New 401(k) Order Opens Crypto and Private Deals to Main Street

What founders and small employers should know about fees, volatility, fiduciary exposure, and the practical steps to keep workers’ nest eggs safe

SoulCycle cofounders Julie Rice and Elizabeth Cutler

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On August 7, 2025, President Donald Trump signed an Executive Order directing the Department of Labor (DOL), Securities and Exchange Commission (SEC), and Treasury to make space for alternative assets—cryptocurrency, private equity/private credit, and real estate—inside 401(k)s.

The White House framed the move as “democratizing access,” while major outlets highlighted the potential upside and higher risks, fees, and complexity for ordinary savers. For founders who sponsor small plans—and for entrepreneurs thinking like investors—the order could expand diversification options while raising the bar on ERISA prudence, documentation, and employee education.

What changed, exactly?

The order—“Democratizing Access to Alternative Assets for 401(k) Investors”—tells regulators to update rules and guidance so plan lineups and target-date funds can include private assets and digital assets under clearer guardrails.

It builds on DOL’s earlier signals (2020 private-equity information letter; 2025 rescission of the 2022 crypto caution) and asks agencies to reduce litigation fear for plan sponsors who follow a prudent process.

For entrepreneurs, the headline is simple: more choice may be coming to your plan—but the duty of prudence and loyalty under ERISA does not relax.

Why founders should care

• Talent & retention: richer menus can attract financially savvy employees.

• Risk & liability: alternative assets can bring higher fees, less liquidity, tougher valuation, and sharper volatility—all of which amplify fiduciary exposure if selection and monitoring aren’t bulletproof.

• Vendor pressure: expect pitches for “hybrid” target-date funds that blend public and private exposures. Scrutinize fee layers and liquidity mechanics.

401(k) assets were about $8.9T as of Q3-2024 (ICI). Average mutual fund expense ratios in 401(k)s were ~0.31% in 2023, with broad fund fees at 0.36% (asset-weighted).

The fee and liquidity realities (and why they matter to small plans)

The SEC reminds investors that “fees may seem small, but over time they can have a major impact.” For plan fiduciaries, that reality compounds across decades and across participants—especially if performance fees stack atop admin and custody layers. Make sure your IPS (Investment Policy Statement) spells out how you will evaluate all-in fees, valuation frequency, redemption terms, and side pockets before adding any option.

Useful primers: SEC on mutual fund fees and expenses and their updated investor bulletin on fees.

Feature	Broad index funds (typical 401(k))	Private equity/credit (in TDF or sleeve)	Crypto/digital assets
Common fee level	~0.31% avg in 401(k)s	Often “2 and 20” (retail variants can be lower but layered)	Trading/spread + fund/ETP fees; custody costs
Liquidity	Daily	Quarterly/annual windows; lockups; gates possible	Daily, but market structure can be stressed
Valuation	Transparent, market-priced	Appraisal/Model-based; lagged marks	Transparent prices; high volatility
Regulatory posture	Mature, standardized	Expanding under EO; complex disclosures	EO encourages access; risk education emphasized

Practical guardrails for entrepreneurs and plan sponsors

1. Re-tool your IPS to define when and how alternative sleeves qualify (fee caps, liquidity terms, valuation standards, diversification tests).

2. Favor diversified vehicles (e.g., target-date funds with capped private-market sleeves) rather than stand-alone PE or single-coin exposure for default options.

3. Cap allocations and phase in. Many institutions limit higher-risk buckets to single-digit percentages; document the rationale. (Best-practice inference; align with ERISA prudence.)

4. Pre-mortem the worst-case: suspended redemptions, valuation write-downs, or a crypto drawdown. Educate participants upfront with plain-English materials and risk labels. FINRA and SEC materials are good templates.

5. Audit total cost of ownership (management, performance, custody, admin, FX/spread, wrap fees). Tie selection to a documented monitoring cadence.

6. Stay current on rulemaking as DOL/SEC translate the EO into operational guidance. The EO is not self-executing; timelines and conditions will evolve.

Short quote you can share with employees: The SEC notes that “fees may seem small, but over time they can have a major impact.”

Balanced take

There is real, long-term potential in professional private-market exposure and tokenization trends. But there is also no free lunch: higher dispersion of outcomes, fee drag, and participant-behavior risk (buying high, selling low) when volatility spikes. For entrepreneurial plan sponsors, the edge will come from process discipline: documented prudence, conservative sizing, and transparent education. That is the kind of “innovation” employees actually value.

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