Category Archives: fiduciary

Things I Worry About (16): Executive Orders, Private Funds, and Fiduciary Standards (2)


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Key Takeaways

  • My last post, Things I Worry About (15), was an overview of the Trump administration’s Executive Order about facilitating investing in “alternative assets” in 401(k) plans.
  • The article was my reading of the EO and my thoughts on what it meant.
  • For this post, I turned to ChatGPT and asked it to summarize the EO.
  • This article is ChatGPT’s view of the order, not mine (or my firm’s).

This article about the Executive Order on Alternative Assets was written by ChatGPT. I thought it would be interesting to see what it, with its infinite database, had to say about the EO. Needless to say, this should not be seen as representing my views or those of  my law firm.

My prompt to ChatGPT was: Please summarize the EO, explain its significance, predict what will happen, discuss the possible problems and benefits.

On August 7, 2025, President Trump issued an Executive Order titled “Democratizing Access to Alternative Assets for 401(k) Investors.” This directive signals a sweeping policy shift aimed at expanding retirement investment choices.

What’s in the EO — At a Glance

Definition of Alternative Assets

The EO broadens the investment universe beyond stocks, bonds, and mutual funds to include:

  • Private investments like private equity and private credit
  • Real estate and real-estate-backed debt
  • Commodities
  • Infrastructure financing projects
  • Digital assets (e.g., cryptocurrencies via actively managed vehicles)
  • Lifetime income tools, such as longevity risk–sharing pools (akin to annuities or tontines)

Agency Directives within 180 Days

The EO orders the Department of Labor (DOL) to:

  1. Reexamine past and present ERISA guidance, including possibly rescinding the 2021 Supplemental Private Equity Statement that discouraged plan fiduciaries from including alternative assets. (Indeed, on August 12, the DOL rescinded that very statement.)
  2. Clarify fiduciary responsibilities—help plan managers weigh higher fees and complexity against diversification and net returns; propose rules, guidance, or “appropriately calibrated safe harbors” to reduce litigation risk.
  3. Coordinate with Treasury, SEC, and other regulators to align regulatory shifts—g., revisiting accredited/qualified investor standards to ease retail access.

Simultaneously, the SEC is tasked with exploring updates to rules that currently limit plan participants’ access to alternative investments.

Why It Matters

For Mutual Funds-Savvy Investors

  • Greater diversification: Alternative assets could mitigate traditional correlation with equities and bonds.
  • Potential for higher returns: Private markets and digital assets may offer outsized growth—but at cost and risk.
  • Bridging the gap: While defined benefit plans (e.g., pensions) and sovereign funds have long used alternatives, DC (defined contribution) plans have lagged due to regulatory and legal caution.
  • Modernizing retirement investing: This EO seeks to give everyday savers the same tools affluent investors already use.

What to Expect: Likely Outcomes

  1. New product development: Major players like BlackRock, Blue Owl Capital, Empower, and others are already preparing to launch 401(k)-friendly products incorporating private assets.
  2. Regulatory updates: Expect new DOL and SEC guidance or rulemaking—though through public notice and comment, which could delay finalized policy beyond the 180‑day window.
  3. Litigation landscape: While safe harbors may emerge to reduce fiduciary lawsuits, ERISA rights remain intact—participant litigation won’t vanish.
  4. Industry caution: Large plan sponsors and providers will move slowly, carefully evaluating due diligence, pricing, liquidity, and transparency—guarding against pitfalls before offering alternatives en masse.

Risks and Pitfalls

  • Illiquidity & complexity: Many alternative assets have long lock-up periods, opaque pricing, and complex fee structures—not ideal for liquidity needs or simple plan administration.
  • Volatility: Particularly in digital assets like crypto, price swings can erode retirement portfolios and undermine risk management.
  • High fees: Private equity and hedge-like vehicles often charge steep benchmark returns plus expenses, which may not pay off net of costs
  • Fiduciary liability: Even with guidance, fiduciaries could face legal scrutiny if alternative additions underperform or are poorly explained.
  • Informed investing gap: Many participants lack deep understanding of non-traditional funds—raising the importance of education and default pathways.

Benefits and Opportunities

  • Diversification and growth: Alternative assets, if well-selected, can smooth returns across market cycles.
  • Innovative retirement tools: Longevity pools or annuities backed by non-public assets may offer more efficient, reliable retirement income.
  • Leveling the playing field: Everyday savers gain access to investment strategies once reserved for the elite.
  • Encourages financial industry innovation: The EO opens doors for novel fund structures (like ’40 Act closed-end funds with private market exposure), enhancing transparency and suitability for DC plans.

Final Thoughts: The 401(k) Landscape—Evolving, Cautiously

While this EO doesn’t immediately change the law, it sets in motion a regulatory and industry shift that may reshape how retirement portfolios are built. For mutual fund-literate readers, think of it as a potential expansion of the toolbox—from familiar public-market investing to a broader, more complex suite of assets.

That said, prudence is paramount. Until guidance is finalized, and products vetted for transparency, liquidity, cost, and fiduciary safety, plan sponsors and participants should proceed cautiously. Retirement security remains the goal—any new additions must be justified by net benefit, not novelty alone.

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Things I Worry About (15): Executive Orders, Private Funds, and Fiduciary Standards (1)


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Key Takeaways

  • The Trump administration has issued an Executive Order about facilitating 401(k) investments in “alternative assets.”
  • The Order directs the Secretary of Labor to examine current guidance and decide if it is appropriate for that purpose.
  • The Order also directs the Secretary of Labor to issue guidance to clarify fiduciary responsibilities for 401(k) investing in alternative assets and to consider creating a fiduciary safe harbor.

This article examines the President’s August 7 Executive Order (EO) entitled Democratizing Access to Alternative Assets for 401(k) Investors (Democratizing Access to Alternative Assets for 401(K) Investors – The White House) and some of the misunderstandings about what the EO says.

The EO uses the term “alternative assets” and defines it as follows:

  • Private market investments, which would include, among others, private equity, private debt, and hedge funds.
  • Interests in real estate and debt instruments secured by real estate.
  • Actively managed vehicles holding digital assets.
  • Investments in commodities.
  • Interests in projects financing infrastructure development.
  • Lifetime income investment strategies including “longevity risk-sharing pools.”

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Things I Worry About (13): Every Plan Commits Prohibited Transactions and the Cornell University Decision


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Key Takeaways

  • When an ERISA governed retirement plan engages and pays service providers, such as advisors and recordkeepers, it commits a prohibited transaction.
  • However, if the plan fiduciaries satisfy the conditions of an exemption (which, in this case, would be the 408(b)(2) statutory exemption), the prohibited transaction is exempt, that is, it becomes permissible.
  • If the conditions of the exemption (e.g., reasonable arrangement and reasonable compensation) are not satisfied, the plan fiduciaries have engaged in a nonexempt prohibited transaction that can be the basis for an adverse finding in a DOL investigation or the basis for a lawsuit.
  • The recent Supreme Court decision in Cunningham v. Cornell held that the burden of proof for determining whether the conditions of 408(b)(2) were satisfied are on the plan fiduciaries, meaning that plaintiffs’ attorneys can simply allege that the fiduciaries hired service providers and then the fiduciaries must prove that they satisfied the conditions of the exemption.

In an ERISA fiduciary breach lawsuit, plaintiffs’ attorneys must allege actions by fiduciaries that violated the law’s fiduciary standards and then, at trial, they must prove those facts. However, the Supreme Court’s decision in Cunningham v. Cornell University turns that process on its head by holding that the burden of proof for an exemption from prohibited transactions is not on the plaintiffs, but instead is on the defendants—the plan fiduciaries. As a result,  lawsuits that allege prohibited transactions are more likely to proceed to trial and perhaps increase the risk of loss for plan fiduciaries. More on this later in the article.

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Things I Worry About (8): DOL Investigations and Unsuspecting Plan Sponsors (2)


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Key Takeaways

  • The Employee Benefit Security Administration (EBSA) of the US Department of Labor (DOL) recently released its Fact Sheet: EBSA Restores Nearly $1.4 Billion to Employee Benefit Plans, Participants, and Beneficiaries: ebsa-monetary-recoveries.pdf
  • One of the targets of their investigation is “missing participants”. The DOL refers to that program as the “Terminated Vested Participant Benefits Payments”. Impressively, the EBSA recovered $429,200,000 for participants under that program in the 2023-2024 fiscal year.
  • Plan sponsors/fiduciaries and their advisors would be well-advised to determine whether they have “missing participants” and, if so, take steps outlined by the DOL to address the issue.

As explained in my last post, Things I Worry About (7), the DOL’s EBSA has a number of programs that can restore benefits to plans and participants. Those include:

  • Civil investigations.
  • Criminal investigations.
  • Informal complaint resolutions.
  • Correction programs.

The issue of “missing participants” comes up in civil investigations. In those investigations the DOL examines whether a plan has former employees who left their accounts in the plan and whether the plan continues to provide the legally required disclosures and to ensure that the participants are aware of their benefits. I put “missing participants” in quotes because the definition I broader than it appears. There isn’t a legal definition, but the practical definition is that it is a former employee who left the employment of a plan sponsor, but did not take a distribution of his or her benefits. If plan communications (e.g., emails, mail, disclosures) are sent to a former employee who has benefits in the plan and it appears that the communications were received, the former employee is not “missing.” But, if the emails and mailings are kicked back as undeliverable, the participant is missing.

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Things I Worry About (7): DOL Investigations and Unsuspecting Plan Sponsors


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Key Takeaways

  • The Employee Benefit Security Administration (EBSA) of the US Department of Labor (DOL) recently released its Fact Sheet: EBSA Restores Nearly $1.4 Billion to Employee Benefit Plans, Participants, and Beneficiaries: ebsa-monetary-recoveries.pdf
  • The Fact Sheet describes the different EBSA programs that can recover money for participants, and the numbers are impressive.
  • However, the Fact Sheet also has specific lessons for plan sponsors, fiduciaries and advisors.

The DOL’s EBSA has a number of programs that can restore benefits to plans and participants. Those include:

  • Civil investigations.
  • Criminal investigations.
  • Informal compliant resolutions.
  • Correction programs.

Civil investigations is the program that most concerns plan sponsors; however, criminal investigations are the most dramatic and can most severely impact the lives of “bad actors.” Last year the EBSA’s criminal investigation resulted in 161 guilty pleas or convictions. The bad acts go far beyond any mistakes that plan sponsors or fiduciaries could reasonably make. Think in terms of embezzlement and theft.

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The New Fiduciary Rule (52): The Loper Bright Decision and What it Means for DOL Exemptions (2)


2020-02, 84-24, DOL, fiduciary, prohibited transaction, reg BI
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Key Takeaways

  • The lawsuits against the DOL’s new regulation on fiduciary advice and the related exemptions—and the likely appeals—will probably last for years.
  • Two key issues in the lawsuits and appeals are whether the DOL has the authority to amend its existing regulation—the 5-part test—to cover one-time recommendations and whether the DOL has the authority to issue prohibited transaction exemptions that require a standard of care (e.g., prudence and loyalty) where the law does not otherwise.
  • The DOL will argue that circumstances have change since 1975, for example, the enactment of Code section 401(k) and the post-ERISA growth in the importance of those plans. As a part of that, the DOL asserts that rollover recommendations should be fiduciary advice and that the compensation from the rollover IRA (account or annuity) would be a prohibited transaction.
  • My last post, Fiduciary Rule 51, discussed the impact of the Supreme Court’s Loper Bright decision on the new fiduciary regulation. This post discusses the impact of Loper Bright on the validity of the amended PTEs, 84-24 and 2020-02.

As I explained in my last post, Fiduciary Rule 51, I have been asked whether the Supreme Court’s decision in Loper Bright Enterprises et al. v. Raimondo, Secretary of Commerce et al. could affect the outcome of the litigation about the validity of the DOL’s fiduciary regulation and related exemptions. The answer is “yes,” but perhaps not in the way you might think. This article discusses the Loper Bright decision in the context of a review of the DOL’s Prohibited Transaction Exemptions (PTEs) 84-24 and 2020-02.

To be fair, I am not an expert on constitutional law and I don’t want to create the impression that this is an authoritative article. Instead, my goal is to highlight the issues for consideration by the courts.

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The New Fiduciary Rule (51): The Loper Bright Decision and What it Means for DOL Regulations (1)


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Key Takeaways

  • The lawsuits against the DOL’s new regulation on fiduciary advice and the related exemptions—and the likely appeals—will probably last for years.
  • A key issue in the lawsuits and appeals is the authority of the DOL to amend its existing regulation—the 5-part test—to cover one-time recommendations (subject to specified limits).
  • The DOL will argue that circumstances have change since 1975, for example, the enactment of Code section 401(k) and the post-ERISA growth in the importance of those plans. As a part of that, the DOL asserts that rollover recommendations should be fiduciary advice.
  • On the other hand, some financial industries, and particularly the insurance industry, will argue that a one-time recommendation associated with a rollover is a sales transaction that should not be held to a fiduciary standard.
  • A critical question for the courts is whether the DOL has authority to issue a new fiduciary recommendation that, among other things, says that a rollover recommendation, explicit or implicit, is fiduciary advice. The Supreme Court’s decision in the Loper Bright case establishes the standard for the courts to evaluate an agency’s authority.

I have been asked whether the Supreme Court’s decision in Loper Bright Enterprises et al. v. Raimondo, Secretary of Commerce et al. could affect the outcome of the litigation about the validity of the DOL’s fiduciary regulation and related exemptions. The answer is “yes”, but perhaps not in the way you might think. This article discusses the Loper Bright decision in the context of a review of the DOL’s fiduciary regulation.

To be fair, I am not an expert on constitutional law and I don’t want to create the impression that this is an authoritative article. Instead, my goal is to highlight the issues for consideration by the courts.

Continue reading The New Fiduciary Rule (51): The Loper Bright Decision and What it Means for DOL Regulations (1) →

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The New Fiduciary Rule (50): What is a Best Interest Process?


best interest, broker-dealers, DOL, fiduciary, investment adviser, IRA, reg BI, rollovers, SEC
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Key Takeaways

  • The DOL’s new regulation defining fiduciary advice to include one-time recommendations has been stayed, but advisers who make ongoing individualized recommendations to ERISA-governed retirement plans, participants in those plans, and IRA owners continue to be fiduciaries subject to fiduciary standards. Those standards—prudence and loyalty—can be called a best interest standard.
  • However, the SEC’s fiduciary standard for one-time recommendations by investment advisers continues to apply. The SEC position is most recently documented in its Commission Interpretation Regarding Standard of Conduct for Investment Advisers. The SEC said that the investment adviser duties of care and loyalty—taken together–are a best interest standard.
  • The best interest standard for both broker-dealers and investment advisers has been further defined by the SEC Staff in its Bulletin entitled Standards of Conduct for Broker-Dealers and Investment Advisers Account Recommendations for Retail Investors.
  • In addition, one-time recommendations of insurance products are regulated by state insurance departments and almost all of the states have adopted NAIC Model Regulation #275, “Suitability in Annuity Transactions”, either verbatim or in large part, for recommendations of annuities. The NAIC has referred to this as a best interest standard.
  • This post discusses the basic requirements for a best interest process for making recommendations to ERISA-governed retirement plans, participants in those plans, and IRA owners.
  • Note that Reg BI and the NAIC model rule do not apply to recommendations to retirement plans, but do apply to participants and IRA owners, including rollover recommendations and recommendations to transfer IRAs.

If you study the rules of the various standard-setters, a pattern emerges about their expectations for the process for developing a best interest recommendation. The DOL and SEC are consistent in that regard, while the NAIC model rule is less demanding, as explained later in this article.

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The New Fiduciary Rule (49): Recommendations to Transfer IRAs (NAIC)


best interest, broker-dealers, DOL, fiduciary, investment adviser, IRA, reg BI, SEC
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Key Takeaways

  • Two Texas Federal District Courts have “stayed” the effective dates of the DOL’s new fiduciary regulation and related exemptions, meaning that the private sector will not have to comply with those rules until the cases are resolved and if the guidance is vacated, those rules will never be effective.
  • As a result, one-time recommendations to plans, participants and IRA owners will not be fiduciary advice for purposes of ERISA and the Internal Revenue Code.
  • However, one-time recommendations of securities (and insurance products that are securities) are regulated by the SEC for broker-dealers and investment advisers.
  • In addition, one-time recommendations of insurance products are regulated by state insurance departments and almost all of the states have adopted NAIC Model Regulation #275, either verbatim or in large part.
  • This post covers NAIC Model Regulation #275’s provisions for recommending exchanges of individual retirement annuities (also referred to as qualified annuities).

The stay of the effective dates of the amended fiduciary regulation and amended exemptions means that the “old” DOL fiduciary regulation (the 5-part test) and the existing exemptions continue in effect indefinitely.

My last post, Fiduciary Rule 48, discussed the DOL’s “old” and continuing definition of fiduciary advice—the 5-part test—and how it might apply to recommendations to transfer IRAs—individual retirement accounts and individual retirement annuities. The post before that, Fiduciary Rule 47, discussed SEC and SEC staff guidance on recommendations to transfer IRAs. This post is about the application of the conduct standards in NAIC Model Regulation #275 to the recommendation of annuities. The Model Regulation has been adopted by substantially all of the states, either verbatim or in large part.

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The New Fiduciary Rule (48): Recommendations to Transfer IRAs (DOL)


2020-02, best interest, broker-dealers, DOL, fiduciary, investment adviser, IRA, reg BI, SEC
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Key Takeaways

    • Two Texas Federal District Courts have “stayed” the effective dates of the DOL’s new fiduciary regulation and related exemptions, meaning that the private sector will not have to comply with those rules until the cases are resolved and if the guidance is vacated, those rules will never be effective.
    • As a result, one-time recommendations to plans, participants and IRAs will not be fiduciary advice for purposes of ERISA and the Internal Revenue Code.
    • However, one-time recommendations are regulated by the SEC for broker-dealers and investment advisers and by state insurance departments for insurance producers (primarily under the NAIC Model Regulation #275 which has been adopted by most states).
    • My last post discussed SEC and SEC staff guidance on recommendations to transfer IRAs.
    • This post covers likely DOL interpretations concerning recommendations to transfer or exchange of individual retirement accounts and individual retirement annuities.
    • The third post in this series will cover NAIC Model Regulation #275’s provisions for recommending exchanges of individual retirement annuities (also referred to as qualified annuities).

The stay of the effective dates of the amended fiduciary regulation and amended exemptions means that the “old” DOL fiduciary regulation (the 5-part test) and the existing exemptions continue in effect indefinitely.

My last post, Fiduciary Rule 47, discussed SEC and SEC staff guidance on recommendations to transfer IRAs. This post is about the DOL’s likely interpretation of how the existing 5-part fiduciary definition applies to IRA transfer recommendations.

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