Answers on Alts in 401(k)s, New Fiduciary Rule on Deck in 2026

MARK IWRY: I think it would be fair to recognize that major interruptions — like this record-breaking shutdown — tend to have knock-on effects and cause all kinds of disruption and delays beyond the duration of the event itself.

The actual delay in regulatory guidance that will result from the 43-day shutdown, including pre-shutdown contingency planning and preparations plus the process of digging out once it’s over, could well be two months or more. I believe many in the stakeholder community would probably agree that these realities should be taken into account when considering upcoming deadlines that were set pre-shutdown — whether set by Congress, the White House, or the agencies themselves (and whether public deadlines or internal ones).

And, as if the new deliverables assigned to Labor regarding alternative investments and ERISA litigation were not enough, the executive order surprisingly classified retirement income as a type of alternative investment, putting another major guidance issue in play.

What does this mean, exactly?

IWRY: In addition to the types of assets typically classified as “alternative assets” — including real estate, infrastructure, commodities, private equity, private credit, cryptocurrency — the executive order also included lifetime retirement income.

This puts another major issue on the table: it could mean that EBSA will consider longstanding industry hopes for broader guidance, potentially regulations, permitting 401(k) plans to use defaults to spur takeup of retirement income.

In other words, allowing qualified default investment alternatives, QDIAs, that default retiring participants into one or more specified, prudently selected types of retirement income options (possibly including annuity contracts, living benefit riders, managed payout accounts, systematic withdrawals, income-oriented bond managed accounts or ladders, and the like).

EBSA recently issued guidance on 401(k) retirement income, correct? Please explain.

IWRY: That’s right. The department’s Sept. 23, 2025 Advisory Opinion issued to AllianceBernstein confirmed that 401(k) managed accounts can include a retirement income sleeve providing guaranteed lifetime withdrawal benefits without losing their status as QDIAs. This builds on 2014 Treasury and Labor guidance allowing QDIA target date funds to include an annuity sleeve to still qualify as QDIAs.

What kind of guidance is expected from Labor regarding investments in alternative assets?

IWRY: One possibility is a process-oriented fiduciary safe harbor. That would describe the specific steps EBSA thinks plan fiduciaries need to take in order to prudently decide to include particular alternative assets in a plan’s target date fund or other default asset allocation fund. This approach would be less challenging for EBSA than designing a more mechanical type of safe harbor.

Of course, the term “alternative” assets refers to a range of investments from somewhat more traditional ones such as real estate, commodities, or infrastructure to alternatives like private equity, private credit, or cryptocurrency, which will raise new issues and potentially new risks of challenge in court.

But it seems unlikely that EBSA would try to meet the executive order’s upcoming deadline through initial guidance on the somewhat more traditional alternative investments because the pressure is coming mainly from the private market industry and crypto.

Meanwhile, the plaintiffs’ bar is closely watching these 401(k) alternative investments and how much plan fiduciaries are willing to pay for them — including how plans can prove they could not have negotiated a lower price. Despite the pressure on 401(k) plan fiduciaries from industry and the current administration to include private market investments in target date funds and managed accounts, the threat of litigation is a major headwind. Plan fiduciaries know the plaintiffs’ bar is waiting and watching — closely eyeing these investments and largely holding their fire. Why would the fox want to scare away the chickens before they settle into the coop?

What do you anticipate Labor's new fiduciary rule to look like, which is expected next May?

IWRY: Yes, as you reported last week, Labor has announced it’s abandoning its defense of the Biden-era fiduciary rule in the courts, which comes as a shock to no one. Consistent with [EBSA chief] Dan Aronowitz’s testimony at his Senate confirmation hearing, he and the current administration will want to put their stamp on this important, longstanding and famously controversial participant protection issue: What rules should determine fiduciary status when providing investment advice, and do rollovers from plans to IRAs constitute investment advice triggering fiduciary duties?

EBSA’s regulatory agenda shows regulations on this topic to be issued by May 2026 (though frankly the time frames published in these agency regulatory agendas often are more in the nature of aspirations than deadlines). When it does come out, this fiduciary-related guidance is expected to be far less regulatory in nature than the Biden-era guidance (in accordance with an earlier Trump executive order directing agencies to deregulate).

Is other guidance from Labor on the horizon?

IWRY: EBSA is also working on PEP guidance, having recently requested and received stakeholder input on a list of questions relating to pooled employer plans.

EBSA's request for comments sounded it was seriously considering issuance of a safe harbor on how PEP providers might avoid conflicts of interest relating to the offering of proprietary funds and other bundling of services. But stakeholder reactions to a possible safe harbor were surprisingly mixed — perhaps hoping a relative lack of guidance on conflicts in PEPs will give industry time to adopt widespread, established PEP practices that will then be harder for EBSA to challenge.

What can we expect from the Internal Revenue Service and Treasury?

Treasury and IRS have a lot on their plate as well. In the wake of this year’s July 4 budget reconciliation and tax bill, the Treasury/IRS guidance process seems to be following a bit of a LIFO pattern: “last in” (recently enacted Trump accounts as well as new favorable tax treatment of tips and overtime and the new seniors' deduction), “first out” (potentially inserted in the pipeline ahead of the pending Secure 2.0 projects).

Treasury/IRS Trump account guidance is imminent. [The IRS released a notice on Tuesday announcing upcoming regulations and providing guidance regarding Trump Accounts]. I understand it’s been worked on heavily including during the shutdown, and Trump Accounts are effective beginning in 2026, with contributions permitted starting July 4, 2026.

Many hope the guidance will include an efficient linkage or coordination with the development of the IRS system for implementing the important Secure 2.0 Saver’s Match, effective Jan. 1, 2027. The Saver’s Match, which some consider possibly the most important provision of Secure 2.0, would provide a tax credit deposited in a 401(k) or 403(b) plan or IRA in the form of a government matching contribution for as many as 20 to 30 million moderate- and lower-income 401(k) and IRA savers.

When do you anticipate a Secure 3.0 bill?

I would not anticipate a Secure 3.0 (or whatever it will ultimately be called) bill to be introduced until sometime in 2026. However, the next iteration of the major automatic IRA coverage expansion bill, sponsored by Ways and Means Ranking Member [Richard] Neal, might well be introduced by this year-end or shortly after.