Trump Executive Order Opens 401(k) Plans to Private Equity, Crypto

President Donald Trump on Thursday, Aug. 7, signed an executive order that formalizes his plan to expand American workers’ 401(k) investment options by allowing alternative assets such as private equity, cryptocurrencies and real estate to be used within these retirement accounts.

The order, titled “Democratizing Access to Alternative Assets for 401(k) Investors”:

• Calls for the Department of Labor (DOL) and the Securities and Exchange Commission (SEC) to issue guidance to employers about providing access to these alternative investments in their retirement account offerings;
• Orders Labor Secretary Lori Chavez-DeRemer to reexamine the guidance on fiduciary duties within the Employee Retirement Income Security Act of 1974 (ERISA) regarding alternative asset investments; and,
• Directs Chavez-DeRemer to work with Treasury Secretary Scott Bessent and the SEC to determine what regulatory changes can be made.

Given these requirements, experts don’t expect any substantive changes to occur until 2026, at the earliest.

Once new rules are drafted, the employer as plan sponsor of a workplace plan will need to conduct its own due diligence about the new investment offerings.

“While more than 90 million Americans participate in employer-sponsored defined contribution plans, the vast majority of these investors do not have the opportunity to participate, either directly or through their retirement plans, in the potential growth and diversification opportunities associated with alternative asset investments,” stated Trump in the executive order. “My administration will relieve the regulatory burdens and litigation risk that impede American workers’ retirement accounts from achieving the competitive returns and asset diversification necessary to secure a dignified, comfortable retirement.” 

More Risk. More Rewards?

There is currently no law prohibiting retirement plan sponsors from offering private market investments to organizational employees. However, sponsors have traditionally avoided or significantly downplayed such options because of their fiduciary duties under ERISA to provide plan participants a menu of prudent, reasonably priced investments. The DOL, primarily through its Employee Benefits Security Administration (EBSA), along with the Pension Benefit Guaranty Corporation (PBGC) and the Internal Revenue Service (IRS) enforce the provisions within ERISA.

Private equity, private credit and cryptocurrency investment options traditionally have been viewed by plan sponsors and some investment experts as riskier, more expensive, less transparent and less liquid than publicly traded stock and bond funds. Up to this point, promoting the former over the latter could be considered a breach of fiduciary duty under ERISA. Penalties for such a breach can include suspension or removal as a trustee or executor and the payment of money damages, attorney fees and court costs.

The White House, though, believes:

• The time is ripe for such retirement investments;
• Americans will benefit by having more investment options; and,
• Alternative assets such as private equity, real estate and digital currency offer investors competitive returns and diversification benefits.

The Latest in a Series of Moves

The executive order regarding cryptocurrency as a retirement investment option is another step by the Trump administration, its representative federal agencies and Republican politicians to promote the validity of such assets.

On May 28, EBSA rescinded a 2022 compliance release that previously discouraged fiduciaries from including cryptocurrency options in 401(k) retirement plans. The 2022 guidance, generated by the prior EBSA leadership during the administration of then-President Joe Biden, had directed plan fiduciaries to exercise “extreme care” before adding cryptocurrency to investment menus.

In a press release announcing the guidance rollback, the agency stated, “This [2022] language deviated from the requirements of the [ERISA] and marked a departure from the department’s historically neutral, principled-based approach to fiduciary investment decisions.”

EBSA said on May 28 that, going forward, it would neither endorse nor disapprove of plan fiduciaries who conclude that the inclusion of cryptocurrency assets in a plan’s investment menu is appropriate. “[The DOL is] making it clear that investment decisions should be made by fiduciaries, not D.C. bureaucrats,” Chavez-DeRemer said.

That EBSA announcement dovetailed with the Trump’s stance on the elevated role of cryptocurrency in his administration.

On Jan. 23, he signed an executive order establishing the Presidential Working Group on Digital Asset Markets, designed to accelerate American innovation in digital finance. The order directed federal departments and agencies to notify the working group upon:

• Identifying any regulations and other agency actions that affect the digital assets sector; and,
• Issuing recommendations for rescinding or modifying those regulations/actions.

The Jan. 23 executive order also revoked the Biden administration’s Digital Assets Executive Order and the Treasury Department’s Framework for International Engagement on Digital Assets, which the Trump administration has contended undermined the country’s global role in digital finance.

“The growth of digital financial technology in America must remain unhindered by restrictive regulations or unnecessary government interference,” the Jan. 23 order stated.

On March 6, Trump signed an additional executive order to establish a strategic bitcoin reserve and a national digital asset stockpile.

The administration’s vision has carried through to Congressional Republicans. 

On April 1, Sen. Tommy Tuberville (R-Alabama) and Rep. Byron Donalds (R-Florida) reintroduced the Financial Freedom Act, which would prohibit the DOL from “issuing a regulation or guidance that limits the type of investments that self-directed 401(k) account investors can choose through a brokerage window.” That bill was referred to the House Committee on Education and Workforce. No action has been taken to date by that committee.

Insights, Opinions and Guidance

So, where could this all shake out for employers as plan sponsors and employees as investors? Investment experts provided a range of options and opinions in tandem with the Aug. 7 executive order.

In an interview with Workspan Daily, Kevin Crain, the executive director of the International Retirement Income Council (IRIC), a nonprofit, membership-based organization, shared some possible pathways for incorporating alternative investments into 401(k) portfolios.

“Likely avenues to expand access to alternative investments in 401(k) plans are with professionally managed, multi-asset-class portfolios,” he said. “[In this manner,] the alternative investments are an investment allocation in the broader, professionally managed portfolios. For example, they could be part of a target-date fund or managed account investment allocation. This parallels the successful use of alternative investments as an allocation for defined benefit plans.

“The other possibility is an alternative investment ‘fund of funds’ in the plan — using a collective trust structure to administer, in a single plan investment option, several alternative investment funds and a liquidity fund,” Crain continued. “All these approaches mitigate concerns about daily pricing and daily liquidity.”

Lisa Gomez, who served as the DOL’s assistant secretary of labor for employee benefits security from October 2022 until January 2025, said in an interview with CNN that, even with change, plan sponsors will likely stick to the status quo by:

• Adhering to their core fiduciary duties;
• Vetting new options as they normally have; and,
• Making prudent decisions that are in the best interests of their plan participants and their beneficiaries.

She admitted, however, “It’s going to be more complicated.”

Eileen Appelbaum, the co-director at the Center for Economic and Policy Research (CEPR), an independent research and analysis organization, said the executive order provides “substantial risks for employers and workers.”

“Private equity investments have delivered disappointing returns, making them far less attractive to workers looking for a secure retirement,” she said in a statement on the CEPR website. “On the flip side, employers and investment advisers have a fiduciary responsibility to the workers they represent; they would put themselves at legal risk by recommending risky investment options.

“It is important to remember that during Trump’s first term, the Department of Labor issued guidance that provided employers with the ability to adopt 401(k) plans that include investments in private equity,” Appelbaum added. “But there has been little take-up; less than 10% of retirement plans offer any kind of alternative investments and investments in private equity are available in only 2.4% of them.”

One expert used the term “reckless” to describe the new executive order.

“Introducing these investments into 401(k)s, which are meant to be a nest egg for retirement, is a reckless decision that could lead to unnecessary financial harm for unsuspecting savers,” said Chris Noble, the policy director at the nonprofit Private Equity Stakeholder Project (PESP), in a press release on the group’s website.

PESP added, “The Trump administration is encouraging Americans to invest their retirement savings in private equity even as private equity has underperformed stocks over the last one, three, five and 10 years.”

In considering how best to proceed, various financial experts advised plan sponsors to:

• Recruit counsel and fiduciary advisers with experience dealing with private equity to help them vet the new options; and,
• Eventually seek in-depth presentations from multiple companies marketing new private market products that outline their fees, investment strategy and performance.

Editor’s Note: Additional Content

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