Key Takeaways
- • An Aug. 7, 2025 executive order directs the Department of Labor (DOL) to encourage defined contribution (DC) plan fiduciaries to offer participants greater exposure to private equity, digital currencies and other alternative assets, with a deadline of Feb. 3, 2026.
- • The order covers private market investments, actively managed digital asset vehicles, real estate, commodities, infrastructure projects and lifetime income strategies, and says access is warranted when fiduciaries judge it will enhance net risk-adjusted returns.
- • DOL rescinded its Biden-era private equity caution statement on Aug. 12, 2025, less than a week after the order was signed, and had previously revoked its cryptocurrency guidance.
- • The order makes no immediate changes to ERISA regulations; it directs DOL to clarify fiduciary process, consider safe harbors and prioritize actions that curb ERISA litigation.
- • According to Mercer, no immediate action is required from plan sponsors or fiduciaries, though further DOL guidance and parallel SEC changes on investor qualifications are expected.
Summary
An Aug. 7, 2025 executive order instructs the Department of Labor (DOL) to take action encouraging defined contribution (DC) plan fiduciaries to offer participants greater exposure to alternative assets, including private equity and digital currencies. DOL has until Feb. 3, 2026 to re-evaluate existing ERISA guidance on asset allocation funds that include these investments and clarify the agency's views, according to a Mercer analysis of the order. The order also directs DOL to prioritize actions that will deter private plaintiffs from bringing ERISA lawsuits.
The order's policy covers participant access to funds holding direct and indirect investments in private market instruments (including private equity funds), actively managed vehicles investing in digital assets, real estate, commodities, infrastructure development projects, and lifetime income strategies such as "longevity risk-sharing pools," a term the order does not define. It states that participants should have access when fiduciaries determine such funds offer an appropriate opportunity "to enhance the net risk-adjusted returns on their retirement assets." The order acknowledges that many defined benefit plans already invest in these assets and attributes DC fiduciaries' reluctance to litigation risk and "burdensome" DOL guidance.
DOL has already acted in part. On Aug. 12, less than a week after the order was signed, the agency rescinded its Biden-era statement cautioning fiduciaries of typical DC plans about including private equity in target-date or balanced funds. The agency had earlier revoked guidance cautioning 401(k) fiduciaries about offering cryptocurrency and other digital assets, which DOL said restored its historically neutral approach to investment types.
The order does not alter existing ERISA regulations. It directs DOL to clarify criteria for prudently balancing higher expenses against long-term net return and diversification objectives, and to propose regulations or guidance, possibly including "appropriately calibrated" safe harbors. The order also points to potential renewed attention to lifetime income options, building on the ERISA Advisory Council's prior recommendations on QDIA selection and monitoring. DOL must consult Treasury, the SEC and other agencies, and the SEC is directed to consider ways to broaden participant access beyond current high net worth and institutional investor limits.
Mercer notes that the form and timing of forthcoming guidance remain uncertain. Open questions include whether asset allocation funds will be the only permitted route, how ERISA disclosure obligations apply to alternative-asset funds, and whether regulatory safe harbors can meaningfully reduce litigation, since participants could still sue over imprudent fund selection.
The order's policy covers participant access to funds holding direct and indirect investments in private market instruments (including private equity funds), actively managed vehicles investing in digital assets, real estate, commodities, infrastructure development projects, and lifetime income strategies such as "longevity risk-sharing pools," a term the order does not define. It states that participants should have access when fiduciaries determine such funds offer an appropriate opportunity "to enhance the net risk-adjusted returns on their retirement assets." The order acknowledges that many defined benefit plans already invest in these assets and attributes DC fiduciaries' reluctance to litigation risk and "burdensome" DOL guidance.
DOL has already acted in part. On Aug. 12, less than a week after the order was signed, the agency rescinded its Biden-era statement cautioning fiduciaries of typical DC plans about including private equity in target-date or balanced funds. The agency had earlier revoked guidance cautioning 401(k) fiduciaries about offering cryptocurrency and other digital assets, which DOL said restored its historically neutral approach to investment types.
The order does not alter existing ERISA regulations. It directs DOL to clarify criteria for prudently balancing higher expenses against long-term net return and diversification objectives, and to propose regulations or guidance, possibly including "appropriately calibrated" safe harbors. The order also points to potential renewed attention to lifetime income options, building on the ERISA Advisory Council's prior recommendations on QDIA selection and monitoring. DOL must consult Treasury, the SEC and other agencies, and the SEC is directed to consider ways to broaden participant access beyond current high net worth and institutional investor limits.
Mercer notes that the form and timing of forthcoming guidance remain uncertain. Open questions include whether asset allocation funds will be the only permitted route, how ERISA disclosure obligations apply to alternative-asset funds, and whether regulatory safe harbors can meaningfully reduce litigation, since participants could still sue over imprudent fund selection.
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