A proposed Department of Labor rule could reshape how 401(k) plans evaluate private markets, real estate, and other alternative investments. Before making any changes, here’s what sponsors need to understand.
A proposed Department of Labor rule could reshape how 401(k) plans evaluate private markets, real estate, and other alternative investments. Before making any changes, here’s what sponsors need to understand.
The Department of Labor is reviewing a proposed rule that could clarify how fiduciaries evaluate alternative investments in defined contribution plans. This follows a broader push to expand retirement plan access to private markets and other non-traditional assets.
Why it matters: Regulatory encouragement does not equal regulatory protection. Fiduciary duties still apply.
Private equity, private credit, real estate, and digital assets may offer diversification benefits, but they also introduce liquidity limits, valuation challenges, and operational complexity that traditional 401(k) investments do not carry.
Why it matters: What works in institutional portfolios does not always translate cleanly to participant-directed plans.
Unlike traditional funds, alternative investments often include layered and performance-based fees that are difficult to fully quantify and communicate to participants.
Why it matters: Fee transparency remains a major source of fiduciary and litigation risk under ERISA.
Even if a safe harbor is introduced, plan sponsors must still demonstrate a prudent process, document decision-making, and ensure investments align with participants’ best interests.
Why it matters: Poor outcomes or weak governance can still invite scrutiny and legal exposure.
Many alternative investment products for defined contribution plans are still emerging. Waiting for final guidance, while updating policies and due-diligence frameworks, can position sponsors to act thoughtfully rather than reactively.
Why it matters: Preparation is a fiduciary strength, not a missed opportunity.
If you’d like to explore how these developments may impact your plan or would value a thoughtful discussion on navigating today’s evolving retirement landscape, we welcome the conversation. Please contact us today.
This material is provided for informational and educational purposes only and is not intended as investment advice or an offer of advisory services.
Contact us to speak with one of our advisors.
