Alts in DC: The State of the Industry

As the defined contribution industry’s interest in private market investments continues to evolve, speakers at the Defined Contribution Alternatives Summit, hosted by the Investment Company Institute and the Defined Contribution Alternatives on Tuesday, outlined some of the obstacles and areas of progress toward sponsor adoption.

While Democrats will gain control of Congress in January, “President [Donald] Trump is still president, and he will be for two more years,” said David Levine, a principal and executive committee chair at Groom Law Group. “That means his political appointees will continue to be in charge of the relevant agencies that affect all of us in the private market space. … It means guidance continues.”

Levine said the industry is in an “interesting spot” with respect to private market investments, in that it is awaiting the Supreme Court’s decision in Anderson v. Intel Corp. Investment Policy Committee, , and awaits the final prudent investment-selection rule, which the Department of Labor on November 6 sent to the White House Office of Management and Budget for review.

The Supreme Court, which heard oral arguments in the case last month, could issue a decision in Intel any time before its term ends in June, and the OMB does not have a deadline for clearing the investment selection rule. Panelists stated that while it is difficult to predict when the DOL will issue its final rule, they generally believe it will come sometime in January or February.

“The reality is, the rule is moving along,” Levine said. “It will be issued whether or not there is a Democrat or Republican controlling Congress.”

Joshua Lichtenstein, a partner in Ropes & Gray LLC, said some in the industry have wondered whether Congress could override a final rule from the DOL once it is finalized as a regulation. While the Congressional Review Act allows the House of Representatives and the Senate to vacate a regulation by a simple majority vote, Lichtenstein said, the president retains veto power, something Trump could be expected to do.

Meanwhile, a ruling in the Intel case will “hopefully give plan sponsors comfort to start incorporating more alternative investments into their 401(k)s,” said Erica Rozow, a partner in Simpson Thatcher & Bartlett LLP. “I think once that happens, it’s going to be hard to put that back in the bag.”

Agreeing with Rozow, Levine said the “biggest barrier to change” is the market.

“If there is a wider adoption of private markets in DC plans, politically, it is much harder for … an administration of any political stripes to pull back a rule and change it, because people are already there,” Levine said.

What Moves Sponsors

“Tentative” is how Rozow described plan sponsors’ current approach to deciding whether to offer private market investments in their plan investment menus. The sponsors that are most receptive to the idea, she said, are “sophisticated sponsors” that operate or previously operated defined benefit plans. Rozow said she believes greater participant demand for private market investments will help increase sponsors’ comfort with offering access to the assets.

“A plan sponsor is not necessarily motivated to move unless they’re getting calls from their employees asking for different investment options in their 401(k) plans,” Rozow said. “We have the supply—we just need the demand.”

In reference to Trump’s August 2025 executive order ordering federal regulators to “relieve the regulatory burdens and litigation risk” to enable plan sponsors to include private market investments in 401(k) plans, Lichtenstein said some plan sponsors have been influenced by the statement, “It is the policy of the United States that every American preparing for retirement should have access to funds that include investments in alternative assets…”

While the word “should” has not led sponsors to immediately jump in and offer access to private assets, it does mean sponsors have felt the conversations should be starting now rather than later, Lichtenstein said. He added that there will always be a smaller number of “early birds” in the 401(k) plan market because of the threat of litigation. However, as more products—and track records—come to market for sponsors to evaluate, Lichtenstein said he predicts the idea of incorporating private assets in DC plans will no longer be novel.