Monthly Newsletter Special Edition:

August 2025

Executive Order on Alternative Investments in Defined Contribution Plans: What It Means for Retirement Accounts

Robert Goldman, President, IMA Retirement

On August 7, 2025, President Trump signed an Executive Order titled “Democratizing Access to Alternative Assets for 401(k) Investors.” We’ve received many questions about its implications for defined contribution (DC) retirement plans. This communication provides a clear overview of what the order does—and does not—mean for plan sponsors and participants.

While the Executive Order signals a potential shift in regulatory posture toward alternative investments in DC plans, its practical impact remains uncertain and will unfold over time.

What the Executive Order Is—and Isn’t

The Executive Order directs the Department of Labor (DOL) to review and clarify fiduciary guidance under ERISA regarding the inclusion of alternative assets in DC plans. It does not:

• Automatically make alternative investments available to plan participants.
• Require plan sponsors to offer these investments.
• Change existing laws or regulations.

Instead, it sets in motion a regulatory review process that could expand access to these investments in the future.

Background: Alternative Investments in Retirement Plans

Institutional investors—such as defined benefit plans, foundations, and endowments—have long used private market investments (e.g., private equity, real estate, infrastructure) to diversify portfolios and seek enhanced returns. These investments have historically been excluded from DC plans due to:

• Limited liquidity
• Lack of fee transparency
• Absence of daily valuation
• Operational complexity

However, asset managers have recently begun developing products that incorporate alternative assets into Managed Accounts and Target Date Funds, anticipating significant demand. As of year-end 2024, DC plan assets totaled approximately $12.5 trillion, according to the Investment Company Institute.

What’s Included in the Executive Order

The Executive Order defines “alternative assets” to include:

• Private market investments (private equity, private credit)
• Real estate (direct and indirect)
• Digital assets (e.g., cryptocurrencies)
• Commodities
• Infrastructure investments
• Lifetime income strategies (e.g., longevity risk-sharing pools)
  

The DOL is instructed to:

• Reexamine and potentially rescind prior guidance (including the December 2021 statement discouraging private equity in DC plans).
• Clarify fiduciary responsibilities when offering asset allocation funds that include alternative assets.
• Propose new rules or safe harbors to support fiduciaries in making prudent decisions.
• Collaborate with the Treasury and SEC to align regulatory frameworks.
• Encourage the SEC to consider changes that would facilitate access to these investments, including revisiting accredited investor and qualified purchaser definitions.

Key Takeaways for Plan Sponsors and Participants

• No immediate action is required. The Executive Order initiates a review process, not a mandate.
• Fiduciary standards remain unchanged. Any future inclusion of alternative assets must follow a sound fiduciary process aligned with participant needs and plan objectives.
• Litigation risk is a concern. The Order seeks to reduce the threat of ERISA lawsuits that may discourage innovation.
• Product development is underway. Asset managers and recordkeepers are preparing investment vehicles that may meet future regulatory standards.

Conclusion

While the Executive Order does not change current investment options, it signals a potential shift in how alternative assets may be incorporated into DC plans. Plan fiduciaries should stay informed and be prepared to evaluate new offerings through a prudent, participant-focused lens once final rules and guidance are issued. We will continue to monitor developments and support our clients by thoughtfully and prudently evaluating any changes.

For assistance with your retirement needs, contact an IMA Retirement advisor
at retirement@imacorp.com or call 877.305.1864.