What Plan Sponsors Should Look for From DOL on Private Assets in 401(k) Plans 

The Department of Labor has a tall task and a short budget.  

Less than two weeks ago, President Donald Trump signed an executive order encouraging more access to private investments for participants in 401(k) plans. Last week, the Department of Labor rescinded a 2021 information letter that questioned if private investments belong in retirement plans.  

The DOL is still managing deadlines for regulatory guidance required by the SECURE 2.0 Act of 2022 and is operating with fewer resources, but its swift decision to rescind the 2021 information letter suggests that fulfilling its obligations under the executive order remain a top priority. 

According to Michael Pedroni, the founder and CEO of Highland Global Advisors, which advises financial services companies on regulatory and market strategy, the executive order elevated providing regulatory guidance on alternative investments in 401(k) plans to the top of the DOL’s agenda.  

For now, in the absence of clear regulatory guidance, most plan sponsors have avoided offering participants access to alternative assets, citing litigation risks. Only 3.9% of plans included alternative investments such as private equity in 2024—up from 2.2% the year before—according to the 2025 PLANSPONSOR DC Plan Benchmarking Report. As the industry awaits direction, some argue that plan sponsors will remain hesitant unless the DOL establishes a safe harbor. 

Benefits of a Safe Harbor 

“The key thing that plan sponsors are looking for is protection for litigation related to the fiduciary obligations,” Pedroni says. “The DOL is certainly working on a safe harbor. I am sure that the staff within the DOL are thinking about how to balance that safe harbor against maintaining the strength of the fiduciary obligation.” 

A regulatory safe harbor is a legal provision that would offer plan sponsors protection from litigation under specific conditions. For example, the DOL has an annuity safe harbor that details the fiduciary responsibilities plan sponsors have when selecting an annuity provider. Following the guidelines, in theory, protects a fiduciary from litigation. 

A safe harbor could be especially impactful in the case of broadening access to private market investments in 401(k) plans because of the numerous risks for which plan sponsors need to account. To ensure they are upholding their fiduciary duties of prudence and loyalty, they need to benchmark for fairness net expected returns, valuation and liquidity, according to Rajib Chanda, a partner in and the global head of asset management for law firm Simpson Thacher whose legal work has focused heavily on democratizing private market investments to increase their accessibility to ordinary investors.  

Safe harbor guidance would also be more definite than an information letter, which the previous Trump administration issued in 2020. It was quickly reversed by the Biden DOL’s now-rescinded 2021 letter. 

“We would be hoping for a formal safe harbor, as opposed to more information letters,” Chanda says. “We just saw how easy it is to rescind a letter, which can happen almost overnight.” 

Russ Ivinjack, the global chief investment officer at Aon Investments, places a near 75% probability that the DOL’s guidance will include some form of safe harbor. Without it, the guidance would likely have little significance, since without a safe harbor, “the specter of litigation will weigh on those plan sponsors,” he says.  

‘Back to the Future’ 

On August 12, the White House released 31 pages of slides that, among other things, indicated that the prudence fiduciaries must display under the Employee Retirement Income Security Act has partly contributed to the lack of alternative investment adoption in defined contribution plans, as compared with defined benefit plans.  

According to Ivinjack, the DOL outlining a recommended due diligence process for fiduciaries would mitigate at least some concerns about litigation risk.  

To be sure, a plan sponsor could already have offered their participants access to private markets before the executive order, but few currently do. What remains to be seen is how much demand there is for these investments, if litigation concerns are assuaged.  

“If there was demand and people thought they must have this, plan sponsors clearly weren’t seeing that, because if they did, they would have been implementing it already, as they could have done prior to the executive order,” says Shana Sissel, founder and CEO of Banríon Capital Management, a financial advisory firm.  

Sissel says that, at the end of the day, plan sponsors seek to mitigate risk, and alternative investments create more variables for plan sponsors to manage. 

In July, Empower released a survey indicating that an average of more than seven out of 10 American worker respondents said they wanted access to private assets in their retirement plans. But the recordkeeper itself only announced that the company would offer private investments in retirement plans in May.  

While it is still unclear whether the DOL will issue a safe harbor or if participants want access to alternative investments, it is clear plan sponsors could have offered the investments decades before the executive order was signed. 

“This is a bit of ‘Back to the Future,’” says Ivinjack. “The first defined contribution plan client I worked with had private equity in the profit-sharing plan for the participants 30 years ago. Now it’s the hot topic of the day.”