401k Alternative Investments: DOL Proposal & Fiduciary Guide
A quiet revolution is under way in employer-sponsored retirement plans. Two federal actions — one from the Department of Labor’s Employee Benefits Security Administration (EBSA) and one from the White House — are converging to bring 401k alternative investments such as private equity, private credit, real assets, and digital assets into the default investment menus of 401(k) and similar participant-directed plans. For plan sponsors, this is not a green light to add whatever the recordkeeper markets. It is a new documentation problem.
At SW Accounting & Consulting Corp, we work with plan sponsors — small and mid-sized employers, professional practices, and family businesses — that must sign the Form 5500 and answer to participants. This article walks through what the proposal and the executive order actually say, what ERISA still requires, and what a fiduciary committee should be documenting right now.
What did the DOL actually propose about 401k alternative investments? 📄
EBSA’s proposed rule would clarify the ERISA §404(a) fiduciary process a plan sponsor must follow when adding an investment option that includes alternative assets to a participant-directed plan menu.
On March 31, 2026 the Department of Labor published a Notice of Proposed Rulemaking titled “Fiduciary Duties in Selecting Designated Investment Alternatives” in the Federal Register (docket 2026-06178). The corresponding EBSA news release is posted on the Department of Labor’s EBSA site.
The proposal focuses on designated investment alternatives (DIAs) — the individual investment options a plan makes available to participants who direct their own accounts. It does not repeal ERISA. Instead, it lays out a framework for how a prudent fiduciary should evaluate a DIA that includes exposure to alternative assets such as private equity, private credit, real assets, or digital assets embedded in a diversified fund vehicle (for example, a professionally managed target-date fund or a collective investment trust).
Two points matter for practitioners. First, the rule is proposed: it is subject to a public comment period, revisions, and a final rule that may look different. Second, ERISA §404(a)(1)’s prudent-expert standard and the duty to diversify continue to apply — nothing in a proposed regulation supplants a statute.
How does the White House executive order fit in? 🏛️
The August 7, 2025 executive order directs Treasury, Labor, and the SEC to identify regulatory barriers that limit participant-directed retirement plans from offering alternative asset exposure.
The presidential action titled “Democratizing Access to Alternative Assets for 401(k) Investors” instructs federal agencies to review guidance, safe harbors, and enforcement posture affecting alternative assets in defined-contribution plans. It sets the policy backdrop for the DOL rulemaking above and for future guidance from the Treasury and the SEC.
An executive order does not amend ERISA. It directs the executive branch to move — and the EBSA proposal is one visible product of that direction. Plan sponsors should read the two together: the executive order signals where federal policy is going; the proposed rule tells fiduciaries how to document the process if they get there.
What does ERISA still require from plan fiduciaries? ⚖️
Section 404(a)(1) of ERISA requires plan fiduciaries to act solely in participants’ interest, with the care of a prudent expert, and to diversify plan investments — and personal liability for breaches is unchanged.
Whatever the DOL finalizes, the statute controls. ERISA §404(a)(1) imposes four core duties on a fiduciary who selects investment options for a participant-directed plan:
- Exclusive purpose: act solely in the interest of participants and beneficiaries, and only for the purpose of providing benefits and defraying reasonable plan expenses.
- Prudent expert: use the care, skill, prudence, and diligence a prudent person familiar with such matters would use — measured against professional practice, not the fiduciary’s own knowledge.
- Diversify: diversify plan investments so as to minimize the risk of large losses, unless it is clearly prudent not to.
- Follow the plan document: act in accordance with the plan’s governing instrument insofar as it is consistent with ERISA.
A proposed regulation cannot lower these standards. A fiduciary who adds a DIA containing alternative assets simply because policy is friendlier — without an evaluation grounded in these duties — is exposed regardless of what the final rule says.
What should plan sponsors document before adding 401k alternative investments? ✅
A prudent process starts with an investment policy statement, expert diligence, participant-level analysis, and formal committee minutes that record the decision and its basis.
Concrete steps for a fiduciary committee weighing an alternative-asset DIA:
- Update the investment policy statement (IPS). The IPS should describe what alternative exposure the plan will consider, in what vehicles, at what allocation limits, and against what benchmarks.
- Retain an independent expert if the committee lacks the skill. The prudent-expert standard is measured against outside expertise. If no committee member has evaluated private-market funds professionally, hire someone who has.
- Evaluate the DIA at the participant level. Consider fees, liquidity, redemption gates, valuation methodology, transparency, custody, expected default use (for example, embedded in a target-date fund), and how the DIA fits in a diversified default investment.
- Compare to reasonable alternatives. Document the comparison to conventional options — not because conventional is required, but because ERISA prudence is a process, and a process without alternatives considered is a weak process.
- Record the decision in minutes. Committee minutes should show who voted, what materials were reviewed, what questions were asked, and what conditions the committee attached (for example, quarterly monitoring reports).
- Update participant disclosures. Participant-facing fee and investment disclosures under DOL regulations must reflect the DIA’s fees, risks, and liquidity constraints.
What is at stake for plan participants? 👥
Alternative assets can add diversification but bring liquidity constraints, valuation uncertainty, and higher fees — features participants may not encounter in a traditional mutual fund.
Alternative-asset funds typically differ from a plain-vanilla stock or bond mutual fund in several ways. Redemptions can be limited to periodic windows and are sometimes suspended or “gated” during stress. Valuations often rely on models rather than daily market prices. Fee structures may include management fees and performance fees embedded in fund-of-fund vehicles. A participant who leaves the employer or takes a hardship withdrawal from a diversified fund holding an illiquid sleeve may face timing and pricing outcomes that a fiduciary needs to have already thought through.
None of this makes alternatives inappropriate; it means the fiduciary evaluation must be specific to how the DIA is offered inside the plan.
Comparing the pieces of federal action 📊
| Action | Issuer | Legal effect |
|---|---|---|
| EO on Democratizing Access to Alternative Assets for 401(k) Investors | White House | Directs federal agencies; does not amend ERISA |
| Proposed rule: Fiduciary Duties in Selecting Designated Investment Alternatives | DOL / EBSA | Proposed regulation; not yet final; subject to comment and revision |
| ERISA §404(a)(1) | Congress (statute) | Binding fiduciary duties; personal liability for breach |
| Participant fee & investment disclosure rules | DOL regulations | Require disclosure of DIA fees, risks, and terms to participants |
📌 Key Takeaways
- DOL has proposed — not finalized — a rule on fiduciary duties in selecting DIAs that include alternative assets.
- The White House executive order directs agencies to ease access to alternative assets in 401(k) plans.
- ERISA §404(a)(1) still governs; a proposal cannot lower the prudent-expert standard.
- Adding a DIA with alternatives requires an IPS update, independent expertise, participant-level analysis, and detailed committee minutes.
Frequently Asked Questions ❓
Q. Has the DOL final-ruled that 401(k) plans can offer private equity?
No. As of publication, the Department of Labor has published a proposed rule on fiduciary duties in selecting designated investment alternatives. A proposed rule is not law; it is subject to public comment, revision, and a final rule, and it does not override ERISA.
Q. Does the executive order require 401(k) plans to add alternative investments?
No. An executive order directs federal agencies to review and act, but it does not require any private plan to add any specific investment option. The fiduciary decision belongs to the plan sponsor and its committee.
Q. What is a designated investment alternative (DIA)?
A DIA is an investment option a plan makes available to participants who direct their own accounts. It can be a mutual fund, collective investment trust, or other diversified vehicle. DOL disclosure rules require plans to provide participants with specified information about each DIA.
Q. If we follow the proposed rule, are we safe from lawsuits?
Not automatically. A proposed rule is not a safe harbor. Even after a final rule, fiduciary liability under ERISA §404(a)(1) turns on the actual process the committee used and how well it was documented.
Q. Are alternative assets suitable for small-plan participants?
It depends on how the exposure is delivered. A modest sleeve of alternative assets inside a diversified target-date fund is a very different question from a standalone private-fund option. The fiduciary evaluation must reflect the actual vehicle, its fees, its liquidity terms, and how it will be defaulted to participants.
Q. Where can I read the primary sources?
Start with the White House presidential action on democratizing access to alternative assets for 401(k) investors, the DOL’s Federal Register proposal “Fiduciary Duties in Selecting Designated Investment Alternatives”, and the ERISA fiduciary framework maintained by the Employee Benefits Security Administration.
If you sit on a retirement-plan committee, the right response to this policy shift is not to add or reject alternatives on principle — it is to strengthen your fiduciary process. To review your plan’s investment policy statement, committee minutes, and DIA documentation before you consider any new option, contact SW Accounting & Consulting Corp. Primary sources: the Department of Labor EBSA, the Federal Register proposed rule, and the White House presidential action.
