Yes, a significant retirement plan proposal could substantially expand investment options in 401(k) plans by allowing private equity, real estate, infrastructure, private credit, and cryptocurrency. On March 30, 2026, the U.S. Department of Labor released a proposed rule titled “Fiduciary Duties in Selecting Designated Investment Alternatives” that responds directly to a presidential directive to reconsider the restrictions on alternative investments in retirement accounts. This proposal represents the most substantial shift in 401(k) investment flexibility in decades, though it comes with important safeguards and requirements for plan administrators.
The proposed rule emerges from President’s August 2025 Executive Order directing the Department of Labor to revisit its stance on alternative investments for 401(k) plans. Rather than mandating these new investments, the proposal would create a legal pathway for plan fiduciaries to offer them—provided they follow a structured process and meet specific criteria. For workers, this could mean the potential to diversify retirement savings beyond traditional stocks, bonds, and mutual funds. For plan sponsors, it creates new complexity around the decision-making process and fiduciary obligations.
Table of Contents
- What Does the Proposed Rule Actually Allow Plan Sponsors to Do?
- How Does the Proposal Protect Plan Fiduciaries and Participants?
- What Are the Key Risks and Concerns With Private Investments in 401(k)s?
- How Could This Proposal Change Retirement Planning Strategy?
- What’s the Timeline, and What Should Retirees Do Now?
- How Does This Compare to Today’s Retirement Investment Rules?
- Looking Ahead—What Could Come Next?
- Conclusion
What Does the Proposed Rule Actually Allow Plan Sponsors to Do?
The Department of Labor’s proposal would permit 401(k) plans to include alternative investments that were previously difficult or impossible to include in most workplace retirement plans. Specifically, plan fiduciaries would be able to offer private equity investments, real estate holdings, infrastructure projects, private credit arrangements, and even cryptocurrency options as designated investment alternatives. This is a fundamental change from current practice, where most 401(k) plans offer only publicly traded stocks, bonds, index funds, and mutual funds.
Consider a concrete example: A mid-sized company’s 401(k) plan could potentially offer employees access to a private real estate fund focused on commercial properties, or a private equity fund invested in growing technology companies. Currently, these options are largely restricted to very wealthy individuals through private wealth management or to large institutional plans with specialized expertise. The proposal aims to democratize access to these investment types, though with important guardrails. The comment period for public feedback on this proposal runs until June 1, 2026, giving stakeholders time to raise concerns and suggestions before the rule becomes final.
How Does the Proposal Protect Plan Fiduciaries and Participants?
Rather than a free-for-all approach to alternative investments, the proposal includes substantial fiduciary requirements and safeguards. Plan fiduciaries—the individuals and companies responsible for managing retirement plans—must objectively consider several specific factors when evaluating whether to include alternative investments: performance data, fees and expenses, liquidity conditions, valuation methodology, appropriate performance benchmarks, and the complexity of the investment relative to participants’ sophistication. The legal framework provides important protections through what’s known as a “safe harbor” provision.
Under the proposal, decisions that follow the prescribed evaluation process would be “presumed to be reasonable” and “entitled to significant deference” in legal proceedings. this means a plan sponsor that properly documents its decision-making process using the DOL’s framework would have significant legal protection if an investment underperforms. However, this safe harbor only applies if fiduciaries genuinely follow the process and document their work thoroughly. A company that rubber-stamps a private equity investment without actually analyzing fees and performance benchmarks would not receive this protection.
What Are the Key Risks and Concerns With Private Investments in 401(k)s?
Alternative investments differ fundamentally from traditional stock and bond funds in ways that create genuine risks for retirement savers. Private equity investments, for instance, typically require capital to be locked up for 5-10 years or longer. A worker who needs to access their retirement savings during a market downturn or personal emergency might find themselves unable to sell a private equity stake, even if their overall plan allows withdrawals. Cryptocurrency holdings carry extreme volatility—Bitcoin has fluctuated by 50% or more within months in recent years—which can devastate retirement savings if the timing is unlucky. Valuation presents another serious concern. Public stocks have prices updated constantly throughout the trading day, making it easy to know exactly what your investment is worth.
Private equity and real estate don’t have transparent, daily pricing. A private fund might tell you your stake is worth $100,000 on December 31st and $85,000 on January 2nd based on internal valuation, leaving participants uncertain about their actual account balance. This opacity also creates opportunity for conflicts of interest, where fund managers might value holdings optimistically to attract capital or reduce the appearance of losses. Fees for alternative investments often run substantially higher than traditional mutual funds. A low-cost index fund might charge 0.05% annually, while a private equity fund typically charges 2% in management fees plus 20% of profits above a certain threshold. For a participant with a $500,000 401(k) balance, the difference between a 0.05% fee and a 2% fee equals roughly $10,000 per year in costs—amounts that compound dramatically over decades of retirement saving.
How Could This Proposal Change Retirement Planning Strategy?
For plan sponsors considering whether to offer alternative investments, this proposal shifts the calculus significantly. Previously, the legal liability of offering private equity or real estate in a 401(k) was substantial because there was no clear regulatory pathway and limited legal precedent. Plan sponsors faced potential lawsuits from participants if these investments underperformed. The Department of Labor’s proposed safe harbor reduces this legal risk considerably for sponsors who follow the process correctly, making alternative investments more attractive to plan design committees.
For individual workers, the implications are more mixed. A younger employee far from retirement might benefit from higher-risk, higher-potential-return investments like private equity. A worker within five years of retirement typically should not be concentrating retirement savings in illiquid, complex investments they may not fully understand. The key difference from current practice is that the choice would exist—something that was previously unavailable to most workers except those with very large balances who could access individual alternative investments outside their 401(k).
What’s the Timeline, and What Should Retirees Do Now?
The Department of Labor will accept public comments on this proposed rule through June 1, 2026. During this comment period, investment firms, retirement industry groups, employee advocates, and financial security organizations will likely submit detailed feedback—some supporting broader access to alternatives, others warning about risks to ordinary workers. The DOL will then review these comments and either finalize the rule, revise it substantially, or potentially withdraw it if concerns outweigh support.
Participants and plan sponsors should not assume that private investments will appear in 401(k) plans immediately, even if the rule is finalized. Plan sponsors would need to research and carefully evaluate specific private investment options, establish proper governance around these decisions, and implement systems to track alternative holdings—all of which takes time. For workers currently saving for retirement, immediate action isn’t necessary, but staying informed about how your plan might change is prudent. If your plan announces alternative investment options in the coming year, request detailed materials explaining the offerings, fees, and risks before deciding whether to participate.
How Does This Compare to Today’s Retirement Investment Rules?
Today’s typical 401(k) plan restricts investment options to publicly traded securities and mutual funds because these investments are easy to value, highly liquid, and have transparent fee structures. This restriction exists partly for safety—protecting workers from complex or risky investments they may not understand—and partly for practicality, since private investments create enormous accounting and administrative burdens for plan sponsors. The proposal doesn’t eliminate these restrictions entirely.
It creates a process for allowing alternatives, but plan sponsors must document that they’ve properly evaluated the options and that the investments meet the fiduciary standards. A majority of 401(k) plans, particularly those offered by smaller employers, will likely continue offering only traditional investments because the administrative burden of managing alternatives is too great. Larger plans at major corporations are more likely to add alternative options, potentially creating a two-tiered system where workers at Fortune 500 companies have access to private investments while workers at smaller companies do not.
Looking Ahead—What Could Come Next?
If the Department of Labor finalizes this rule, expect a gradual expansion of alternative investment products designed for 401(k) plans over the next 3-5 years. Investment firms will create new vehicles specifically structured for workplace retirement plans, with messaging emphasizing both the upside potential and the risks.
Financial advisors will develop frameworks for helping workers decide whether alternative investments fit their retirement timeline and risk tolerance. The broader question is whether this proposal represents genuine democratization of investment opportunity or a expansion of risk into accounts that were designed to be straightforward and protected. That debate will unfold during the comment period and, ultimately, through how individual plan sponsors choose to implement these changes if the rule is finalized.
Conclusion
The Department of Labor’s March 2026 proposal would substantially alter what investments can be offered in 401(k) plans by establishing a legal framework for private equity, real estate, infrastructure, private credit, and cryptocurrency holdings. The proposal includes meaningful safeguards through fiduciary requirements and a safe harbor process, but these protections only work if plan sponsors actually follow them rigorously. For workers, the proposal represents an opportunity to diversify beyond traditional stocks and bonds—and a risk of exposure to complex, illiquid, or volatile investments that may not belong in retirement accounts.
The comment period extending through June 1, 2026 is critical for anyone with a stake in retirement security. Plan sponsors should monitor developments to understand how this might affect their fiduciary obligations. Workers should focus on understanding how alternative investments might fit their specific situation—particularly their timeline to retirement, need for liquidity, and tolerance for complexity and risk. The decisions made in coming months will shape retirement investing for a generation.