In his Aug. 7 Executive Order, “Democratizing Access to Alternative Assets for 401(k) Investors,” President Donald Trump explained his reasoning behind the order, intended to make it easier from a regulatory standpoint for workplace retirement plan sponsors to include alternative assets without running afoul of ERISA.
“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.”
President Donald Trump
Noting that more than 90 million Americans participate in employer-sponsored defined-contribution plans, Trump’s EO said the vast majority of them 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.
He blamed regulatory overreach and lawsuits from “opportunistic trial lawyers” for stifling access to alternative assets such as private equity and other financial instruments that are not traded on public exchanges.
“Burdensome lawsuits that seek to challenge reasonable decisions by loyal, regulated fiduciaries, and stifling Department of Labor guidance issued since my first term, however, have denied millions of Americans opportunities to benefit from investment in alternative assets,” Trump wrote in the EO. “Such assets are an increasingly large portion of the portfolios of public pension and defined-benefit retirement plans and offer competitive returns along with diversification opportunities.”
He said the obstacles have largely relegated 401(k) and other defined-contribution retirement plan participants to asset classes whose returns lack the very same long-term net benefits allowed for and achieved by public pension plans and other institutional investors.
“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,” Trump wrote.
Groundhog Day deadline
Thursday’s EO gave Secretary of Labor Lori Chavez-DeRemer 180 days—until Feb. 2, 2026—to examine the DOL’s past and present guidance regarding a fiduciary’s duties under ERISA, in connection with making available to participants an asset allocation fund that includes investments in alternative assets. “When conducting this reexamination, the Secretary shall consider whether to rescind the Department of Labor’s December 21, 2021, Supplemental Private Equity Statement.”
The EO adds that the Labor Secretary shall further seek to clarify the DOL’s position on alternative assets and the appropriate fiduciary process associated with offering asset allocation funds containing investments in alternative assets under ERISA.
“Such clarification must aim to identify the criteria that fiduciaries should use to prudently balance potentially higher expenses against the objectives of seeking greater long-term net returns and broader diversification of investments. The Secretary shall also propose rules, regulations, or guidance, as the Secretary deems appropriate, that clarify the duties that a fiduciary owes to plan participants under ERISA when deciding whether to make available to plan participants an asset allocation fund that includes investments in alternative assets, which rules, regulations, and guidance may include appropriately calibrated safe harbors.”
In carrying out the directives in the order, the Secretary is instructed to prioritize actions that may curb ERISA litigation that constrains fiduciaries’ ability to apply their best judgment in offering investment opportunities to relevant plan participants.
The EO also instructs the Chavez-DeRemer to consult with Treasury Secretary Scott Bessent, the Securities and Exchange Commission (SEC), and other federal regulators to carry out the policy objectives of the order. The SEC, in consultation with Chavez-DeRemer, was instructed to consider ways to facilitate access to investments in alternative assets by participants in DC plans.
“Such facilitation may include, but not be limited to, consideration of revisions to existing SEC regulations and guidance relating to accredited investor and qualified purchaser status, to accomplish the policy objectives of this order,” the EO states.
The DOL released a statement from Chavez-DeRemer yesterday praising the Executive Order.
“The federal government should not be making retirement investment decisions for hardworking Americans, including decisions regarding alternative assets. The Department of Labor already took action to rescind the Biden Administration’s guidance that disadvantaged crypto investments. This Executive Order further supports our efforts to improve flexibility and eliminate unfair one-size-fits-all approaches, and I applaud President Trump for taking decisive action,” Chavez-DeRemer said.
Defining alternative assets
For purposes of the order, the term “alternative assets” includes:
• Private market investments, including direct and indirect interests in equity, debt, or other financial instruments that are not traded on public exchanges, including those where the managers of such investments, if applicable, seek to take an active role in the management of such companies;
• Direct and indirect interests in real estate, including debt instruments secured by direct or indirect interests in real estate;
• Holdings in actively managed investment vehicles that are investing in digital assets;
• Direct and indirect investments in commodities;
• Direct and indirect interests in projects financing infrastructure development;
• Lifetime income investment strategies including longevity risk-sharing pools.
Read the full Executive Order, “Democratizing Access to Alternative Assets for 401(k) Investors,” at this link, and the accompanying Fact Sheet here.
Retirement industry reaction and analysis surrounding Thursday’s Executive Order from President Trump—both for and against—continues to emerge, and 401(k) Specialist will continue to cover the issue extensively in the coming weeks.
SEE ALSO:
• DOL, Industry Leaders React to Trump’s EO Signing on Private 401(k) Funds
• Trump Signing EO Today Enabling Private 401(k) Investments
• Should 401(k) Plans Offer Annuities and Alternative Investments?