DOL’s new 401(k) proposal hailed as step towards ‘fairer’ retirement system

The Department of Labor’s new 401(k) proposal to open up retirement plans to a broader set of investments, including private markets, has been lauded as an important move that will increase the options available to advisors and their clients.

The proposed regulation focuses on the steps that managers of 401(k) plans should take when considering alternative assets and establishes a set of “safe harbors” for plan fiduciaries to use when selecting designated investment alternatives. 

“This is an important step towards creating a more inclusive and fair retirement system – private markets have long been key asset classes for institutional investors but have remained out of reach for the average American saver until now,” said Daniel Cahill, head of U.S. defined contribution at asset manager Partners Group. “This proposed regulation gives fiduciaries the ultimate discretion to utilize private markets within professionally managed, multi-asset solutions toward the goal of helping plan participants reach a successful retirement.”

“With time and choice, we believe that DC [defined contribution] plans will adopt similar asset allocations to DB [defined benefit] plans, incorporating private markets as a key potential performance driver,” he added.

Rasmus Goksor, CEO of Sekond, which provides data and analytics on private credit funds, also sees potential for investors in the DOL's proposal. "The democratization of private markets is a defining opportunity for retail investors to access high-growth assets — and we can get it right," he told InvestmentNews. "The key is ensuring that disclosure standards keep pace with access, so that every investor has the timely information they need to participate with confidence.”

Data from the Investment Company Institute show that total U.S. retirement assets climbed to $49.1 trillion at the end of December 2025, an increase of 11.2% for the year, and a 2.1% hike from the end of September. Assets held in defined contribution plans were $14.2 trillion at the end of the fourth quarter, up 1.7% from Sept. 30, 2025, while private sector defined benefit plans held $3.1 trillion in assets, essentially flat from the end of the prior quarter.

While the Department of Labor’s proposal means more choice, it also brings greater responsibility, according to Ari Jacobs, global head of investments at Aon. “Private investment strategies can offer diversification benefits when used appropriately, but their inclusion in defined contribution plans hinges on strong fiduciary governance,” he said, in a statement. “The proposed rule reinforces that ERISA [Employment Retirement Income Security Act] prudence is about process, requiring sponsors to objectively assess factors such as fees, liquidity, valuation and participant impact.”

“Plan sponsors should work to understand what, if anything, changes for their specific plans and governance frameworks, and that they are sufficiently prepared to support disciplined evaluation and ongoing oversight of investment options,” Jacobs added.

These sentiments were echoed by Chris Littlefield, president of retirement and income solutions at Principal Financial Group. “For most plan sponsors, the key question isn’t simply how to add alternative assets; it’s whether their participants, their plan, and their operating partners are truly prepared for them,” he said, in a statement. “When that readiness is in place, private assets can be a durable component of a long‑term retirement strategy.”

“When it’s not, the most fiduciary‑sound decision is to wait,” he added. “Either path can be prudent. What matters is making the decision deliberately.”

The Department of Labor’s move was not completely out of the blue – last year President Donald Trump issued an executive order that greenlit alternative investments in 401(k) accounts.

In a statement Monday, U.S. Treasury Secretary Scott Bessent described the Department of Labor proposal as “another step in ushering in President Trump's Golden Age.”

However, the proposal has attracted the ire of Senator Elizabeth Warren. The Democratic lawmaker, who is the ranking Member of the Senate Banking, Housing, and Urban Affairs Committee, slammed the move Monday.

“As cracks emerge in the private credit market, private equity returns fall to 16-year lows, and crypto keeps tumbling, President Trump has decided now is the time to stick all of these risky assets into Americans’ 401(k)s,” she said, in a statement. “Americans facing an uncertain future in Trump’s economy will now have more reasons to question the security of their retirement savings – all so that Trump’s Wall Street buddies have another pile of cash to play with.”