On March 30, 2026, the U.S. Department of Labor issued a notice of a proposed rule to establish guidelines for 401(k) plan managers considering investments in alternative assets. The proposed rule would establish guidelines for plan fiduciaries that create safe harbors under the Employee Retirement Income Security Act of 1974 (ERISA) when evaluating and investing in nontraditional assets, such as private equity or credit markets. Safe harbors shield plan fiduciaries from legal liability for investment decisions.
The comment period for the proposed rule ends on June 1.
Why does it matter?
According to the CFA Institute, assets under management in private markets more than doubled to USD $11.7 trillion between 2017-2022. Recent reports put the figure at more than $15 trillion. The growth reflects a number of trends, including the search for yield, longer-term investment horizons, and stricter post-2008 risk capital rules for banks. Private markets can offer more flexibility and protect investors from the short-term volatility of public markets, but they lack the on-demand liquidity, disclosure requirements, and oversight mechanisms that public markets provide.
Environmental, social, and governance (ESG) investing also works differently in private markets than it does in public ones. When choosing which companies to invest in, private equity firms can employ an ESG approach without public shareholder scrutiny. And, because they own their portfolio companies, they also have more ability to implement operational changes aligned or opposed to ESG than public shareholders do. Private firms are also not subject to ESG-related disclosure requirements in the U.S., meaning that such disclosures are largely voluntary and vary widely.
Background
The proposed rule comes after President Trump’s (R) August 2025 Executive Order, “Democratizing Access to Alternative Assets for 401(k) Investors.” The order established a policy “that every American preparing for retirement should have access to funds that include investments in alternative assets.” It defined these assets as including “private market investments…; direct and indirect interests in real estate…; holdings in actively managed investment vehicles that are investing in digital assets;… direct and indirect investments in commodities;… direct and indirect interests in projects financing infrastructure development; and lifetime income investment strategies including longevity risk-sharing pools.”
Critics of opening up private markets to investment by employer sponsored retirement plans argue that these investments are typically complex financial products unsuitable for millions of Americans’ retirement plans. They say that private funds bring greater concentration and illiquidity risk, higher fees, and higher uncertainty about asset valuations. In response to the proposed rule, Sen. Elizabeth Warren (D) said, “Americans facing an uncertain future in Trump's economy will now have more reasons to question the security of their retirement savings — all so that Trump's Wall Street buddies have another pile of cash to play with.”
Supporters of the move say that millions of Americans and institutional investors already have access to private markets, including through government-sponsored pension plans. They say that private markets provide higher returns in the long-term, and that clearer guidance for fiduciaries expands access to these returns to more people. Secretary of the Treasury Scott Bessent said the rule is a step towards “broaden[ing] access to additional retirement plan options for millions of Americans while being mindful of the importance of protecting retirement assets.”
Ballotpedia tracks support for and opposition to the environmental, social, and corporate governance (ESG) investing movement. To learn more about arguments for, against, and about ESG, click here. For more information on reform proposals related to ESG policy, click here.
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