Digital Assets Might Fit Differently in DC Plans Than Other Alternative Assets

The retirement industry faces a critical decision point regarding digital asset integration into defined contribution plans, as regulatory pressure mounts but practical and fiduciary concerns persist. Ary Rosenbaum, an ERISA attorney at the Rosenbaum Law Firm P.C. who specializes in plan sponsor fiduciary liability, articulated the core challenge: digital assets exhibit volatility fundamentally different from established alternative investments. Bitcoin prices have ranged from below $108,000 in late August 2025 to above $120,000 in early October, before declining to less than $105,000 by November 4, 2025. While Rosenbaum personally invests in bitcoin and acknowledges its profit potential, he explicitly cautions against placing such volatile instruments directly in the hands of retail retirement plan participants. "With private equity, you're going to have less volatility," he notes, underscoring that digital assets require different risk assessment frameworks than conventional alternatives.

Regulatory momentum for alternative asset inclusion has accelerated recently. In May 2025, the Department of Labor adopted a "neutral" stance toward crypto in DC plans, reversing prior restrictive positions. This shift followed President Trump's August executive order, which directed federal regulators to issue comprehensive guidance enabling plan sponsors to integrate alternative investments more effectively into retirement vehicles. However, regulatory clarity has not automatically translated into market adoption.

The practical pathway for plan sponsors choosing to provide digital asset exposure appears to favor exchange-traded funds (ETFs) focused on bitcoin over direct digital asset holdings. This structure addresses critical operational barriers: digital assets often require separate custody arrangements outside standard plan administration infrastructure, and they pose heightened cybersecurity risks that direct ownership would amplify. Plan sponsors must balance participant demand for digital asset exposure against their fiduciary obligation to act prudently.

Despite these regulatory developments, alternative asset inclusion in DC plans remains limited. While alternative investments have become an increasingly large component of public pension and defined-benefit plan portfolios—contributing to their historically superior returns compared to DC plans—DC plan adoption has been constrained by persistent litigation concerns. Plan sponsors remain cautious, viewing fiduciary liability as a material barrier to product innovation, even as regulatory guidance becomes more permissive. The distinction between digital assets and other alternatives appears likely to shape implementation strategies going forward, with structured products like ETFs potentially serving as the practical bridge between participant demand and sponsor risk tolerance.