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401(k) Plans: Alternative Investments are In and En Vogue, But are They the Right Choice for Your Plan?

  • Writer: Katrina Veldkamp
    Katrina Veldkamp
  • 18 hours ago
  • 3 min read

As we’ve advised, the times are changing when it comes to what participants’ retirement plan investment options.  On Thursday, August 7, 2025, the president signed an executive order to allow 401(k) participants to join institutional investors and non-ERISA retirement plans in investing in alternative investments like private equity, cryptocurrency, and real estate.  The order is aimed to place ERISA regulated 401(k) and defined contribution plan participants on an equal playing field with other investors by combating regulatory overreach and easing fiduciary litigation risk.


The Secretary of the Department of Labor ("DOL") must review and clarify its current guidance outlining fiduciaries' duties under the Employee Retirement Income Security Act (“ERISA”) to make asset allocation funds that include alternative investments available to 401(k) plan participants within 180 days.  The DOL is also required to issue rules clarifying fiduciary duties owed to ERISA plan participants when making alternative investments available.  Specifically, the DOL has been directed to “prioritize actions that may curb ERISA litigation that constrains fiduciaries’ ability to apply their best judgment in offering investment opportunities.”  In conjunction with these tasks, the DOL is mandated to coordinate with the Department of the Treasury, Securities and Exchange Commission (“SEC”), and other federal regulators to achieve the order's objectives.


On Tuesday, August 12, 2025, the DOL began carrying out its marching orders and rescinded a December 21, 2021, supplemental statement (“2021 Statement”) issued by the Biden administration (which clarified a June 3, 2020, letter (“2020 Letter”) issued by the DOL that stated an individual account plan fiduciary could offer an asset allocation fund that included a private equity component without violating their ERISA fiduciary duties).  The 2021 Statement did not rescind the 2020 Letter, nor did it state offering a professionally managed asset allocation fund with a private equity component was a per se violation of a fiduciary’s duties under ERISA Sections 403 and 404.  Instead, the 2021 Statement emphasized the 2020 Letter’s reasons why ERISA fiduciaries must carefully consider whether such funds were appropriate offerings.  For example, when compared to traditional individual account plan investments, private equity investments are typically more complicated, have longer time horizons, tend to be less liquid, and are subject to different disclosure and reporting rules.  


Alternative investments in non-ERISA retirement plans are not uncommon, and ERISA plans’ appetite for their availability has been steadily increasing.  The California Public Employees Retirement System ("CalPERS") is the largest public pension system in the U.S.—managing more than $550 billion in assets.  CalPERS, which is not subject to ERISA, has invested in private equity for years.  As of June 2025, private equity investments account for a sizeable portion of its asset allocation.  Plans subject to ERISA have been ready to wade into waters filled with expensive fiduciary lawsuits to give 401(k) plan participants access to alternative investments.  In May 2025, the 9th Circuit Court of Appeals upheld the dismissal of Anderson v. Intel, supporting the conclusion ERISA does not bar the inclusion of private equity and complex investment options in self-directed 401(k) plans.  Though these investments may have higher fees and increased complexity, the 9th Circuit emphasized they may still be prudent plan investments.  On August 1, 2025, Anderson and the other plaintiffs in the case petitioned the United States Supreme Court for a 60-day extension to file a writ of certiorari.  So, it looks like this six-year case might not be over just yet.


Investment advisors are increasingly open to recommending alternative investments to retirement plans, but plan sponsors and 401(k) plan fiduciaries should understand two things: first, plan fiduciaries’ duties under ERISA have not changed (at least for now).  Second, plan fiduciaries are not required to offer alternative assets as an investment option to plan 401(k) participants.  Employers considering offering alternative investments in their plans will want to ensure they understand their fiduciary responsibilities, seek appropriate investment advice, appropriately document their investment selection decisions, revisit their plan investment policy statements, and consult with legal counsel.


Plan fiduciaries who want more information regarding potential issues around offering alternative investments in 401(k) plans may reach out to a Boutwell Fay attorney.



Boutwell Fay LLP

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