DoL to Unleash New Investment Opportunities for 401(k) Participants

On March 30, 2026, the Department of Labor published its proposed rule in alignment with President Trump’s executive order on democratizing access to alternative assets in 401(k) plans last year. The proposed rule would help incentivize investment plan fiduciaries to begin offering private equity options and other alternative assets beyond basic stock and bond funds for 401(k) plan participants.  

While no federal law explicitly prohibits fiduciaries from offering private equity or other alternative assets, litigation risks created by the Employee Retirement Income Security Act of 1974 (ERISA) have dissuaded employers from broadening their 401(k) investment menus. The law broadly states that employers must act in the best interest of plan participants. The ambiguous framing of what constitutes acting in the best interest of participants has long gone unaddressed leading to costly lawsuits over the years where employees have sued their employer claiming underperforming funds they were offered and invested into represented a failure of acting in their best interest. As such, many 401(k) plans display limited offerings—including only those investments which yield moderate returns and exhibit moderate risk such as major stock indices and bonds.  

A major discrepancy exists wherein defined benefit plan participants, those with pensions, or government employees have reaped the benefits of private equity offerings. Typically, only wealthy individuals, endowments, and pension funds have been the primary investors into private equity since they qualify as institutional investors. Retail investors on the other hand have no mechanism by which they can gain exposure to the private market. This lack of access bodes poorly for 401(k) plan participants considering the number of publicly traded companies has halved since 1999. Private funds, on the other hand, have been growing.  

Aside from the diversification benefits of including private equity options, private equity generally yields better returns. The American Investment Council released a report last year revealing many state pension funds report private equity as their highest returning asset. Unlike 401(k) plans, state pension funds are not subject to ERISA since they operate under state laws, enabling them to bypass the legal burdens that defined contribution plan participants face. The Trump administration has now taken real action to address this issue in a meaningful way. 

The DoL aims to curb those risks by detailing guidance on how alternative investment funds should be evaluated and selected. Plan sponsors that follow the DoL’s guidance would have a safe harbor that shields them from litigation by proving adherence to the duty of prudence established in ERISA. While the regulation does not give full immunity against lawsuits, it helps give justification and clarity for those fiduciaries interested in upholding their ERISA obligations.  

To assist plan fiduciaries, the Department will be issuing safe harbors to demonstrate that the duty of prudence is upheld by the plan fiduciary. The department has clear statutory authority under ERISA to promulgate safe harbors as needed and already does so with regards to fiduciary duty in other areas such as selecting annuity providers.  

The DoL cited a plethora of case law examples that reinforce the department’s argument that the duty of prudence is a process-based matter not contingent on outcomes. Several cases cited point to the fact that courts evaluate prudence based on the information available to the fiduciary at the time of decision-making, not from hindsight. Furthermore, “The prudent person standard is not concerned with results; rather it is a test of how the fiduciary acted viewed from the perspective of the time of the challenged decision.” In other words: “prudence does not mean clairvoyance.” By providing a clear, process-based standard for plan fiduciaries, the DoL will incentivize fiduciaries to open investment options for future retirees without inviting unwarranted litigation. The rule is a win for 401(k) contributors, the free market, and a blow for trial lawyers whose livelihoods depend on exploiting good-faith actors.  

Americans for Tax Reform supports the DoL’s proposed rule and commends the Trump administration for taking a bold step in the right direction to ensure more secure retirement for 401(k).