Roughly 90 million Americans with 401(k) plans have had access to the same basic menu: public stocks, bonds, and target-date funds. Alternative assets like private equity, private credit, real estate & digital assets including Bitcoin & other cryptocurrencies have stayed mostly out of reach, not because the law prohibited them, but because the litigation risk made most plan fiduciaries too nervous to go near them. The U.S. Department of Labor shared a proposed rule on March 31, 2026 that is designed to change that & the implications stretch beyond retirement savings.

• What the Rule Actually Does
• The Six-Factor Safe Harbor
• Where Crypto & Digital Assets Fit
• What This Does Not Do

What the Rule Actually Does

The proposed rule, published by the Employee Benefits Security Administration under ERISA section 404(a)(1)(B), creates a process-based safe harbour for plan fiduciaries selecting investment alternatives for participant-directed defined contribution plans. When a fiduciary follows the process outlined in the rule their decision is presumed prudent & entitled to significant deference in any subsequent litigation.

That last part is the point. The rule is not primarily about adding crypto to 401(k)s. It is about reducing the litigation risk that has made plan sponsors avoid anything outside the conventional menu in the first place. Over 500 excessive fee cases have been filed since 2016, with more than a billion dollars paid in settlements. Plans with perfectly reasonable investment processes have spent millions defending themselves before cases were ultimately dismissed. That environment has produced a predictable result: plan sponsors offer the safest-looking options, not necessarily the best ones for participants.

The rule traces directly to Executive Order 14330, signed by President Trump on August 7, 2025, which directed the Department to reexamine guidance on alternative assets in retirement plans & create appropriately calibrated safe harbours. It builds on the Department's May 2025 rescission of Biden-era guidance that had urged plan fiduciaries to exercise extreme care before adding any cryptocurrency to a 401(k) menu. The proposed rule restores what the Department calls its historically neutral position, no asset class is favoured or prohibited by ERISA, as long as it is not otherwise illegal.

The Six-Factor Safe Harbor

The safe harbour identifies six non-exhaustive factors that fiduciaries must consider when selecting any designated investment alternative. The factors apply equally to traditional & alternative assets, the rule is explicitly asset-neutral & does not favour one category over another.

Performance is the first factor. Fiduciaries must consider risk-adjusted expected returns net of fees over an appropriate time horizon, compared against a reasonable number of similar alternatives. The rule is clear that selecting the highest-returning option is not the standard, maximising risk-adjusted returns for a given level of risk is.

Fees are the second. The fiduciary must determine that fees are appropriate relative to the risk-adjusted returns & any other value the investment brings. Crucially, the rule states that fiduciaries are not required to select the cheapest option. A higher-fee investment can be prudent if the value proposition justifies it.

Liquidity is the third. Fiduciaries must confirm that the investment can meet the anticipated needs of the plan at both the plan & participant levels. The rule explicitly acknowledges that illiquid investments can be appropriate particularly for younger participants with long time horizons as long as the liquidity tradeoffs are understood & documented.

Valuation is the fourth. The investment must have adequate measures to ensure timely & accurate valuation. For publicly traded assets, exchange prices satisfy this. For private assets, the rule accepts independent quarterly valuation processes meeting established accounting standards.

Performance benchmarking is the fifth. Fiduciaries must identify a meaningful benchmark with similar mandates, strategies, & risk characteristics to the investment being considered. For alternative assets with mixed exposures, custom composite benchmarks are explicitly permitted.

Complexity is the sixth. Fiduciaries must confirm they have or have obtained through qualified advisers, the skills & knowledge to understand the investment sufficiently to discharge their obligations. This factor is particularly relevant for private equity, private credit, & digital asset funds with sophisticated fee structures.

When a fiduciary objectively considers & makes determinations on any of these factors following the described process, their judgment on that factor is presumed reasonable. The Department describes this as providing confidence to act without undue fear of litigation.

Where Crypto & Digital Assets Fit

Digital assets appear explicitly in the rule's definition of alternative assets, drawn directly from Executive Order 14330. The category covers holdings in actively managed investment vehicles that are investing in digital assets, meaning crypto exposure in 401(k)s would most likely come through funds rather than direct holdings.

The rule includes worked examples involving target-date funds with private equity sleeves & actively managed vehicles holding digital assets. An investment in Bitcoin through a professionally managed fund that applies the six-factor process to its selection would, under this rule, carry a presumption of prudence for the fiduciary who included it.

This follows the Department's May 2025 withdrawal of its 2022 guidance, which had specifically flagged cryptocurrency as warranting extreme care. The new rule does not say crypto belongs in every 401(k). It says crypto is subject to the same neutral prudence standard as any other asset & that fiduciaries who follow the process have protection.

The reaction from the digital asset industry has been broadly positive, with the rule seen as a legitimacy signal & a potential pathway for meaningful capital inflows into Bitcoin & other assets through the retirement savings system. Alternative asset managers including Blackstone, KKR, & Apollo saw stock movements on the announcement, reflecting expectations of increased fund flows.

What This Does Not Do

The rule is a proposal, not a final regulation just yet. It opens for a sixty-day public comment period following publication in the Federal Register, after which the Department will review comments & decide whether to finalise, modify, or withdraw it. No plan will change its investment menu because of this publication alone.

Even once finalised, the rule does not require any plan to offer alternative assets. It removes a barrier that had been discouraging fiduciaries from considering them. Whether individual plan sponsors actually add private equity sleeves to their target-date funds or permit crypto exposure through managed vehicles is a decision each fiduciary still has to make for their specific plan & participant base.

Fiduciaries also remain fully liable for genuine breaches of prudence. The safe harbour presumes prudence when the process is followed,it does not eliminate accountability for fiduciaries who ignore liquidity mismatches, fail to understand fee structures or select investments without meaningful benchmarking. The critics who have raised concerns about exposing average retirement savers to illiquid or volatile assets are not wrong that those risks exist. The rule's position is that those risks should be evaluated through a rigorous process rather than avoided categorically.

The current 401(k) universe holds approximately $8.8 trillion in assets across 721,000 plans covering 118 million participants. Alternative assets represent roughly 0.1 percent of that total today. The degree to which that number moves depends on how the rule is finalised, how fiduciaries respond, & how the market for retirement-focused alternative investment products develops in the months ahead.

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