US Department of Labor Proposes Rule for Easier 401(k) Plans to Include Alternative Assets - Tekedia

The U.S. Department of Labor proposed a rule to make it significantly easier for 401(k) plans to include alternative assets such as cryptocurrencies, private equity, real estate, private credit, infrastructure, commodities, and related vehicles.

The regulation, 'Fiduciary Duties in Selecting Designated Investment Alternatives,' creates process-based safe harbors under ERISA and lets fiduciaries select and document investment options if they follow a prudent, objective, asset-neutral evaluation that includes performance and risk‑adjusted returns.

The rule aims to reduce regulatory burdens and litigation risk, implements President Trump’s executive order to democratize access to alternative assets, follows the DOL’s rescission of prior Biden‑era warnings, and takes a neutral stance on endorsing specific assets.

It affects participant-directed defined contribution plans (e.g., 401(k)s) covering about 90–100 million Americans; exposure to alternatives could come via target‑date funds, asset‑allocation vehicles, or direct options and may broaden diversification and access.

Proponents say it could improve long‑term returns and democratize alternatives; critics warn of higher fees, lower liquidity, valuation and complexity challenges, and volatility (especially for crypto); widespread adoption depends on plan sponsors, record‑keepers, custodians, and operational, educational, and risk‑management factors.