Private Equity for the People? Trump Wants 401(k) Access Expanded

President Trump’s latest executive order promises to shake up the retirement landscape by expanding access to alternative investments within 401(k) plans.

For asset managers, it’s a long-awaited green light. For plan sponsors, it’s a potential minefield.

To get clarity on what this actually means, I spoke with Robert L. Sichel, partner at the law firm K&L Gates. His message is that there’s momentum behind private assets in defined contribution plans, but the legal risks haven’t gone away.

“The administration's hope is that this will mitigate risk,” Sichel said. “But the executive order won’t do that on its own.”

The Executive Order

Trump’s executive order, released Thursday, directs the Secretary of Labor to “reexamine the Department of Labor’s guidance on a fiduciary’s duties regarding alternative asset investments in ERISA-governed 401(k) and other defined-contribution plans,” according to a fact sheet released by the White House.

It also calls on the SEC and Treasury to consider regulatory changes that could support expanded access to alternative assets in 401(k)s.

The administration framed the initiative as part of a broader effort to “Make America Wealthy Again,” by opening the door to investments that have historically been off-limits in most 401(k)s due to concerns around complexity, liquidity, and legal liability.

The White House said the move aims to “ensure a dignified and comfortable retirement for all Americans” by expanding access to investment options long reserved for institutions and high-net-worth investors.

“More than 90 million Americans participate in employer-sponsored defined-contribution plans, and most of those are currently restricted from investing in alternative assets, unlike wealthy investors and retirement plans for government workers,” the administration said.

“Alternative assets, such as private equity, real estate, and digital assets, offer competitive returns and diversification benefits. Regulatory overreach and litigation risks have limited ERISA-governed plan fiduciaries from including alternative assets in their investment portfolios, hindering workers’ retirement growth.”

Legal Risk Still Looms

Sichel said the move formalizes what many in the industry were already anticipating.

“There’s already a lot happening because it’s no secret that this was going to happen,” he said. “This just puts a little more wind in the sails of the stakeholders who are already working on these types of products.”

Still, he emphasized that nothing in the executive order changes the underlying legal framework. ERISA remains the law of the land, and it’s what keeps many employers cautious.

“The risk [of litigation] will never go away,” Sichel said.

But what could help, he added, is further guidance from the Department of Labor, similar to the subregulatory letter it issued in 2020 around the use of private equity in target-date funds.

“We’ll need something from DOL to mitigate risk,” he said. “If they move forward with subregulatory guidance, like they did for private equity in 2020, that could provide a roadmap for fiduciaries.”

“They could do something similar, but broader, for crypto or other alternatives. If we get that kind of guidance—something that says, ‘Here’s how to think about this issue’—it helps mitigate the risk. It doesn’t make it go away, but it does reduce it.”

Political Whiplash Is a Concern

Sichel also cautioned that any subregulatory guidance could change depending on the political winds in Washington.

“We get different subregulatory guidance depending on who’s in power,” he said. “That leads plan sponsors to maybe not move quickly.”

Regardless, he expects the asset management industry to continue pushing ahead. Whether plan sponsors and investors follow, though, remains to be seen.

ETF Options Already Exist

While adding alternative assets directly to core 401(k) investment options, like target-date funds, would be a major shift, the idea of holding them in retirement accounts isn’t new. Many investors already access alternatives through self-directed IRAs or 401(k) brokerage windows, where ETFs tied to crypto and private credit are increasingly common.

The Virtus Seix AAA Private Credit CLO ETF (PCLO) and BondBloxx Private Credit CLO ETF (PCMM) offer exposure to private credit CLOs, while the SPDR SSGA IG Public & Private Credit ETF (PRIV) blends investment-grade public and private credit.

Meanwhile, the iShares Bitcoin Trust (IBIT) and iShares Ethereum Trust (ETHA) provide exposure to bitcoin and ether, respectively.

Still, ETFs have limits. Their requirement for daily liquidity makes them a tough fit for the more illiquid parts of the alternatives market, like private equity. That’s why some see 401(k)s—with their decades-long holding periods—as a better home for illiquid strategies, if the legal hurdles can be cleared.