While proponents argue these investments democratize access to higher returns, fiduciaries face complex legal and ethical obligations that raise serious concerns about protecting ordinary retirement savers.

The Core Fiduciary Dilemma

Under ERISA, federal law requires employers who administer 401( k) plans to act in employees ' best interest as fiduciaries— giving workers the right to sue their employers for failing to do so( Morgan Lewis). This fundamental duty creates a challenging landscape for plan sponsors considering alternative assets. Plan sponsors and committees considering alternatives will still be judged under the duty of prudence and loyalty, with ongoing monitoring obligations recognized by the U. S. Supreme Court in Tibble v. Edison International( 2015) and Hughes v. Northwestern University( 2022)( Bloomberg Law).

The legal standard remains clear: In Hughes, the Court held that offering some prudent options does not immunize fiduciaries for including imprudent ones; participant choice does not cure a flawed lineup Bloomberg Law. This means fiduciaries cannot sim-

Under ERISA, federal law requires employers who administer 401( k) plans to act in employees ' best interest as fiduciaries— giving workers the right to sue their employers for failing to do so.

ply offer risky alternatives and claim they fulfilled their duty by providing other safer options.

Specific Concerns with Private Equity

Private equity investments present unique fiduciary challenges. Private investments, including private equity, rely on long-term capital and usually stipulate lengthy lock-up periods for investors, making these investments illiquid and not easily sold to other investors or convertible into cash, raising serious concerns during economic downturns when retirement savers are seeking to access their investments( CBS News).

The Department of Labor has repeatedly cautioned about private equity in 401( k) s. The Biden administration DOL stated it believed that private equity as a component of a designated investment alternative is generally not appropriate for a typical 401( k) plan( NPR). The DOL ' s 2021 Supplemental Statement expressed the DOL ' s opinion that, in the majority of cases, plan-level fiduciaries of small, individual account plans are not likely suited to evaluate the use of PE investments in designated investment alternatives in individual account plans( PBS).

Cryptocurrency ' s Volatility Problem

Cryptocurrency poses different but equally serious fiduciary concerns. The earlier 2022 guidance had urged plan fiduciaries to exercise " extreme care " before offering cryptocurrency investment options, citing concerns such as fraud, volatility, lack of custody protections, and legal uncertainty( NPR). While this guidance was rescinded in May 2025, the DOL reaffirmed a " facts and circumstances " standard, requiring plan fiduciaries to assess crypto and other digital assets through prudent, context-specific evaluation( NPR).

Litigation Risk and Regulatory Shifts

BlackRock ' s CEO Larry Fink said on a recent earnings call, " There is a lot of litigation risk. There ' s a lot of issues related to the defined contribution business," with the CFO adding that industry-wide litigation reform may be necessary to avoid legal bottlenecks( The Block). The August 2025 executive order explicitly states that burdensome lawsuits that seek to challenge reasonable decisions by loyal, regulated fiduciaries have denied millions of Americans opportunities to benefit from investment in alternative assets( The Block).

However, this policy shift does not change the scope of any fiduciary duties and could easily add to the ever-evolving list of litigation concerns that plan sponsors and fiduciaries must consider( PBS). An express purpose of the clarification is to curb fiduciary lawsuits, giving employers and plan administrators a potent weapon to defeat claims challenging risky investment options( KCCI 8 News).

Congressional Opposition

Democratic lawmakers have expressed serious concerns. Senators Elizabeth Warren and Bernie Sanders issued a letter to the Department of Labor and SEC cautioning the usage of alternative investments in retirement plans, condemning the financial instruments for their volatility and opaqueness, touching on the investments ' lack of transparency and illiquidity( CBS News).

DAVID WENTZ is CEO of TFB, Inc. David frequently speaks at various seminars about profit sharing, 401( k) plans and investment programs. The North American Dealers Association( NAEDA) endorses Tax Favored Benefits as a 401( k) provider. No compensation is received. More information is available at www. taxfavoredbenefits. com.

DAVID WENTZ is CEO of TFB, Inc.

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