U.S. Labor Department Rescinds 2021 Alternative Assets Guidance for 401(k) Plans

The U.S. Department of Labor announced the rescission of a 2021 supplemental guidance that had discouraged fiduciaries from incorporating alternative assets into 401(k) retirement plans [1]. This move marks a reversal from the Biden administration’s earlier stance and aligns with an executive order aimed at “Democratizing Access to Alternative Assets for 401(k) Investors.” The 2021 statement had cautioned against the inclusion of private equity and similar non-traditional assets, citing concerns over high fees, limited liquidity, and increased risk [2]. The rescission, issued by the Employee Benefits Security Administration (EBSA), removes this deterrent, allowing greater flexibility for plan sponsors to consider alternative investments in retirement offerings, as long as fiduciary standards are maintained [3].

The original 2021 guidance had created uncertainty among financial professionals, who interpreted it as a de facto prohibition on alternative assets in 401(k) plans [4]. By rescinding it, the Labor Department removes a regulatory hurdle that had discouraged some plan sponsors from offering such investments. This development is expected to encourage more inclusion of private equity and other alternative assets in retirement portfolios, potentially increasing diversification and aligning with broader market trends [5].

While the rescission is seen by some as a step toward expanding investment options for retirement savers, it has also drawn criticism. Analysts caution that alternative assets are often more complex, less transparent, and carry higher fees than traditional investments [6]. They argue that these characteristics can complicate fiduciary responsibilities and may not always be in the best interest of plan participants. The decision reflects a policy shift rather than a change in the core regulatory framework, which continues to emphasize fiduciary responsibility and participant protection [7].

The move highlights a growing recognition of demand for alternative investment options in retirement planning. While the 2021 guidance aimed to serve as a cautionary measure, the rescission signals a more open regulatory stance toward these assets. This change is likely to influence how plan sponsors and financial advisors approach retirement investment strategies, with a potential increase in the inclusion of alternative assets in 401(k) offerings [8].

Source:

[1] https://www.dol.gov/newsroom/releases/ebsa/ebsa20250812

[2] https://www.plansponsor.com/dol-rescinds-biden-era-guidance-on-alternative-investments-in-401k-plans/

[3] https://www.pionline.com/rules-regulations/government-politics/pi-labor-department-rescinds-alternatives-statement-401k/

[4] https://www.federalregister.gov/documents/2025/08/12/2025-15340/democratizing-access-to-alternative-assets-for-401k-investors

[5] https://www.ropesgray.com/en/insights/alerts/2025/08/planning-to-take-advantage-of-executive-order-on-alternatives-in-401k

[6] https://www.law360.com/articles/2376380/dol-yanks-2021-guidance-on-private-equity-401-k-risks