- Although legally permitted, most IRAs and 401(k)s effectively exclude alternative assets because custodians and plan fiduciaries face high regulatory, operational, and litigation risk.
- An August 2025 executive order and subsequent Labor Department actions (including rescinding prior discouraging guidance) aim to clear a path for prudent alternative-asset exposure in defined contribution plans.
- Participant interest is meaningful (about 45% say they would invest if offered), but adoption is expected to be slow given fees, illiquidity, and transparency concerns.
- Near-term growth is likely to flow through packaged vehicles like CITs or target-date funds alongside evolving safe harbors, disclosures, and implementation rules.
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The foundational claim in the primary article—that alternative assets are effectively excluded from tax-advantaged retirement accounts despite permissibility under law—largely holds up under scrutiny but needs nuance. U.S. law (Internal Revenue Code and ERISA) does not categorically prohibit retirement accounts like IRAs or 401(k)s from holding alternative assets. For example, self-directed IRAs permit holding private equity, real estate, non-public businesses, subject to custodian agreement and compliance with prohibited transaction rules. ([legalclarity.org](https://legalclarity.org/ira-alternative-investments-rules-compliance/?utm_source=openai))
Where exclusion comes from is regulatory guidance, risk aversion by plan fiduciaries, cost, illiquidity, and litigation risks. Private equity exposure in defined contribution (DC) plans has historically been under 1% of assets. Many plan sponsors were discouraged by the 2021 DOL Supplemental Private Equity Statement, which suggested private equity is generally inappropriate for typical 401(k) plan investment menus. ([cnbc.com](https://www.cnbc.com/2025/03/11/private-equity-wants-a-larger-piece-of-workplace-retirement-plan-assets.html?utm_source=openai))
Recent events—most notably the August 7, 2025 Executive Order “Democratizing Access to Alternative Assets for 401(k) Investors”—have begun to shift the landscape. That Order defines alternative assets broadly (including private equity, real estate, infrastructure, commodities, digital asset-based vehicles), directs agencies (DOL, SEC, Treasury) to reexamine and clarify guidance, potentially issue regulations with safe harbors, rescind discouraging statements, and reduce litigation risk. ([whitehouse.gov](https://www.whitehouse.gov/presidential-actions/2025/08/democratizing-access-to-alternative-assets-for-401k-investors/?utm_source=openai))
Evidence of demand exists: a July–August 2025 Schroders survey of US workplace retirement plan participants (401k, 403b, 457) showed 45% would invest in private equity or private debt if available, up from 36% in 2024. Yet, only about 30% expect such access in their current plan within five years. ([businesswire.com](https://www.businesswire.com/news/home/20250825895559/en/Schroders-Study-Finds-Nearly-Half-of-Retirement-Plan-Participants-Would-Invest-in-Private-Assets?utm_source=openai))
Strategic implications include a potential market opportunity for asset managers and providers who can build compliant vehicles (e.g. CITs, target date funds with alt sleeves); risk exposure for fiduciaries regarding higher fees and illiquidity; and a regulatory environment in flux which requires plan sponsors to stay aligned. For example, in May 2025 Empower announced it will allow private investments in supported plans as of late 2025. ([barrons.com](https://www.barrons.com/advisor/articles/empower-retirement-plan-private-investments-4abf1f48?utm_source=openai))
Open questions remain: How stringent will the future safe harbors be? What liquidity constraints will be imposed to protect participant withdrawals? How will cost disclosures evolve? Which types of alternative assets will prove practical for average plan participants versus institutional investors? And will demand from participants translate into actual adoption by sponsors given governance and legal risk?
Supporting Notes
- U.S. retirement assets total ~$48.1 trillion as of Q3 2025: IRAs $18.9 trillion, DC plans $13.9 trillion, government DB plans $9.5 trillion. ([ici.org](https://www.ici.org/statistical-report/ret_25_q3?utm_source=openai))
- Alternative assets (e.g. private equity) make up less than 1% of assets in defined contribution plans. ([cnbc.com](https://www.cnbc.com/2025/03/11/private-equity-wants-a-larger-piece-of-workplace-retirement-plan-assets.html?utm_source=openai))
- Schroders 2025 survey: 45% of DC plan participants would invest in private equity / debt if available; only 30% expect access in their plan within five years. ([businesswire.com](https://www.businesswire.com/news/home/20250825895559/en/Schroders-Study-Finds-Nearly-Half-of-Retirement-Plan-Participants-Would-Invest-in-Private-Assets?utm_source=openai))
- Executive Order (Aug 7, 2025) directs DOL and SEC to re-examine guidance, clarify fiduciary duties, define criteria for prudent inclusion of alternative assets, consider safe harbors, revise ‘accredited investor’/‘qualified purchaser’ rules. ([whitehouse.gov](https://www.whitehouse.gov/presidential-actions/2025/08/democratizing-access-to-alternative-assets-for-401k-investors/?utm_source=openai))
- DOL rescinded its December 2021 Supplemental Private Equity Statement, which had discouraged plan fiduciaries from including private equity in 401(k) menus; also issued advisory opinion confirming lifetime income investment options can be qualified defaults even if they include alternative assets. ([dol.gov](https://www.dol.gov/newsroom/releases/ebsa/ebsa20250923?utm_source=openai))
- Empower, a retirement services provider with $1.8 trillion under management for ~19 million savers, is partnering with large asset managers to allow private assets in employer-sponsored plans late in 2025. ([barrons.com](https://www.barrons.com/advisor/articles/empower-retirement-plan-private-investments-4abf1f48?utm_source=openai))
- The EO does not change substantive ERISA law but mandates agencies to propose rules/guidance by early February 2026. ([kslaw.com](https://www.kslaw.com/news-and-insights/executive-order-seeks-to-promote-incorporation-of-alternative-assets-in-401k-plans?utm_source=openai))
- Potential risks: high fees, illiquidity, lack of transparency. ([kiplinger.com](https://www.kiplinger.com/retirement/pros-and-cons-of-alternative-investments-in-your-ira?utm_source=openai))
- Passive and public asset classes (stocks, mutual funds) dominate current DC plan lineups (e.g. mutual funds manage ~60%+ of 401(k) plan assets). ([ici.org](https://www.ici.org/node/836811?utm_source=openai))