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Employers may begin fielding questions from employees on why the company’s 401(k) plan does not offer alternative investments such as cryptocurrency. The answer has traditionally been straightforward: the fiduciary risks under the Employee Retirement Income Security Act of 1974 (ERISA), as amended, have been too significant to justify expanding the investment menu beyond conventional asset classes. Additionally, recordkeepers and investment advisors and consultants may face operational challenges in developing the products and infrastructure necessary to accommodate alternative assets in 401(k) plans. However, recent regulatory developments are aimed at reducing those risks, making this an opportune moment to examine whether alternative investments should be offered in a participant-directed retirement plan. This article will help employers understand the risks associated with alternative investments under current law and the shifting regulatory environment.

Understanding the Fiduciary Landscape

Many plan sponsors have historically taken a cautious, paternalistic view of their retirement plans, and with good reason. ERISA’s fiduciary framework imposes duties of prudence and loyalty on those who manage retirement plan assets. When considering whether to add any investment option, plan fiduciaries must engage in a prudent decision-making process that involves gathering qualitative and quantitative information about that investment option, evaluating that option objectively, reviewing fees and expenses associated with each investment option, and comparing the plan’s current investment menu. Any perceived misstep can trigger scrutiny from regulators and plaintiffs’ attorneys, especially for asset classes subject to heightened volatility.

ERISA’s fiduciary framework creates a substantial hurdle for alternative investments. Unlike publicly traded securities with daily valuations and extensive historical data, many alternative assets present challenges related to valuation, liquidity constraints, and complexity that make it difficult for fiduciaries to satisfy their fiduciary obligations. 

Limited Protection Under ERISA Section 404(c)

Under ERISA Section 404(c), plans that meet specific design and disclosure requirements can limit their fiduciary exposure for losses that are the result of the participant’s exercise of control over the investments in their plan account. ERISA Section 404(c) generally shifts liability for investment decisions away from plan fiduciaries and toward the participants who are making the investment choices.

To qualify for protection under ERISA Section 404(c), a plan must: 

• Provide a participant with an opportunity to exercise control over assets in his or her account, subject to reasonable restrictions.
• Offer an appropriately broad range of investment alternatives.
• Allow participants to actually exercise independent control with respect to their investments, and
• Satisfy specific disclosure requirements.

Even when these conditions are met, ERISA Section 404(c) protection does not absolve fiduciaries of their duty to prudently select and monitor the investment options made available to participants. This is critical when evaluating alternative investments. A fiduciary cannot simply add a volatile or speculative investment option to the plan lineup, whether that investment be cryptocurrency or any other investment, and then hide behind ERISA Section 404(c) when participants suffer losses. The plan fiduciaries still have a duty to select investments that are appropriate for a retirement plan and must continue to monitor that investment over time.

A Changing Regulatory Posture

The governmental regulatory landscape is evolving in ways that may prove favorable to alternative investments. In August 2025, President Trump signed an  titled “Democratizing Access to Alternative Assets for 401(k) Investors,” which directed the Department of Labor (DOL) to re-examine its guidance regarding ERISA’s fiduciary duties when 401(k) plans offer alternative assets. The administration is exploring ways to expand access to alternative assets, such as cryptocurrency, real estate, commodities, and private equity for 401(k) plan participants who have historically been limited to publicly traded stocks and bonds.

The DOL also issued , which rescinded the 2022 guidance cautioning 401(k) plan fiduciaries to use “extreme care” before adding cryptocurrencies as investment options for plan participants. That rescission removed a regulatory warning that discouraged plan sponsors from considering crypto and signaled a softening of the government’s posture toward alternative investments in retirement plans.

Most recently, in response to that executive order, the DOL reportedly submitted a proposal to the White House’s Office of Information and Regulatory Affairs on January 13, 2026. Although the DOL’s proposed guidance is unknown at this time, it is expected that the DOL will provide clearer parameters for plan fiduciaries seeking to offer alternative investments. 

Practical Considerations for Plan Administrators

Despite the potential for a more favorable regulatory environment, plan administrators should proceed with caution when considering alternative assets. Several practical considerations warrant attention.

1. Alternative assets differ from traditional investments. Liquidity limitations, valuation methodologies, fee structures, and disclosure requirements present challenges that must be addressed before adding alternatives to the plan. Plan administrators should work closely with their recordkeepers and investment advisors and consultants to understand these operational realities. For example, it is unclear how, under current recordkeeping infrastructures, a 401(k) plan participant could directly invest in privately held companies, real estate, and/or invest their 401(k) plan account in a cryptocurrency exchange platform. Recordkeepers would need to update their policies and systems to accommodate such investments and additional DOL guidance may be necessary before they are prepared to do so.
2. Documentation remains paramount. The rescission of prior guidance does not eliminate a fiduciary’s duty to prudently select and monitor the investment options. Plan fiduciaries must continue to document their investment selection and monitoring processes thoroughly.
3. Participant communications deserve special attention. The ERISA Section 404(c) protections still require sufficient participant communications and disclosures to ensure participants make informed decisions based on the risks associated with alternative assets. Plans that offer alternative assets will be faced with unique disclosure challenges.
4. Any participant demand should be evaluated carefully. Employee inquiries may reflect a genuine desire to diversify investment portfolios, or they may reflect speculative enthusiasm driven by media coverage or a fear of missing out. Fiduciaries must distinguish between providing valuable investment options and capitulating short-term sentiment.

Conclusion

As the regulatory framework on alternative assets continues to evolve, plan fiduciaries must remain mindful of their duty to act prudently and in the best interest of plan participants when deciding whether to offer alternative assets as an investment under their 401(k) plan. Plan fiduciaries should proceed cautiously, document their decision-making process, and assume that any decision to add alternative assets may be scrutinized by plaintiffs’ attorneys or the DOL. Uncertainty remains regarding how alternative assets could practically be incorporated into a 401(k) plan investment menu, as recordkeepers and investment advisors will need time to develop appropriate products and operational infrastructure to support such offerings. The attorneys at �鶹��ý will continue to monitor the changing regulatory landscape and should be consulted before adding alternative assets to a 401(k) plan investment menu.