternative assets and the appropriate fiduciary process associated with offering asset allocation funds containing investments in alternative assets. Relatedly, the DOL must prioritize actions that "may curb ERISA litigation that constrains fiduciaries' ability to apply their best judgment in offering opportunities to relevant plan participants."
- Consult with the Secretary of the Treasury, the Securities and Exchange Commission (the "SEC") and other federal regulators to determine whether parallel regulatory changes should be made by those agencies to give effect to the purpose of the Executive Order.
The Executive Order also directs the SEC to facilitate access to alternative assets for participant-directed defined-contribution retirement savings plans by revising applicable regulations and guidance.
While the ultimate impact of the Executive Order will depend on the DOL and the SEC's specific actions to implement it, the Order should add momentum to efforts to offer DC plan participants access to private market investment strategies.
II. ERISA Considerations
With few exceptions not applicable here, ERISA does not limit the types of investment assets available to covered retirement plans, including DC plans. Thus, DC plan fiduciaries may include alternative assets in the plan's designated investment alternatives, provided they act prudently, in the best interests of the plan's participants and beneficiaries and otherwise in accordance with ERISA. Some DC plans—largely those sponsored by sophisticated employers or managed by investment professionals—already offer exposure to some investment strategies, including through target date funds and other commonly-used pooled vehicles. But many others do not, due to concerns about complex or opaque structures, valuation challenges, illiquidity, relatively high fees, and volatility, scams and fraud (in crypto in particular), plus the attendant litigation risk if things go wrong, among others.
DOL's Prior Guidance on Private Equity in 401(k)
Plans
On June 3, 2020, the DOL under the first Trump
Administration issued an Information Letter stating that a DC plan
fiduciary would not violate ERISA's fiduciary duties solely
because it offers a professionally managed asset allocation fund
with a private equity component as a designated investment
alternative. The Information Letter outlined a framework for
evaluating such options and was widely interpreted at the time as
signaling a green light for the limited use of alternative assets
in DC plans, at least as far as DOL enforcement was concerned. But,
by its nature, the Information Letter did not create a safe harbor
or otherwise offer legal protection from private litigation.
In December 2021, the DOL under the Biden Administration issued a Supplemental Statement that substantially narrowed the import of the 2020 Information Letter. The Supplemental Statement asserted that the Information Letter "did not endorse or recommend" the inclusion of private equity strategies in DC plans. The Statement also cautioned against the application of the 2020 Information Letter outside of the limited context of fiduciaries who offer both defined benefit and defined contribution plans, who may already invest in private equity and who are simply considering whether to incorporate similar strategies into DC plans. The Statement expressed skepticism that plan-level fiduciaries, particularly those overseeing small DC plans, would possess the necessary expertise to evaluate private equity investments prudently. The Statement also reiterated that ERISA Section 404(c) does not relieve fiduciaries of their duties of prudence and loyalty when selecting and monitoring investment options or service providers.
DOL's Prior Guidance on Cryptocurrency in 401(k)
Plans
In March 2022, the DOL under the Biden
Administration issued a subregulatory guidance that cautioned
401(k) plan fiduciaries to exercise "extreme care" when
including a cryptocurrency option on a 401(k) plan's investment
menu option. The DOL highlighted investment-related risks such as
volatility, regulatory uncertainty and cybersecurity concerns. The
DOL even indicated that plan sponsors have a duty to protect plan
participants from exposure to crypto investments inside of a
brokerage widow.
In May 2025, the DOL rescinded its prior guidance, thereby ceasing to discourage plan sponsors and other fiduciaries from including cryptocurrency in their plans' investment menu options. Instead, under the new subregulatory guidance, the DOL expressly took the view that cryptocurrencies should be evaluated under the same fiduciary standards (e.g., prudence and loyalty) that apply to any other asset class.
III. How the Demand (and Supply) of Retail Private Market Solutions and Other Alternative Assets has Increased
Even without defined contribution plan access, there has been explosive growth in the market for funds which offer retail investors access to private market and other alternative asset strategies. As of June 30, 2025, there were approximately:
- 96 unlisted closed-end funds registered under the Investment Company Act of 1940 (the "1940 Act") which offered access to private credit strategies with a total of just under $96 billion in assets under management;
- 51 unlisted closed-end funds registered under the 1940 Act which offered access to private equity or venture capital strategies with a total of about $51 billion in assets under management; and
- 38 unlisted closed-end funds registered under the 1940 Act
which offered access to real estate / real asset strategies with a
total of about $29 billion in assets under
management.2
- There also were approximately 70 real estate investment trusts ("REITs") that are registered with the SEC under the Securities Act of 1933, as amended (the "Securities Act") but not listed on a stock exchange. As of that date, such non-traded REITs had a total of just under $90 billion in assets under management.3
In addition, as of March 2025 there were approximately 90 business development companies ("BDCs"; a form of closed-end investment company registered under the 1940 Act that invests in developing companies and is subject to a different, often more flexible, set of requirements under the 1940 Act) which primarily offer access to various private credit strategies. 51 of those BDCs were publicly listed with a total of approximately $112 billion in assets under management, while 39 BDCs were unlisted with a total of approximately $127 billion in assets under management.4
Finally, since the SEC finally permitted the listing of exchange-traded products ("ETPs") which hold cryptocurrency in spot form in January 2024, a number of such ETPs have launched: most prominently, as of August 6, 2025 there were 12 such ETPs offering access to bitcoin which had amassed a total of almost $151 billion in assets under management.5
If the Executive Order and subsequent regulatory changes increases the adoption of such strategies in retirement plans, the demand for such funds could increase dramatically.
IV. What Comes Next?
DOL
There are a number of plausible possibilities for
subsequent DOL actions:
- The DOL could issue a new Information Letter similar to the 2020 version or simply rescind the 2021 Supplemental Statement. As with the 2020 Information Letter, however, such action would merely provide comfort from a DOL enforcement perspective, and not legal protection from private litigation. Further, even such enforcement comfort would be subject to reversal by future administrations.
- The DOL could issue a formal advisory opinion containing the current Administration's view. While such opinions are generally viewed by the regulated community with greater weight than less formal guidance, they have no legal effect in private litigation.
- The DOL could issue a class exemption providing legal relief from ERISA's prohibited transaction rules, including permitting DC plan fiduciaries to include proprietary products in their plans. By its nature, however, such relief would not extend to other requirements under ERISA, such as the duties of loyalty and prudence.
- The DOL could programmatically file amicus briefs consistent with the Executive Order. Such briefs could, for example, urge courts to view alternative investments without any special skepticism, notwithstanding any additional or enhanced risks.
- A more ambitious approach would involve promulgating a safe harbor through a new regulation. ERISA contains no express authority for such a regulation, however. Thus, any such regulation would seem ripe for challenge, particularly in light of the Supreme Court's decision in Loper Bright, which held that federal courts do not defer to agency interpretations of the law.
Whether the Executive Order will spur Congress to effect conforming statutory changes to ERISA is unknown.
In light of the foregoing, plan fiduciaries considering offering exposure to private investments in DC plans will need to factor in the risk of both private litigation and future changes in enforcement positions. Fiduciaries deciding to offer such exposure should ensure that they have—or hire—the expertise necessary to prudently evaluate private investments, that they engage in a prudent evaluation process and that they appropriately document such process and the conclusions reached. Among other things, that process should consider mitigating liquidity and overall risk through the use of pooled funds that offer daily or other high levels of liquidity backed by limited allocations to private assets and substantial allocations to diverse, highly liquid assets.
SEC
With respect to subsequent actions on the part of the
SEC, the Executive Order stipulates that the SEC may propose
"revisions to existing SEC regulations and guidance relating
to accredited investor and qualified purchaser status." To
accomplish this, the SEC could propose and adopt amendments to
Regulation D under the Securities Act and Rule 2a51-1 under the
1940 Act to provide for classifying retirement plan investors as
"accredited investors" and "qualified
purchasers," respectively, under certain defined
circumstances. Depending on the scope of any such amendments, they
could further expand the pool of investors eligible to be offered
private market strategies through retirement plans.
Further, in anticipation of the Executive Order, SEC Chair Paul Atkins stated in an interview that the SEC would work with the DOL to "develop good guardrails for people" to offer registered funds for retail investors in retirement plans and noted that, in light of the issues such funds necessarily face regarding valuation, liquidity and fees, it was important for individual investors to rely on fiduciaries before investing in such funds through retirement plans.6 It is unclear whether any such specific requirements may be incorporated into any SEC rule changes regarding the definition of "accredited investors" or "qualified purchasers," or whether they may instead be included in standards issued by the DOL.
V. Join Goodwin in New York on September 30, 2025, for More on These Developments
In addition to any further client alerts to follow as the SEC and DOL take action as directed in the Executive Order, Goodwin is hosting a client event at our New York offices on September 30, 2025 titled "The Retail Private Markets Revolution: A Guide for Private Fund Managers". The program will feature extensive discussion of the Executive Order, any subsequent SEC and DOL actions and the ramifications for the availability of private market strategies in retirement plans. We hope you will be able to join us!
Footnotes
1 The Executive Order defines the term "alternative assets" as follows:
(i) private market
investments, including direct and indirect interests in equity,
debt, or other financial instruments that are not traded on public
exchanges, including those where the managers of such investments,
if applicable, seek to take an active role in the management of
such companies;
(ii) direct and indirect interests in real estate, including debt
instruments secured by direct or indirect interests in real
estate;
(iii) holdings in actively managed investment vehicles that are
investing in digital assets;
(iv) direct and indirect investments in commodities;
(v) direct and indirect interests in projects financing
infrastructure development; and
(vi) lifetime income investment strategies including longevity
risk-sharing pools.
2 Source: XA Investments' Non-Listed CEF Q2 2025 Market Update.
3 Source: The Stanger Report – Q2 2025 Non-Listed REITs + Other Alts Edition
4 Sources: "BDC Universe" page at cefdata.com, "Non-Traded Perpetuals Take Control of the BDC Market, But Deployment Issues Continue" by Stephen L. Nesbitt of Cliffwater (May 27, 2025, https://www.cliffwater.com/ResourceArticle/nontraded-perpetuals-take-control-of-the-bdc-market-but-deployment-issues-continue)
5 Source: BiTBO's "US Bitcoin ETF Tracker and AUM" page: https://bitbo.io/treasuries/us-etfs/
6 Interview with CNBC on July 21, 2025: https://www.cnbc.com/2025/07/21/cnbc-excerpts-sec-chair-paul-atkins-speaks-with-cnbcs-squawk-box-today.html
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
