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On August 12th, 2025, the U.S. Department of Labor’s (DOL’s) Employee Benefits Security Administration (EBSA) made an announcement involving 401(k) plans. Specifically, the agency rescinded a December 21st, 2021, supplemental statement that discouraged fiduciaries from considering alternative assets in 401(k) plans. In addition to following the laws established by the EBSA, employers must also comply with essential labor laws that affect most workplaces. Failure to comply with any labor or employment laws can lead to hefty fines and penalties.
Overview of the Employee Retirement Income Security Act of 1974 and 401(k) Plans
Markedly, the Employee Retirement Income Security Act of 1974 (ERISA) gives the EBSA the authority to protect employee retirement investments. In brief, the federal law sets minimum standards for private industry plans. Among the retirement plan requirements set forth by ERISA are fiduciary responsibilities for managers and controllers of plan assets. Specifically, ERISA requires plan fiduciaries to act in the financial interests of plan participants. To that end, plan fiduciaries must take professional care when choosing investment options for inclusion in 401(k) plans. In fact, these obligations of prudence and loyalty are called “the highest known to the law.” In the end, fiduciaries are personally liable for any losses resulting from a breach of duty.
Background of Recent Updates
On August 7, President Donald Trump signed an executive order (EO) called, “"Democratizing Access for 401(k) Investors," and published a related fact sheet. Overall, the EO expresses the administration’s belief that "every American preparing for retirement should have access to funds that include investments in alternative assets when the relevant plan fiduciary determines that such access provides an appropriate opportunity for plan participants and beneficiaries to enhance the net risk-adjusted returns on their retirement assets.” Specifically, the EO directs several federal agencies, including the DOL, to take steps intended to facilitate increased access to alternative assets in ERISA-governed 401(k) plans.
Actions Taken by the DOL and EBSA
After the release of the EO, the DOL rescinded previously issued guidance that discouraged fiduciaries from considering alternative assets in 401(k) retirement plan investment menus. That December 2021 guidance, called “Supplemental Private Equity Statement,” was issued by the Biden administration to clarify a June 3rd, 2020, Information Letter that the Trump administration released. That information letter discussed the use of private equity (PE) investments in defined contribution plans.
Comparatively, the Supplemental Private Equity Statement stated that any potential benefits of private equity "were not balanced with counter-arguments and research data from independent sources." The Supplemental Statement also "caution[ed] against application of the Information Letter outside of the specific context discussed in the 2020 Information Letter.” According to the Biden administration DOL, in the majority of cases, "plan-level fiduciaries of small, individual account plans are not likely suited to evaluate the use of PE investments in designated investment alternatives in individual account plans."
Additionally, in the August 12 release, the Trump administration's DOL claimed that the Supplemental Private Equity Statement marked a departure from previous department norms. Usually, the agency dictates a neutral, principled-based approach to fiduciary investment decisions. Such decisions are consistent with the requirements of ERISA. In other words, the department should not single out particular investments or investment strategies for additional or special scrutiny.
Employer Takeaways
In conclusion, the EO and any actions taken by various federal agencies do not change the overall law. All that the EO does is encourage the expansion of investment options into 401(k) plans. Specifically, this could include items like cryptocurrency. In the meantime, employers should keep an eye out for any specific regulatory guidance that might be issued that would affect their plan providers and their employee plan contributions.
