Millions of American workers saving for retirement through 401(k) plans could soon gain access to stakes in private companies like SpaceX, Stripe, and other firms that have historically been off-limits to everyday investors. The U.S. Department of Labor on March 30 proposed a rule that would create process-based safe harbors for plan fiduciaries who want to offer alternative investments, including private equity and private credit, inside defined-contribution retirement accounts. The proposal follows an executive order issued in August 2025 that directed the DOL, in consultation with the SEC and Treasury, to reexamine longstanding ERISA restrictions that have kept these assets confined largely to pension funds and wealthy individuals.
How the DOL safe harbor would change 401(k) investing
The core tension is straightforward: defined-benefit pension plans and endowments have allocated to private markets for decades, but the 401(k) system, which now holds the bulk of American retirement wealth, has almost entirely excluded them. The new proposed rule from DOL attempts to bridge that gap by giving plan fiduciaries a defined set of procedural steps they can follow when adding alternative-asset options to a plan menu. If a fiduciary satisfies those steps, the rule would treat the selection as consistent with ERISA’s duty of prudence, reducing the legal risk that has discouraged sponsors from even considering private holdings.
That legal risk has been real. In a 2020 supplemental statement, the DOL cautioned that its earlier information letter on private equity in 401(k) plans “was not intended as an endorsement” of such investments for typical participant-directed accounts. The agency flagged valuation difficulties, liquidity constraints, and disclosure gaps as specific concerns fiduciaries must weigh. The proposed rule published in the Federal Register on March 31 now attempts to address those concerns through structured requirements rather than blanket prohibition.
Under the draft framework, fiduciaries seeking safe-harbor protection would need to document a due-diligence process focused on several elements. These include the experience and regulatory history of the private fund manager; the methodology used to value illiquid holdings; the alignment of fees and carried interest with participant outcomes; and the mechanisms for providing periodic liquidity, such as interval funds or target-date structures that blend public and private assets. The rule does not mandate any particular allocation level, but it emphasizes that private strategies should be part of diversified options, not stand-alone, high-risk bets.
The DOL also stresses participant comprehension. Plan sponsors relying on the safe harbor would have to ensure that disclosures explain, in plain language, how capital is locked up, how often valuations are updated, and how performance fees are calculated. The department frames these requirements as a way to narrow the information gap between sophisticated institutions and individual savers who may be encountering private markets for the first time.
Executive Order 14330 and the regulatory trail
The policy did not originate at DOL. Executive Order 14330, titled “Democratizing Access to Alternative Assets for 401(k) Investors,” directed the Labor Department to work with the SEC and Treasury to revisit ERISA guidance and explore whether accredited-investor and qualified-purchaser thresholds should be adjusted for retirement-plan participants. That directive set deadlines for agency action and framed the effort as expanding access that pension funds and institutional investors already enjoy.
In the order’s preamble, the administration argued that excluding 401(k) savers from private markets could leave them structurally disadvantaged if return premia persist outside public exchanges. At the same time, it acknowledged that opaque fee structures, complex valuation practices, and limited redemption rights pose distinct risks when investments are offered to millions of small accounts instead of a handful of large institutions. The DOL’s safe-harbor proposal is the first major attempt to translate that high-level directive into operational rules for plan sponsors.
A separate regulatory layer complicates the picture. The SEC’s Private Fund Adviser rules, which imposed audit and disclosure requirements on private fund managers, were vacated by the Fifth Circuit. That judicial outcome removed a set of investor protections that would have applied to any private fund packaged for retirement-plan distribution. Without those rules, the guardrails around fee transparency and third-party audits for private funds are thinner than the administration’s own executive order language might suggest, putting more weight on whatever standards the DOL ultimately finalizes.
Unanswered questions about plan-size divergence and valuation
The proposed rule leaves several practical questions open. No publicly available Form 5500 data or plan-level filings show how many sponsors are prepared to adopt private-asset options if the safe harbor is finalized. Large employers with in-house investment staff or consultant relationships may be better positioned to evaluate complex vehicles, negotiate fees, and monitor managers. Smaller plans, by contrast, could struggle to meet the documentation and oversight expectations embedded in the safe harbor, potentially widening an existing gap between large and small 401(k) offerings.
Valuation remains another fault line. Private equity and private credit funds typically report net asset values on a quarterly basis using appraisal-based methods that can lag market conditions. If those valuations feed into daily 401(k) account balances, participants might see smoothed returns that understate volatility or delay the recognition of losses. The DOL proposal calls for “reasonable and consistently applied” valuation policies but stops short of prescribing specific methodologies, leaving room for variation across providers.
There is also the question of how much complexity participants can reasonably absorb. Target-date funds that blend public and private assets could shield individuals from manager selection decisions, but they also make it harder for savers to understand what they own and how quickly they can exit. If market stress forces private funds to gate redemptions or suspend withdrawals, plan sponsors may face difficult choices about liquidity management and communication, even if they have technically complied with safe-harbor procedures.
The coming comment period is likely to surface these tensions. Industry groups representing asset managers are expected to argue that carefully structured access to private markets can improve diversification and long-term returns for 401(k) savers. Consumer advocates and some plan fiduciaries may counter that the combination of illiquidity, opaque pricing, and limited regulatory oversight could expose workers to risks they are ill-equipped to evaluate. How the DOL balances those competing views when it finalizes the rule will determine whether the safe harbor becomes a niche tool for a handful of large plans or a catalyst for a broader shift in how Americans invest for retirement.
