An executive order signed in August 2025 set in motion the biggest change to workplace retirement menus in a generation, directing federal regulators to clear a path for private equity, private credit and cryptocurrency inside 401(k) plans. In March, the Labor Department followed with a proposed rule meant to give plan sponsors legal cover to add those alternative assets, putting some of the roughly $12.2 trillion held in workplace plans in play. Supporters cast it as giving ordinary savers the same investments the wealthy and big pensions already use; critics warn the same door lets in high fees, hard-to-value holdings and risks most retirement savers have never had to judge.
The executive order and the Labor Department’s proposed safe harbor
The order itself did not drop crypto into anyone’s account. It instructed agencies, chiefly the Department of Labor, to reexamine the rules that have kept alternative assets out of most 401(k)s and to write guidance encouraging their inclusion. The concrete follow-through came on March 31, when the department’s Employee Benefits Security Administration issued a proposed rule outlining a safe harbor that would shield fiduciaries who offer diversified funds holding private-market or digital assets from certain lawsuits.
A safe harbor matters because plan sponsors, the employers who pick the investment lineup, carry a legal duty to act in workers’ best interest and have long avoided illiquid or opaque products for fear of being sued. By softening that exposure, the Labor Department’s proposed safe-harbor rule from its Employee Benefits Security Administration clears the way for target-date and other managed funds to fold in a sleeve of private equity or crypto. Because it is a proposal, it still moves through public comment before anything is final, and even then employers decide whether to offer it at all.
That two-step matters for how the change reaches ordinary accounts. Nothing about the order or the proposed rule forces a single dollar into alternatives, and no worker is required to hold them. Instead, the framework removes the legal caution that has kept employers from adding such options, so the practical effect will depend on how many plan sponsors decide the new products are worth the added complexity and how the final rule is written after comments are weighed.
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Why $12.2 trillion in workplace plans is suddenly in play
The scale is what makes this consequential. Roughly $12.2 trillion sits in employer-sponsored defined-contribution plans, and much of it rides in default target-date funds that workers rarely adjust. Asset managers running private equity and private credit have watched that pool for years, because most of it has been off limits to them. Opening even a modest slice to alternatives, as reporting on what the 401(k) changes mean for savers has detailed, would channel enormous sums into markets that trade infrequently and price themselves on their own schedules.
For workers still building a nest egg, the pitch is diversification and a shot at returns that public stocks may not deliver. For those already retired or close to it, the stakes cut the other way: money that may be needed for withdrawals within a few years is less forgiving of investments that cannot be sold quickly or valued cleanly. The same $12 trillion that makes the opportunity large for Wall Street makes the downside large for households if the products underperform their fees.
The fees, opacity and liquidity risks critics warn about
The loudest objections center on cost and transparency. Private-market funds commonly charge management and performance fees far above the near-zero expense ratios of index funds that now dominate 401(k) menus, and the executive order expanding retirement-account access drew immediate warnings that those fees can quietly erode the compounding that makes retirement accounts work. Because private holdings are not traded daily, their stated values rest on estimates rather than live market prices, leaving savers less able to know what their account is truly worth.
Liquidity is the other worry. A retiree taking required withdrawals needs to convert holdings to cash on demand, and private equity, private credit and crypto can all be difficult to exit at a predictable price during stress. Regulators building the safe harbor argue that packaging alternatives inside professionally managed, diversified funds contains those risks, but the debate over whether the protections are strong enough is still live as the proposal moves ahead.
For savers close to retirement, the timing question sharpens all of this. Money that will be drawn down within a decade has less room to recover from a bad stretch than a young worker’s contributions do, and the very features that make private assets appealing over long horizons, such as locking capital up in exchange for higher potential returns, cut against a household that may need the balance soon. How a plan defaults its oldest participants into or out of these options, if it offers them at all, will matter as much as the headline that the door is now open.
What is settled is the direction. The order and the proposed rule have swung a door open that had been shut for decades, and the coming months will decide how many employers walk through it and on what terms. For savers, the choice that once belonged only to pensions and the rich is edging toward the ordinary 401(k), fees, opacity and all.
This article was researched and drafted with the assistance of artificial intelligence.
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