401(k) accounts are where most Americans  put their financial assets.1 President Trump appears determined to prod them to invest those accounts in “alternative investments,” most prominently, private equity. To that end, in Executive Order 14330, the president ordered the Department of Labor (“DOL”) to “relieve the regulatory burdens and litigation risk that” allegedly deny 401(k) participants access to such investments.2

Executive Order 14330 is a solution in search of a problem. The Employee Retirement Income Security Act of 1974 (“ERISA”) permits 401(k) trustees to offer participants the option of investing their retirement accounts in private equity and other alternative investments – if that option is prudent. When the option has been challenged, the courts have upheld the legal positions of ERISA trustees who have carefully offered to their participants the ability to direct their 401(k) accounts to private equity and other unconventional investments. ERISA’s rules of prudence and diversification3 provide a well- established and successful legal framework for protecting Americans’ retirement savings and for assessing private equity and other alternative investments for retirement plans.

The underlying issue is not that ERISA precludes private equity, but that private equity may not be a prudent investment for many and perhaps most 401(k) investors. To the extent that the DOL responds to Executive Order 14330 by confirming existing ERISA law – 401(k) trustees can offer private equity and other alternative investment options when these options prudently and diversely serve participants’ retirement interests – there would be no particular harm or benefit in confirming that status quo.

But if the DOL interprets Executive Order 14330 as requiring 401(k) plans to offer private equity or any other alternative investment, that would diminish ERISA’s protection of employees’ retirement security.

Instructive is the recent, carefully reasoned decision of the U.S. Court of Appeals for the Ninth Circuit in Anderson v. Intel Corporation Investment Policy Committee.4 In that case, the appeals court confirmed that Intel employees did not adequately allege that adding hedge funds and private equity funds to 401(k) investment menus violated ERISA’s fact-based fiduciary duty of prudence. Affirming the district court, the Ninth Circuit agreed that the Intel plaintiffs in their complaint had “not stated an imprudence claim under ERISA.”5 Because fiduciaries must construct an overall diversified portfolio, “generalized attacks on hedge funds and private equity funds as a category have been rejected both by courts…and by the Department of Labor.”6

Thus, contrary to the contention of Executive Order 14330, there are no “regulatory burdens”7 or “litigation risk[s]”8 that inordinately discourage ERISA fiduciaries from offering participants the option of directing their retirement investments into private equity or other alternative investments such as hedge funds.

The thoughtful proponents of alternative investments acknowledge that private equity and similar investments are often risky and illiquid and typically entail high fees. These proponents counter that these disadvantages of many alternative investments are outweighed by such investments’ higher returns. Important voices, including Warren Buffett, disagree,9 suggesting that the promise of higher returns to private equity are illusory, a trap that can ensnare often unsophisticated 401(k) participants directing the investment of their relatively small retirements accounts.

In this setting, the critical legal point is that 401(k) trustees can, under ERISA, prudently assess these alleged benefits and costs, determining in the fact-specific context of their particular plans and participants whether or not private equity is an appropriate investment option for their respective plans.

An argument President Trump advances is that defined benefit plans routinely invest in alternative investments including private equity.10 But defined benefit pensions are different from 401(k) plans. They are often large, professionally managed funds held for thousands of participants over long periods of time. In contrast, the typical 401(k) participant is an unsophisticated investor directing the investment of a relatively small account, is often near retirement and will soon need liquidity.

Though private equity and other alternative investments may be sensible for large, professionally managed defined benefit plans, they are not necessarily prudent for 401(k) plans generally or for any 401(k) plan in particular.

Even when properly offering a private equity investment option, the trustee may find it prudent to place a limit on the amount any particular account holder can invest. Besides prudence, another important principle of ERISA is that retirement funds should hold diverse investments. Unsophisticated 401(k) participants might invest too heavily in risky, illiquid investments like private equity. This suggests that a trustee who properly offers an alternative investment might limit that investment to, for example, 10% of the account.

The bottom line is that Executive Order 14330 is unnecessary. ERISA requires trustees to offer prudent and diverse investment options to 401(k) participants. This allows trustees to offer private equity and other alternative investments, perhaps with limits, when it is prudent to do so – and to otherwise refrain from offering such investment choices.

ENDNOTES

1 On the causes and consequences of the emergence of the 401(k) plan as the dominant form of qualified retirement arrangement, see Edward A. Zelinsky, THE ORIGINS OF THE OWNERSHIP SOCIETY: HOW THE DEFINED CONTRIBUTION PARADIGM CHANGED AMERICAN (2007). See also John H. Langbein, ERISA’s Role in the Demise of Defined Benefit Pension Plans in the United States, Chapter 6 in David Pratt (ed.), NEW YORK UNIVERSITY REVIEW OF EMPLOYEE BENEFITS AND EXECUTIVE COMPENSATION (2025).

2 90 FR 38921 (Aug. 12, 2025).

3 ERISA §§ 404(a)(1)(B) and 404(a)(1)(C), 29 U.S.C. §§ 1104(a)(1)(B) and 1104(a)(1)(C).

4 137 F. 4th 1015 (9th cir. 2025).

5 Id. at 1021.

6 Id.

7 90 FR 38921. 8 Id.

8 Id.

9 Edward A. Zelinsky, Is Bitcoin Prudent? Is Art Diversified? Offering Alternative Investments to 401(k) Participants, 54 CONN. L. REV. 509, 540 (2022). See also Alicia H. Munnell, Workers do not need private equity in their 401(k) accounts, Morningstar Marketwatch (Aug. 10, 2025) (“Private equity is illiquid, has high fees, and hasn’t produced high returns for state and local plans.”).

10 90 FR 38921.

Edward A. Zelinsky is the Morris and Annie Trachman Professor of Law at Yeshiva University’s Benjamin N. Cardozo School of Law. This post is based on his recent article, “Executive Order 14330: A Solution in Search of a Problem,” available here.