By: Tony Roda and Ryan Muller, Williams & Jensen PLLC
As part of its well-documented efforts to expand Americans’ access to retirement through the promotion of various savings vehicles, the Trump Administration is working to broaden the types of assets available to retirement savers through their 401(k) plans.
Pursuant to Executive Order 14330,1 the Department of Labor’s Employee Benefits Security Administration (EBSA) has led this effort. On March 31, EBSA issued “a proposed regulation that provides a safe harbor for a fiduciary’s duty of prudence under the Employee Retirement Income Security Act (ERISA) in connection with selecting designated investment alternatives for a participant-directed individual account plan, including asset allocation funds that include alternative assets.”2
With the public comment period having closed on June 1, the Trump Administration now has heard from a disparate group of individuals, think tanks, advocacy groups, institutional investors, and Members of Congress. Some 45,000 comments were submitted for EBSA’s consideration.
Attitudes toward the proposal in Congress fell sharply along partisan lines. The first Republican Members to throw their support behind the proposal were Reps. Barry Moore (AL), Troy Downing (MT), Byron Donalds (FL), and Warren Davidson (OH), who asserted that the proposal’s “clear, asset-neutral framework” would reduce the chilling effect arising from litigation risk while emphasizing that this rule does nothing to eliminate fiduciary safeguards.3
Other Republicans weighed in as well. Twenty-five House Members signed a letter which, in addition to noting the chilling effect of ERISA lawsuits, pointed to the benefits of diversification. When comparing defined benefit (DB) and defined contribution (DC) plans, they argued that the relative prominence of alternative assets in DB plans compared to the lack of uptake in DC plans does not reflect a “considered judgment” that these assets are “unsuitable for retirement savers,” but rather that it reflects regulatory uncertainty and the fear of costly, prolonged litigation.4 They reasoned that a process-based safe harbor would remedy this situation and create parity between the two types of retirement vehicles. A group of twenty-one Republican Senators echoed these same arguments.5
Former House Financial Services Committee Chairman Jeb Hensarling (R-TX) also weighed in on the issue, noting that a strong majority of Americans — spanning demographic lines — support expanding 401(k) access into private markets, adding that these markets offer diversification and the spreading of risk, factors that have been waning in the S&P 500 as the “Magnificent 7” continues to grow ever more dominant in their total market share.6
Across the aisle, Congressional Democrats are unified in their opposition to the proposed regulation. Senator Jack Reed (D-RI), a senior member of the Senate Banking Committee, raised concerns about illiquidity and opacity in private credit markets. He also pointed to the currently high rates of pre-retirement 401(k) withdrawals as Americans struggle to cope with increased living costs. Senator Elizabeth Warren (D-MA), the ranking member of the Banking Committee, sent a letter with two other members of the Massachusetts delegation, Senator Ed Markey and Rep. Stephen Lynch. The letter argued that private equity investments are subject to high fees and chronic underperformance. Senator Warren’s second letter was authored with ranking members Bernie Sanders (I-VT) of the Health, Education, Labor, and Pensions Committee, and Rep. Bobby Scott (D-VA) of the Education and Workforce Committee. They argued that the proposed regulation would create a standard of extreme deference to plan sponsors and investment managers by weakening protections around inherently risky asset classes.
Possibly of most significance, twenty Democratic state Attorneys General (AGs) submitted a comment letter opposing the proposed rulemaking, stating that the rule would weaken the high prudence standard set forth by ERISA, “a standard deliberately crafted by Congress and assiduously policed by the federal courts for the protection of workers and retirees.”7 They emphasized that robust litigation ensures accountability and deters fund managers from making overly risky decisions, while pointing to “decades of clear Supreme Court and circuit court precedent” that have held ERISA’s fiduciary standard in the highest regard. The interest among the AGs may signal that future litigation is likely to challenge the statutory underpinning of the regulation.
Though many investment industry groups strongly support the proposal, other stakeholders, such as AARP, the Securities Industry & Financial Markets Association, and T. Rowe Price, urged EBSA to amend the rule to harmonize it with other regulatory standards, amend liquidity requirements, modernize the Prohibited Transaction Exemption 77-4, and emphasize that fiduciaries maintain discretion in determining which assets are appropriate for inclusion in managed funds.
The public comments clearly demonstrate a lack of consensus on the proposed regulation. The Department of Labor now must weigh these divergent opinions as it develops a final regulation. Despite the controversy, however, the Trump Administration is expected to issue a final regulation before the end of the calendar year. Once in place for private sector ERISA plans, we anticipate that several state legislatures will consider legislative or regulatory changes along the same lines for their public sector DC plans.
Please be assured that NCPERS will closely monitor developments in this area of public policy and will apprise its members of any significant developments.
Endnotes:
1 https://www.federalregister.gov/documents/2025/08/12/2025-15340/democratizing-access-to-alternative-assets-for-401k-investors
2 https://www.federalregister.gov/documents/2026/03/31/2026-06178/fiduciary-duties-in-selecting-designated-investment-alternatives
3 https://www.regulations.gov/comment/EBSA-2026-0166-6613
4 https://www.regulations.gov/comment/EBSA-2026-0166-46959
5 https://www.regulations.gov/comment/EBSA-2026-0166-46933
6 https://www.regulations.gov/comment/EBSA-2026-0166-37454 citing https://www.retiresafer.org/2025/12/09/bipartisan-majority-of-americans-support-expanding-401k-options-and-access-to-private-markets/
7 https://www.regulations.gov/comment/EBSA-2026-0166-44083
Comment Period Closes on Alternative Investment Proposed Regulation
By: Tony Roda and Ryan Muller, Williams & Jensen PLLC
As part of its well-documented efforts to expand Americans’ access to retirement through the promotion of various savings vehicles, the Trump Administration is working to broaden the types of assets available to retirement savers through their 401(k) plans.
Pursuant to Executive Order 14330,1 the Department of Labor’s Employee Benefits Security Administration (EBSA) has led this effort. On March 31, EBSA issued “a proposed regulation that provides a safe harbor for a fiduciary’s duty of prudence under the Employee Retirement Income Security Act (ERISA) in connection with selecting designated investment alternatives for a participant-directed individual account plan, including asset allocation funds that include alternative assets.”2
With the public comment period having closed on June 1, the Trump Administration now has heard from a disparate group of individuals, think tanks, advocacy groups, institutional investors, and Members of Congress. Some 45,000 comments were submitted for EBSA’s consideration.
Attitudes toward the proposal in Congress fell sharply along partisan lines. The first Republican Members to throw their support behind the proposal were Reps. Barry Moore (AL), Troy Downing (MT), Byron Donalds (FL), and Warren Davidson (OH), who asserted that the proposal’s “clear, asset-neutral framework” would reduce the chilling effect arising from litigation risk while emphasizing that this rule does nothing to eliminate fiduciary safeguards.3
Other Republicans weighed in as well. Twenty-five House Members signed a letter which, in addition to noting the chilling effect of ERISA lawsuits, pointed to the benefits of diversification. When comparing defined benefit (DB) and defined contribution (DC) plans, they argued that the relative prominence of alternative assets in DB plans compared to the lack of uptake in DC plans does not reflect a “considered judgment” that these assets are “unsuitable for retirement savers,” but rather that it reflects regulatory uncertainty and the fear of costly, prolonged litigation.4 They reasoned that a process-based safe harbor would remedy this situation and create parity between the two types of retirement vehicles. A group of twenty-one Republican Senators echoed these same arguments.5
Former House Financial Services Committee Chairman Jeb Hensarling (R-TX) also weighed in on the issue, noting that a strong majority of Americans — spanning demographic lines — support expanding 401(k) access into private markets, adding that these markets offer diversification and the spreading of risk, factors that have been waning in the S&P 500 as the “Magnificent 7” continues to grow ever more dominant in their total market share.6
Across the aisle, Congressional Democrats are unified in their opposition to the proposed regulation. Senator Jack Reed (D-RI), a senior member of the Senate Banking Committee, raised concerns about illiquidity and opacity in private credit markets. He also pointed to the currently high rates of pre-retirement 401(k) withdrawals as Americans struggle to cope with increased living costs. Senator Elizabeth Warren (D-MA), the ranking member of the Banking Committee, sent a letter with two other members of the Massachusetts delegation, Senator Ed Markey and Rep. Stephen Lynch. The letter argued that private equity investments are subject to high fees and chronic underperformance. Senator Warren’s second letter was authored with ranking members Bernie Sanders (I-VT) of the Health, Education, Labor, and Pensions Committee, and Rep. Bobby Scott (D-VA) of the Education and Workforce Committee. They argued that the proposed regulation would create a standard of extreme deference to plan sponsors and investment managers by weakening protections around inherently risky asset classes.
Possibly of most significance, twenty Democratic state Attorneys General (AGs) submitted a comment letter opposing the proposed rulemaking, stating that the rule would weaken the high prudence standard set forth by ERISA, “a standard deliberately crafted by Congress and assiduously policed by the federal courts for the protection of workers and retirees.”7 They emphasized that robust litigation ensures accountability and deters fund managers from making overly risky decisions, while pointing to “decades of clear Supreme Court and circuit court precedent” that have held ERISA’s fiduciary standard in the highest regard. The interest among the AGs may signal that future litigation is likely to challenge the statutory underpinning of the regulation.
Though many investment industry groups strongly support the proposal, other stakeholders, such as AARP, the Securities Industry & Financial Markets Association, and T. Rowe Price, urged EBSA to amend the rule to harmonize it with other regulatory standards, amend liquidity requirements, modernize the Prohibited Transaction Exemption 77-4, and emphasize that fiduciaries maintain discretion in determining which assets are appropriate for inclusion in managed funds.
The public comments clearly demonstrate a lack of consensus on the proposed regulation. The Department of Labor now must weigh these divergent opinions as it develops a final regulation. Despite the controversy, however, the Trump Administration is expected to issue a final regulation before the end of the calendar year. Once in place for private sector ERISA plans, we anticipate that several state legislatures will consider legislative or regulatory changes along the same lines for their public sector DC plans.
Please be assured that NCPERS will closely monitor developments in this area of public policy and will apprise its members of any significant developments.
Endnotes:
1 https://www.federalregister.gov/documents/2025/08/12/2025-15340/democratizing-access-to-alternative-assets-for-401k-investors
2 https://www.federalregister.gov/documents/2026/03/31/2026-06178/fiduciary-duties-in-selecting-designated-investment-alternatives
3 https://www.regulations.gov/comment/EBSA-2026-0166-6613
4 https://www.regulations.gov/comment/EBSA-2026-0166-46959
5 https://www.regulations.gov/comment/EBSA-2026-0166-46933
6 https://www.regulations.gov/comment/EBSA-2026-0166-37454 citing https://www.retiresafer.org/2025/12/09/bipartisan-majority-of-americans-support-expanding-401k-options-and-access-to-private-markets/
7 https://www.regulations.gov/comment/EBSA-2026-0166-44083
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