Comments: DOL’s Proposed Rule on Alternative Assets for 401k Investors

By SBE Council at 1 June, 2026, 10:43 am

The Honorable Daniel Aronowitz
Assistant Secretary
Employee Benefits Security Administration
U.S. Department of Labor
200 Constitution Avenue NW
Washington, D.C. 20210

Re: RIN 1210-AC38 — Fiduciary Duties in Selecting Designated Investment Alternatives

Dear Assistant Secretary Aronowitz:

On behalf of the Small Business & Entrepreneurship Council (SBE Council), I appreciate the opportunity to comment on the Department of Labor’s proposed rule regarding “Fiduciary Duties in Selecting Designated Investment Alternatives.” SBE Council supports the Department’s proposed rule and commends the Administration for advancing a regulatory framework that modernizes retirement investment policy, expands opportunity for American workers and small business employees, and restores fiduciary clarity under the Employee Retirement Income Security Act (ERISA).

Retirement Investment Opportunities Need to Align with Modern Opportunity and Capital Markets

The proposed rule appropriately recognizes that America’s retirement system and capital markets have evolved significantly over the past several decades. Increasingly, economic growth, innovation, and long-term value creation occur in private markets and through emerging companies operating in sectors such as artificial intelligence, biotechnology, advanced manufacturing, financial technology, healthcare innovation, energy innovation, and other entrepreneurial industries. Yet workers participating in defined contribution retirement plans have largely been excluded from access to investment opportunities connected to these areas of economic and innovative growth.

SBE Council supported President Trump’s Executive Order (“Democratizing Access to Alternative Assets for 401(k) Investors”) directing the Department to examine ways to responsibly expand access to alternative assets within 401(k) plans because we believe American workers and small business employees should have greater opportunity to participate in long-term wealth creation and capital appreciation. Retirement investing should not be structured in a way that reserves certain investment opportunities almost exclusively for institutional investors and large defined-benefit plans while limiting the options available to ordinary workers and small business owners saving for retirement through employer-sponsored plans.

Today, more than 90 million Americans participate in defined contribution retirement plans, and approximately 13 million of those workers are employed by small businesses. At the same time, a growing share of business value creation now occurs in private markets before companies ever reach public exchanges. As a result, ordinary retirement savers are increasingly excluded from investment exposure to some of the nation’s most innovative and fastest-growing companies during important stages of their growth trajectory. The Department’s proposal represents an important step toward addressing this imbalance in a prudent and responsible manner.

The Proposal Aligns with ERISA’s Original Intent

Importantly, the proposed rule does not mandate the inclusion of any specific asset class or investment product. Rather, it establishes a sensible, process-based safe harbor framework intended to provide fiduciaries with regulatory clarity and confidence when evaluating designated investment alternatives. As the Department correctly recognizes, ERISA is an asset-neutral statute grounded in fiduciary prudence and process, not one that categorically favors or disfavors particular investments. The Department’s proposed framework appropriately aligns with ERISA’s original intent by focusing on whether fiduciaries engage in a thorough, objective, and analytical review process when evaluating investments.

This clarification is especially important given the substantial rise in ERISA-related litigation in recent years. The current litigation environment has contributed to overly defensive fiduciary behavior and discouraged innovation within defined contribution plans. In many cases, plan sponsors and fiduciaries have avoided considering broader investment options not because such investments are inherently imprudent, but because of fear of costly litigation and hindsight-based challenges. This dynamic disproportionately impacts smaller employers and plan sponsors, who often lack the resources necessary to navigate ambiguous standards and mounting legal risks.

According to the U.S. Chamber of Commerce’s Institute for Legal Reform, litigation costs in 2021, which include fiduciary liability, “totaled $347 billion,” with small businesses bearing about 50 percent of that cost, even though they only account for 20 percent of business revenue.

The Department’s proposed safe harbor framework provides an important and necessary response to this problem. By establishing clearer standards around prudent fiduciary evaluation, the rule would help restore confidence that fiduciaries acting in good faith and following a disciplined process will not be unfairly penalized solely because an investment underperforms or is later second-guessed through litigation. This is a significant and constructive modernization of ERISA administration.

Diversified Investment Structures Offer an Opportunity for Greater Retirement Security

SBE Council believes the proposal appropriately recognizes the growing importance of diversification and broader market participation within retirement portfolios. Defined-benefit pension systems and sophisticated institutional investors have long utilized alternative investments as part of diversified investment strategies designed to improve long-term returns and manage volatility. Meanwhile, millions of Americans participating in 401(k)-style plans have remained largely limited to public market investment options, even as a growing share of business formation, innovation, and capital appreciation occurs in private markets.

Allowing fiduciaries to prudently consider diversified investment structures that may include alternative assets can help provide workers with broader exposure to long-term economic growth opportunities while also supporting retirement security. This issue is particularly relevant to workers employed by entrepreneurial firms and high-growth industries, many of whom are helping drive innovation and economic expansion but currently have limited ability to participate in the broader value creation occurring in private capital markets.

Importantly, the modern workforce is increasingly mobile, entrepreneurial, and decentralized. Workers often build retirement savings over the course of multiple jobs, contract arrangements, startup ventures, and small business employment experiences. Retirement policy should reflect these evolving workforce realities and provide workers with access to investment opportunities that better align with today’s innovation-driven economy.

In addition, small businesses often struggle to offer benefit packages that are competitive with those offered by larger corporations. Expanding access to diversified and potentially higher-performing retirement investment options can help strengthen the ability of small employers to recruit and retain workers in an increasingly competitive labor market. Policies that improve retirement outcomes and investment opportunities for workers at entrepreneurial firms can contribute to broader workforce stability and long-term economic mobility.

SBE Council also believes the proposed rule advances broader financial inclusion and economic participation goals by helping democratize access to investment opportunities that historically have been concentrated among large institutional investors and wealthy accredited investors. Workers and families saving through employer-sponsored retirement plans should not be structurally excluded from participating in areas of economic growth that increasingly define the modern U.S. economy.

Strengthening Capital Access for Startups and Small Businesses 

Expanding retirement investment flexibility may produce broader economic benefits by strengthening capital formation and supporting investment into innovative firms and emerging industries that are critical to U.S. competitiveness. America’s entrepreneurial economy depends heavily on efficient capital markets and long-term investment vehicles that support business growth, innovation, and scale. Policies that responsibly broaden participation in investment opportunities can help reinforce this ecosystem while benefiting retirement savers.

Recommendations and Targeted Refinements

While SBE Council strongly supports the proposed rule, we respectfully encourage the Department to consider several targeted refinements to ensure the final rule remains appropriately flexible, asset-neutral, and workable in practice.

First, the Department should reconsider the application of SEC Rule 22e-4 liquidity requirements within the context of collective investment trusts (CITs). As currently drafted, the rule could effectively impose a 15 percent cap on private assets in certain structures by importing SEC mutual fund liquidity standards into vehicles regulated by the Office of the Comptroller of the Currency. This approach risks introducing unnecessary regulatory complexity and limiting the effectiveness of the rule.

CITs are expected to serve as an important vehicle for retirement products that include alternative assets, and unlike mutual funds, they are not subject to the same SEC liquidity framework. Applying SEC-specific standards to OCC-regulated structures could create operational uncertainty and inadvertently undermine the Administration’s broader objective of responsibly expanding investment flexibility within retirement plans. The White House Council of Economic Advisers has noted the potential benefits of higher levels of private equity exposure for younger investors with longer investment horizons. The Department should therefore avoid creating unnecessary regulatory barriers that could constrain prudent portfolio construction or reduce potential long-term benefits for retirement savers. We respectfully encourage the Department to remove or substantially revise this provision in the final rule.

Second, SBE Council recommends that the Department further clarify or modify language relating to “conflict-free” valuation processes for private assets. We agree that fiduciaries should utilize sound and widely accepted valuation methodologies, including appropriate accounting standards such as FASB 820. However, requiring valuations to be entirely “conflict-free” or fully independent may unintentionally impose unrealistic or impractical standards on certain private market investments.

Unlike publicly traded securities with continuously observable pricing, private assets often rely on valuation methodologies that necessarily incorporate information from underlying asset managers and investment sponsors. The Department should avoid creating ambiguity or standards that could inadvertently discourage prudent use of private asset structures or expose fiduciaries to unnecessary compliance uncertainty. Additional clarification in the final rule would help preserve the proposal’s intended asset-neutral framework.

More broadly, SBE Council encourages the Department to ensure the final rule remains principles-based and sufficiently flexible to accommodate evolving investment structures, retirement products, and market innovation. The strength of the proposal lies in its emphasis on fiduciary process and prudent evaluation rather than rigid prescriptive requirements.

Conclusion

SBE Council strongly supports the Department’s proposed rule and appreciates the Administration’s leadership in modernizing retirement investment policy and expanding economic opportunity for American workers. The proposal supports small businesses and their workers, the startup and small business ecosystem in general, and represents an important step toward democratizing access to broader investment opportunities. The proposal will strengthen retirement security, support innovation and capital formation, and ensure that workers and entrepreneurs participating in defined contribution plans are not unnecessarily excluded from areas of economic growth increasingly driving the modern economy.

At a time when entrepreneurship, innovation, and small business growth are central to America’s economic future, retirement policy must evolve in ways that expand opportunity, encourage long-term wealth creation, and allow more Americans to participate in the nation’s growth and success. The Department’s proposal advances these important objectives while maintaining ERISA’s longstanding commitment to fiduciary prudence and participant protection.

We urge the Department to finalize the rule expeditiously while incorporating targeted refinements that preserve flexibility, reduce unnecessary regulatory friction, and maintain the proposal’s appropriately asset-neutral approach.

Thank you for the opportunity to comment on this important proposed rule.

Sincerely,

Karen Kerrigan
President & CEO