A proposed rule from the U.S. Department of Labor could mark a turning point for defined contribution plans, formally establishing a pathway for fiduciaries to incorporate alternative investments into 401(k) lineups. 

Issued by the department’s Employee Benefits Security Administration, the proposal follows a prior executive directive from Donald Trump to revisit guidance on alternatives within ERISA-governed retirement plans. The rule would allow plan sponsors to consider private equity, real estate, cryptocurrency and other alternative assets alongside traditional investments. 

At its core, the proposal reinforces the long-standing “prudent-man” standard under ERISA, requiring fiduciaries to evaluate investments with “care, skill, prudence, and diligence.” Rather than endorsing specific asset classes, the rule emphasizes process—placing alternatives on equal footing with traditional strategies. 

“The department’s days of picking winners and losers are over. Our rule clearly spells out that managers must evaluate any and all potential product offerings by following a prudent process,” said Keith Sonderling. “This proposal is decidedly neutral and refrains from saying that any asset class is any better or worse than other investment types, as the law requires.” 

Fiduciaries would be required to assess six core factors: performance, fees, liquidity, valuation, benchmarking and complexity. The duty of prudence would apply not only to individual selections but to the overall investment menu. 

The DOL expects alternatives to be introduced primarily through target-date funds and estimates more than 51,000 annual additions of such strategies across roughly 721,000 affected plans. Public comments are now being solicited on implementation and fiduciary standards.