Labor Department rule opens 401(k)s to risky assets

The Department of Labor has proposed a new rule to make it easier for 401(k) plans to include alternative investments such as cryptocurrency, real estate, and private equity.

The proposal follows an executive order by President Donald Trump that aims to expand access to nontraditional assets. It seeks to ease regulatory restrictions and reduce legal risks for employers managing these plans, building on earlier efforts to broaden investment choices.

What the rule means
The change could redirect part of the $14.2 trillion held in retirement accounts into less transparent markets. 

Employers must still follow ERISA rules and evaluate investments based on performance, fees, risk, and liquidity. The proposal also offers a safe harbor process to help plan managers meet legal requirements.

Benefits vs risks
Supporters say alternative assets can boost returns and diversify portfolios, especially as public stock listings have dropped sharply since the 1990s. Critics warn these investments carry higher fees, limited transparency, and long lock-in periods. 

Retirees won’t be able to sue employers over alternative investments.

Experts also point to rising stress in private credit markets and question whether returns actually improve. The rule is open for public comment until June 1, with final decisions expected later this year.