Labor Department proposes new 401(k) rules

The U.S. Department of Labor has unveiled a sweeping proposed regulation that could significantly broaden the range of investment options available in workplace retirement plans, potentially affecting more than 90 million Americans.

The proposal, issued by the department’s Employee Benefits Security Administration (EBSA), outlines how managers of 401(k) plans can incorporate alternative assets — such as private equity, real estate, or other nontraditional investments — into their plan offerings. It also establishes a series of process-based “safe harbors” designed to guide fiduciaries in selecting these investments while meeting their legal obligations.

Labor Secretary Lori Chavez-DeRemer said the rule is intended to modernize retirement planning and align it with today’s evolving investment landscape.

“Our goal is to deliver on President Trump’s promise for a new golden age by fostering a retirement system that allows more Americans to retire with dignity,” Chavez-DeRemer said. “This proposed rule will show how plans can consider products that better reflect the investment landscape as it exists today.”

Builds on previous changes

The proposal follows a recent executive order aimed at expanding access to alternative assets within retirement plans. Administration officials argue that broader diversification could help workers build wealth over the long term.

Treasury Secretary Scott Bessent called the rule an “initial step” toward implementing that directive, emphasizing the need to balance expanded access with investor protections.

“Broadening access to additional retirement plan options for millions of Americans” must be done “in a safe and smart manner,” Bessent said.

The Securities and Exchange Commission also collaborated on the proposal. SEC Chairman Paul Atkins said expanding access to diversified investments is key to helping Americans participate more fully in economic growth.

New requirements for fiduciaries

Under the proposed regulation, fiduciaries would be required to follow a structured evaluation process when considering any investment option. That includes analyzing factors such as fees, performance history, liquidity, valuation methods, benchmarks, and overall complexity.

The rule does not endorse any specific asset class. Instead, it emphasizes neutrality, reinforcing that fiduciaries must rely on a prudent decision-making process rather than favoring or excluding certain types of investments.

“The department’s days of picking winners and losers are over,” said Deputy Labor Secretary Keith Sonderling. “Managers must evaluate any and all potential product offerings by following a prudent process.”

Although plan managers have long had the authority to include alternative assets, adoption has been limited. Federal officials pointed to prior guidance — since rescinded — that cautioned against including certain investments, such as cryptocurrency, as a factor that may have discouraged broader use.

The EBSA, which oversees retirement and health benefit plans covering more than 156 million Americans, said the proposal is consistent with longstanding principles under the Employee Retirement Income Security Act (ERISA), which prioritizes fiduciary prudence and flexibility.

If finalized, the rule could mark a major shift in how Americans save for retirement, opening the door to a wider array of investment strategies while placing greater emphasis on careful oversight by plan managers.