Trump to sign order opening 401(k)s to private equity

President Donald Trump is set to sign an executive order that could make it easier for US workplace retirement plans to offer private equity, cryptocurrencies, and other alternative investments.

The move, expected on Thursay, may reshape the landscape for 401(k) participants and their advisors, as reported by multiple media outlets.

The order will direct the Labor Department and Securities and Exchange Commission to issue guidance for employers considering private equity and other private market options in retirement accounts.

Private equity investments have long been limited to institutional and high-net-worth investors, but the directive signals a push to broaden access for the more than $12 trillion held in defined-contribution workplace savings plans, as noted by CNN.

A senior White House official told CNBC the order will also cover cryptocurrencies and real estate, expanding the range of alternatives available in 401(k)s. The executive order will direct the Secretary of Labor to review fiduciary guidance on private market investments in defined-contribution plans governed by the Employee Retirement Income Security Act of 1974 .

For plan sponsors, the order does not immediately change existing rules. Jaret Seiberg, a financial services policy analyst at TD Cowen Washington Research Group, said in a research note reported by CNN, “It will still require the agencies to craft new rules. That could take into 2026.”

Employers will need to conduct their own due diligence before making new investment options available. Lisa Gomez, former assistant secretary of labor for employee benefits security, told CNN, “It’s going to be more complicated.”

Gomez advised sponsors to consult experienced counsel and fiduciary advisers when evaluating private equity products. She said, “Be careful to not get caught in the hype. But we also shouldn’t be afraid. We should learn,” as reported by CNN.

Private market assets have traditionally been excluded from 401(k)s due to high fees, lack of transparency, and longer lockup periods, CNBC noted.

However, the DOL under the first Trump administration issued guidance in 2020 saying private market exposure could be appropriate for defined contribution plans under certain conditions.

Asset managers and plan sponsors have already begun creating products for retirement vehicles. BlackRock announced in June it will launch a 401(k) target date fund in 2026 with a 5% to 20% allocation to private investments, while Empower said in May it will allow private assets in some accounts later this year, according to CNBC .

The private equity industry has lobbied for access to workplace retirement plans, arguing that such investments can provide greater diversification. Hal Ratner, head of research at Morningstar Investment Management, told CNN there are “roughly 25 times more individual firms in the private equity market than in the publicly traded one.”

Ratner also noted that firms are staying private longer and entering public markets at a more mature stage. This may limit growth opportunities for public market investors, according to CNN.

The proposal has drawn skepticism from consumer advocates and lawmakers. Senator Elizabeth Warren has repeatedly pressed Empower with concerns about the risks to retirement savers and the broader financial system.

In a recent letter to Treasury Secretary Scott Bessent, Warren highlighted a 145% increase in bank loans to private debt funds. She called for regulators to assess the systemic risks posed by nonbank financial companies’ involvement in private credit markets.

Warren has also urged the Financial Stability Oversight Council to conduct stress tests on nonbank financial institutions engaged in private credit activities. Most plan sponsors are expected to proceed cautiously, given the added complexity and the need for robust due diligence.

With the looming changes, advisors and sponsors will need to weigh the potential benefits of diversification against the challenges of cost, transparency, and liquidity that private equity investments may present. That might present steep hurdles for would-be adopters under current fiduciary standards, according to Edward Gottfried, VP of product at Betterment at Work.

"401(k) investment selection and management is governed by fiduciary rules, which require an employer – and any advisor they may be working with – to review the investments to ensure they have fair fees and performance in line with general market returns," Gottfried said. "It will be extremely challenging for private securities to meet those standards, and employers should be very cautious to rush to adopt them as new investment options for their employees."