Alternative Assets (1)—the Executive Order and Proposed Regulation


General

The Employee Benefit Security Administration (EBSA) of the US Department of Labor (DOL) has issued a proposed regulation on the selection of investments for participant-directed plans, such as 401(k) plans. 2026-06178.pdf

The Beginning: An Executive Order

The proposal is the direct result of an August 7, 2025 White House Executive Order (EO) entitled “Democratizing Access to Alternative Assets for 401(k) Investors”.  Democratizing Access to Alternative Assets for 401(K) Investors – The White House

The EO defines “alternative assets” as:

  • Private market investments, such as private equity and private credit funds, and hedge funds.
  • Direct and indirect investments in real estate, including debt associated with real estate.
  • Actively managed investment vehicles investing in digital assets.
  • Direct and indirect investments in commodities.
  • Direct and indirect interests in projects financing infrastructure development.
  • Lifetime income investment strategies including longevity risk-sharing pools.

The EO then says, in relevant part:

Within 180 days of the date of this order, the Secretary shall further, as the Secretary deems appropriate and consistent with applicable law, seek to clarify the Department of Labor’s position on alternative assets and the appropriate fiduciary process associated with offering asset allocation funds containing investments in alternative assets under ERISA.  Such clarification must aim to identify the criteria that fiduciaries should use to prudently balance potentially higher expenses against the objectives of seeking greater long-term net returns and broader diversification of investments.  [The bolding was added by me]

In other words, the DOL is ordered to issue guidance on the prudent selection of “asset allocation funds” that include allocations to alternative assets, including the criteria that fiduciaries should use in a prudent process.

The proposed regulation is responsive to that order and, in fact, goes beyond it by describing the criteria that apply to all investments for participant-directed plans, including both alternative assets and traditional assets (such as mutual funds and collective investment trusts).  That means that fiduciaries of plans that don’t include alternative investments need to pay attention to this proposal as well.

Also, while the EO limited itself to allocations to alternative investments as parts of asset allocation investments and strategies, the proposal is much broader….it covers the selection of standalone alternative investments.

Realistically, though, plan sponsors may choose not to add alternatives (such as private funds) as standalone options.  Instead, at least for the foreseeable future, they are more likely to allow alternatives to be included in asset allocation funds and strategies, such as target date funds and managed participant accounts.  In that case, the likely course of action would be to transfer the job of prudently evaluating and acting on the criteria identified by the DOL to the 3(38) investment managers of those funds and strategies.

The EO also expressed the White House’s concerns about “frivolous” lawsuits against plan fiduciaries and directs the DOL go take steps to reduce that risk:

The Secretary shall also propose rules, regulations, or guidance, as the Secretary deems appropriate, that clarify the duties that a fiduciary owes to plan participants under ERISA when deciding whether to make available to plan participants an asset allocation fund that includes investments in alternative assets, which rules, regulations, and guidance may include appropriately calibrated safe harbors.  In carrying out the directives in this section to further the policy set forth in this order, the Secretary shall prioritize actions that may curb ERISA litigation that constrains fiduciaries’ ability to apply their best judgment in offering investment opportunities to relevant plan participants. [I added this bolding too]

The proposed regulation also addresses that part of the EO by developing a fiduciary “safe harbor” that will, once the regulation is finalized (and if it survives court challenges), be more protective of plan fiduciaries. However, notwithstanding the label, the protection is not a safe harbor as that term is commonly used; instead, it is a conditional and rebuttable presumption. (The details of the safe harbor are for a future article.  This article is just an overview.)

 

The Proposed Regulation

The proposal responded to the White House EO by describing the criteria (or, at least, some of the criteria) for selecting alternative assets and by developing a presumption that the EBSA refers to as a safe harbor.

As I will explain in a future article, the proposed regulation identifies six factors that the DOL says are common to the consideration of all investments, alternative and traditional, for participant directed plans.  In addition, it says that there may be other “relevant” factors beyond those six.  (A “relevant” factor is one that a knowledgeable investor would decide is material to making a decision about a particular investment.) Fiduciaries must consider all relevant factors in making a prudent investment decision.  As the DOL explains, that involves identifying the criteria for evaluating a particular investment, and then obtaining and evaluating that information.  In some cases, the information and its evaluation may exceed current investment practices—but that is for a future article.

Concluding thoughts

That’s it for now.  There is much to talk about.  My next post will be about other surprises in the proposal.  After that, I will get into the concept of relevant factors and the six relevant factors that the DOL considers to be common to the evaluation of all investments for participant-directed plans. Then, in due course, I will discuss the scope and limits of the safe harbor.

The Last Rodeo


401(k)

Last year, I asked ChatGPT to write lyrics for a country and western song about retirement . . . about the uncertainty of moving into a new phase of life. It wrote these lyrics about a cowboy who had a 401(k) plan.  While we don’t often think of cowboys having 401(k) plans, this one did. I am posting it this year as I retire from Faegre Drinker and move on.  But I will continue to be involved in the 401(k) world.  After all, Fouro1k and I grew up together. Until we meet again.

(Verse 1)

I’ve spent all my life punchin’ that clock,
Dust on my boots, walkin’ the walk.
Built a name, carved it deep, strong and proud,
But now the quiet’s callin’ out loud.

(Chorus )

It’s the last rodeo, it’s time to ride on,
But I’m scared of the shadows, the dreams that are gone.
Will I still matter, when I lay my tools down,
Or fade like an echo, in a cold empty town?

(Verse 2)

Friends shake my hand, say “You’ve earned some rest,”
But this heart in my chest still pounds at my best.
I’ve lived for the rush, the workin’ man’s pride,
Now I’m fearin’ the silence waitin’ outside.

(Chorus)

It’s the last rodeo, it’s time to ride on,
But I’m scared of the shadows, the dreams that are gone.
Will I still matter, when I lay my tools down,
Or fade like an echo, in a cold empty town?

(Bridge)

I spent years bein’ needed, now I’m learnin’ to roam,
But it’s hard when you don’t know the way back home.
The clock stops tickin’, but the heart don’t slow,
What’s left of a cowboy, with nowhere to go?

(Verse 3)

If I let go, will I still belong?
Can I make peace in an old man’s song?
I used to know where I was headin’ and why,
Now the road disappears in the night sky.

(Chorus)

It’s the last rodeo, it’s time to ride on,
But I’m scared of the shadows, the dreams that are gone.
Will I still matter, when I lay my tools down,
Or fade like an echo, in a cold empty town?

(Outro)

So, here’s to the years, the hard-earned scars,
To reachin’ for dreams that seem way too far.
I’ll ride to the edge, ‘til the end of the line,
And hope that I mattered, just one last time.

Things I Worry About (28): SEC Exams About Older and Retirement Investors


IRA, rollovers, SEC
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Key Takeaways

  • The SEC Division of Examinations has issued its 2026 fiscal year Examination Priorities.
  • The Priorities include a focus on older investors, investing for retirement and rollovers.
  • This article discusses those priorities.

The SEC Division of Examinations has published its 2026 Examination Priorities. (2026-exam-priorities.pdf)  While the Priorities are far reaching, this article looks at the references to older investors, retirement investors and rollovers.

Among those references are:
Continue reading Things I Worry About (28): SEC Exams About Older and Retirement Investors →

Things I Worry About (27): Pooled Employer Plans and DOL RFI (8)


DOL, fiduciary, prohibited transaction
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Key Takeaways

  • The DOL has issued guidance about PEPs—pooled employer plans—that includes questions designed to assist the DOL in developing future guidance about PEPs.
  • Some of those questions suggest that the DOL is concerned about conflicts of interest in the organization and management of PEPs.
  • This article continues a discussion of the questions asked by the DOL and my comments on those questions and issues. In particular, this article covers conflicts of interest questions raised by the DOL.
  • While the DOL questions are for future guidance, advisors and providers should be paying attention to the DOL’s questions because, among other reasons, some current practices may be disfavored by the DOL.

This series of articles examines the DOL’s July 29, 2025, release that includes interpretative guidance on PEPs, solicits information about PEP practices, includes tips for selecting PEPs, and discusses a possible fiduciary safe harbor for adopting PEPs. 2025-14281.pdf (SECURED).

The first two articles in this series,  Things I Worry About (20) and Things I Worry About (21), discussed some of the DOL’s findings when it reviewed the 2023 Forms 5500 filed by PEPs.

Continue reading Things I Worry About (27): Pooled Employer Plans and DOL RFI (8) →

Things I Worry About (26): Pooled Employer Plans and DOL RFI (7)


DOL, fiduciary
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Key Takeaways

  • The DOL has issued guidance about PEPs—pooled employer plans—that includes questions designed to assist the DOL in developing future guidance about PEPs.
  • Some of those questions suggest a possible fiduciary safe harbor for small employers who adopt PEPs.
  • This article continues a discussion of the questions asked by the DOL and my comments on those questions and issues. In particular, this article covers some of the “safe harbor” questions raised by the DOL.
  • While the DOL questions are for future guidance, advisors and providers should be paying attention because, among other reasons, some current practices may be disfavored by the DOL.

This series of articles examines the DOL’s July 29, 2025, release that includes interpretative guidance on PEPs, solicits information about PEP practices, includes tips for selecting PEPs, and discusses a possible fiduciary safe harbor for adopting PEPs. 2025-14281.pdf (SECURED).

The first two articles in this series,  Things I Worry About (20) and Things I Worry About (21), discussed some of the DOL’s findings when it reviewed the 2023 Forms 5500 filed by PEPs.

The third, fourth and fifth articles, Things I Worry About (22), Things I Worry About (23), and Things I Worry About (24), reviewed issues identified by the DOL for employers who may be deciding whether to join a PEP.

Continue reading Things I Worry About (26): Pooled Employer Plans and DOL RFI (7) →

Things I Worry About (25): Pooled Employer Plans and DOL RFI (6)


DOL, fiduciary
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Key Takeaways

  • The DOL has issued guidance about PEPs—pooled employer plans—that includes questions designed to assist the DOL in developing future guidance about PEPs.
  • Some of those questions suggest a possible fiduciary safe harbor for small employers who adopt PEPs.
  • This article begins a discussion of the questions asked by the DOL and my comments on those questions and issues. In particular, this article covers some of the “safe harbor” inquiries. The remaining DOL safe harbor questions will be discussed in my next article.
  • While the DOL inquiries are for future guidance, advisors and providers should be paying attention because, among other reasons, some current practices appear to be disfavored by the DOL.

This series of articles examines the DOL’s July 29, 2025, release that includes interpretative guidance on PEPs, solicits information about PEP practices, includes tips for selecting PEPs, and discusses a possible fiduciary safe harbor for adopting PEPs. 2025-14281.pdf (SECURED).

The first two articles in this series,  Things I Worry About (20) and Things I Worry About (21), discussed some of the DOL’s findings when it reviewed the 2023 Forms 5500 filed by PEPs.

The third, fourth and fifth articles, Things I Worry About (22), Things I Worry About (23), and Things I Worry About 24, reviewed issues identified by the DOL for deciding whether to join a PEP.

This article begins a series about the part of the guidance that was an RFI, where the DOL is soliciting information that would be helpful for future guidance. I quote and then discuss the questions that are the most interesting and relevant to employers and service providers.

Continue reading Things I Worry About (25): Pooled Employer Plans and DOL RFI (6) →

Things I Worry About (24): Pooled Employer Plans and DOL RFI (5)


DOL
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Key Takeaways

  • The DOL has issued guidance about PEPs—pooled employer plans—that provides tips for adopting employers and questions about PEPs and that suggests a possible fiduciary safe harbor for small employers who adopt PEPs.
  • This article continues a discussion of the questions that the DOL says that employers should ask when considering adopting a PEP for their employees. The questions covered in this article are 7 through 9, which deal with fees and costs, investments and scope of fiduciary responsibility.
  • Both advisors and employers should consider the DOL Tips when considering PEPs and, if a PEP would be a good choice, which one is a good fit for the employer.

This series of articles examines the DOL’s July 29, 2025, release that includes interpretative guidance on PEPs, solicits information about PEP practices, includes tips for selecting PEPs, and discusses a possible fiduciary safe harbor for adopting PEPs. 2025-14281.pdf (SECURED).

The first two articles in this series,  Things I Worry About (20) and Things I Worry About (21), discussed some of the DOL’s findings when it reviewed the 2023 Forms 5500 filed by PEPs. The third and fourth articles, Things I Worry About (22) and Things I Worry About (23), started the review of issues identified by the DOL for deciding whether to join a PEP.

This is the third article about the questions that the DOL suggested employers ask when adopting PEPs. That section—entitled “Fiduciary Tips for Small Employers Selecting a PEP”—posed nine questions that employers should ask. This article covers the remaining DOL questions and comments, as well as my comments.

Continue reading Things I Worry About (24): Pooled Employer Plans and DOL RFI (5) →

Things I Worry About (23): Pooled Employer Plans and DOL RFI (4)


DOL
, , , , , , , , , , ,

Key Takeaways

  • The DOL has issued guidance about PEPs—pooled employer plans—that provides tips for adopting employers and questions about PEPs and that suggests a possible fiduciary safe harbor for small employers who adopt PEPs.
  • This article continues a discussion of the questions that the DOL says that employers should ask when considering adopting a PEP for their employees. The questions covered in this article are 4 through 6, which deal with fees and costs, investments and scope of fiduciary responsibility.
  • Both advisors and employers should consider the DOL Tips when deciding whether to join a PEP and, if so, which one.

This series of articles examines the DOL’s July 29, 2025, release that includes interpretative guidance on PEPs, solicits information about PEP practices, includes tips for selecting PEPs, and discusses a possible fiduciary safe harbor for adopting PEPs. 2025-14281.pdf (SECURED).

The first two articles in this series,  Things I Worry About (20) and Things I Worry About (21), discussed some of the DOL’s findings when it reviewed the 2023 Forms 5500 filed by PEPs. The third article, Things I Worry About (22), started the review of issues identified by the DOL for deciding whether to join a PEP.

This is the second in a series of articles about the questions that the DOL suggested employers ask when adopting PEPs. That section—entitled “Fiduciary Tips for Small Employers Selecting a PEP”—posed nine questions that employers should ask. My last article, Things I Worry About (22), covered the first three questions. This article and my next one cover the remaining DOL questions and comments, as well as my comments.

Continue reading Things I Worry About (23): Pooled Employer Plans and DOL RFI (4) →

Things I Worry About (22): Pooled Employer Plans and DOL RFI (3)


DOL
, , , , , , , ,

Key Takeaways

  • The DOL has issued guidance about PEPs—pooled employer plans—that provides tips for adopting employers and questions about PEPs and a possible fiduciary safe harbor for small employers who adopt PEPs.
  • This article begins a discussion of the questions that the DOL says that employers should ask when considering adopting a PEP for their employees.

This series of articles examines the DOL’s July 29, 2025 release that includes interpretative guidance on PEPs, solicits information about PEP practices, includes tips for selecting PEPs, and discusses a possible fiduciary safe harbor for adopting PEPs. 2025-14281.pdf (SECURED).

The first two articles in this series,  Things I Worry About (20) and Things I Worry About (21), discussed some of the DOL’s findings when it reviewed the 2023 Forms 5500 filed by PEPs. This article moves on to the questions that the DOL suggested employers ask when adopting PEPs. That section—entitled “Fiduciary Tips for Small Employers Selecting a PEP”—posed 9 questions that employers should ask. This article and my next two provide the DOL’s questions and comments, as well as my comments.

Continue reading Things I Worry About (22): Pooled Employer Plans and DOL RFI (3) →