Alternative Assets in Retirement Plans: Federal Rule and Lawsuit Risks

The U.S. Department of Labor proposed a regulation on March 30, 2026, intended to expand the inclusion of alternative investments within 401(k) plans. The rule seeks to provide a broader range of retirement savers with access to diversification opportunities that have historically been available primarily to wealthy investors and participants in public pension plans.

According to a Federal Register notice published on March 31, 2026, the proposed regulation clarifies the fiduciary duty of prudence under the Employee Retirement Income Security Act of 1974 (ERISA). The rule establishes a safe harbor for fiduciaries when selecting designated investment alternatives for participant-directed individual account plans, specifically for asset allocation funds that include alternative assets.

Expanding Access to Alternative Assets

The regulatory proposal follows an Executive Order issued on August 7, 2025, titled Democratizing Access to Alternative Assets for 401(K) Investors. The order noted that while more than 90 million Americans participate in employer-sponsored defined-contribution plans, the vast majority lack the opportunity to invest in alternative assets, either directly or through their plans.

Burdensome lawsuits that seek to challenge reasonable decisions by loyal, regulated fiduciaries, and stifling Department of Labor guidance issued since my first term, however, have denied millions of Americans opportunities to benefit from investment in alternative assets.

Executive Order, August 7, 2025

The August 7, 2025, order highlighted that alternative assets already constitute a significant portion of portfolios for public pensions and defined-benefit retirement plans, where they are used to seek competitive returns, and diversification.

Litigation Risks and Fiduciary Duties

Despite the proposed safe harbor, some employers remain cautious about adding alternative assets, such as private equity or cryptocurrency, to 401(k) offerings. This hesitation is driven by the risk of lawsuits challenging the decisions of plan fiduciaries.

To mitigate these risks, fiduciaries are required to conduct rigorous vetting of private offerings. This process includes evaluating the capabilities, experience, and effectiveness of investment managers in overseeing alternative asset investments to ensure they are acting safely and prudently.

Legal analysis suggests that by adhering to specific management practices, plan fiduciaries may better navigate the litigation risks associated with private equity and other alternative assets while attempting to enhance returns for plan participants.

Regulatory Framework

The March 30, 2026, proposal from the Department of Labor outlines the specific steps 401(k) plan managers should take when considering alternative assets as a component of their investment strategy.

The focus of the proposed rule is to reduce the legal uncertainty that has previously deterred employers from offering these investment options. By providing a clearer framework for what constitutes a prudent selection of asset allocation funds, the Department of Labor aims to encourage the proliferation of strategies that allocate a portion of participant interests to alternative assets, mirroring the approach used by institutional investors.