What You Need to Know
- The Trump Administration has shifted away from Biden-era rules related to certain investments, like alternative asset investments, ESG, and cryptocurrency in 401(k) plans.
- Plan fiduciaries still need to proceed with caution.
Alternative Asset Investments in 401(k) Plans
On August 7, 2025, President Trump signed an Executive Order (EO) directing the Department of Labor (DOL) to reexamine guidance on fiduciary duties regarding alternative asset investments in 401(k) plans (and other defined contribution plans) governed by ERISA. This includes clarifying duties that a fiduciary owes plan participants when offering asset allocation funds containing investments in alternative assets, and which may include appropriate safe harbors. In addition, the DOL is tasked with consulting with the Securities and Exchange Commission (SEC), the Department of Treasury (“Treasury”) and other regulators, to determine whether parallel regulatory changes should be made in light of the EO. The DOL has already responded by rescinding its December 21, 2021 Supplemental Letter that cautioned against private equity in defined contribution-plan-designed investment alternatives.
This EO expands upon guidance from the first Trump Administration, which allowed the inclusion of certain private-market investments in managed funds. Although the Biden Administration did not reverse the guidance from the first Trump Administration, it expressed concerns about private-market investments in 401(k) plans, cautioning fiduciaries to consider the risks and benefits before including private-market investments in 401(k) plans.
The EO states that it intends for 401(k) plan participants to have access to the potential growth and diversification opportunities that are associated with alternative investments, and indicates that these investments already represent “an increasingly large portion” of public pension and defined benefit plans’ investment portfolios. These investments include private equity and private debt, real estate, actively managed investment vehicles that are investing in digital assets, commodities, infrastructure development projects, and lifetime income strategies, including longevity risk-sharing pools.
Critics of alternative asset investments in 401(k) plans argue that the complexity and lack of transparency, liquidity issues, valuation challenges, and high layered fees that significantly exceed traditional 401(k) investments, like mutual funds, pose risks to plan participants. In addition, over the years, there has been a significant rise in ERISA litigation targeting plan fiduciaries for excessive fees or perceived underperformance of a plan’s investment options. Though the EO specifically tasks the DOL to prioritize actions that may curb ERISA litigation that constrains fiduciaries’ abilities in deciding whether to offer these investments to its plan participants, it is unclear whether reduction in the risk of litigation is possible even with regulations since plan participants and beneficiaries have a right to bring lawsuits to enforce rights under ERISA.
Despite criticism, it is anticipated that as a result of the EO, we will see an increase in the amount of alternative assets allocated to target date funds or managed accounts, thus allowing more opportunities for plans to include these types of investments.
Takeaways for Plan Fiduciaries
Though the Trump Administration is tasking the DOL to loosen rules, plan fiduciaries interested in alternative assets as an investment offering should carefully monitor forthcoming guidance from the DOL, SEC and the Treasury. In addition, plan fiduciaries should consult with plan investment advisors, who can help select and monitor alternative investments, and evaluate investment strategy, fees, and liquidity, before adding these types of investments to their 401(k) plans.
ESG in the New Era. Out with the Old… Again
The Trump Administration has taken steps to reverse Biden-era rules that allowed plan fiduciaries to consider Environmental, Social, and Governance (ESG) factors (often used to assess a company’s sustainability and societal impact beyond just its financial performance) in its investment decisions, swinging the pendulum back to the first Trump Administration. While the Biden-era rule did not mandate that plan fiduciaries consider ESG factors, it allowed the consideration of ESG factors, if and when investments were financially equally strong. This reversed a rule under the first Trump Administration, which stated that plan fiduciaries could not consider any non-pecuniary factors, like ESG, when deciding between investment options.
On May 28, 2025, the DOL informed the Fifth Circuit Court of Appeals of its intention to end its defense of the ESG rule adopted under the Biden Administration. The DOL expressed its intent to engage in new rulemaking, though no details have been provided about the forthcoming rule. Thus, it remains to be seen whether the DOL will revert back to the prior pecuniary factors analysis that was the focus under the first Trump Administration or something more exclusionary.
Takeaway for Plan Fiduciaries
Plan fiduciaries should ensure that any decisions involving plan investments, investment managers and proxy voting are based on financial rationales and the result of a prudent process. To the extent any ESG factors remain under consideration, employers must consider the financial risks and benefits of such funds and confirm a pecuniary basis for the inclusion of these funds.
Cryptocurrency in 401(k) Plans
The DOL’s newest guidance, Compliance Assistance Release (CAR) No. 2025-01, formally rescinded Biden-era cryptocurrency guidance, CAR No. 2022-01, which cautioned “extreme care” before the addition of any cryptocurrency plan options to 401(k) plan lineups. The Biden Administration voiced concerns about extreme volatility, valuation issues, fraud, theft, and loss in investing cryptocurrency and other digital assets. While the Biden-era compliance did not preclude the ability of plan fiduciaries to add cryptocurrency as part of a plan’s investment line-up, it ultimately had a chilling effect on the inclusion of cryptocurrency in plans, with plan investments in cryptocurrency remaining low.
In contrast, CAR 2025-01, the Trump Administration has removed all reference to “extreme care” or “increased caution” and allows plan fiduciaries to exercise judgment in deciding whether to include cryptocurrency plans in 401(k) plans. The DOL now takes a more “neutral” stance towards cryptocurrency and allows plan fiduciaries to determine whether cryptocurrency or other types of assets are an appropriate investment for their particular plan participants.
Takeaways for Plan Fiduciaries
While the Trump Administration has seemingly opened the doors for adding cryptocurrency and digital assets in 401(k) plans, fiduciaries should continue to fulfill their duties of prudence, loyalty and diversification under ERISA before including, and when monitoring, any cryptocurrency and digital assets in the plan. Thus, as with any other investment option, plan fiduciaries should consult their investment advisors and review and discuss all relevant information about adding cryptocurrency and digital assets in the plan, and document such decision. Significant potential participant litigation risk still exists with adding such investments.
* Kenny Anagbogu, a Summer Associate (not admitted to the practice of law) in Epstein Becker Green’s New York City office, contributed to the preparation of this post.
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