Retirement Retirement Planning

Why Regulators Are Suddenly Worried About What’s Inside 401(k)s

This 401(k) debate is heating up.

By Catherine Collins

Edited by Laura Hohenstein

Updated Feb. 9, 2026

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Over the last few decades, more and more people have used traditional 401(k) retirement plans to save and invest for their futures. In fact, 43% of Americans currently have a 401(k). Right now, only specific assets are allowed in 401(k)s. These include mutual funds, index funds, and other straightforward investment options that are regulated.

Although many people continue to find 401(k)s complex, employees can generally learn more about their options and investment fees by closely reading their 401(k) disclosure documents. However, some new 401(k) policies and regulations being introduced in Washington are raising concerns among regulators and government officials.

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Why do regulators limit the assets in 401(k)s?

Historically, 401(k) plan administrators have had a fiduciary responsibility to allow investments in 401(k)s that are in the best interests of American workers. Part of that fiduciary responsibility, according to the Department of Labor, is to offer diversified investments that reduce the potential for significant investment losses. That's why there's been some backlash over proposed policy changes that would allow alternative investments in 401(k) plans, if approved.

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Proposed 401(k) policy changes

In recent weeks, the Trump Administration has proposed new policy changes for 401(k) plans. It has asked regulators to consider allowing private equity and other alternative assets, such as cryptocurrency, in 401(k) plans. President Trump issued an executive order in August 2025 called "Democratizing Access to Alternative Assets for 401(k) Investors." In this executive order, he asked the Department of Labor and the SEC to review all existing regulations and consider making alternative investments available to 401(k) plan participants.

Why do some leaders advocate for including these alternatives?

Proponents of including alternative investments in 401(k) plans say that more workers need access to assets that have traditionally been reserved for private investors. Other supporters say that investments like cryptocurrency, for example, are just as volatile as some other stocks. Many people supporting this plan say it's okay to include alternative investments as long as there are consumer protections in place and judicial oversight.

Why are some leaders against these alternatives?

Many congressional leaders, including Senators Elizabeth Warren and Bernie Sanders, have criticized allowing these types of investments in 401(k) plans. These detractors argue that alternative investments may have complex fee structures and high volatility, making them unsafe investments for workers who rely on 401(k) plans to provide steady retirement income. Additionally, those who oppose this plan say that many workers may unknowingly purchase assets without realizing how risky they can be for preserving retirement funds in the future.

Asking for answers and oversight

Because of these concerns, Elizabeth Warren and other leaders drafted a letter to the SEC (Securities and Exchange Commission) asking what the agency will do to protect workers if these alternative investments are allowed in 401(k) plans. After all, allowing new types of investments in plans means that 401(k) plan sponsors might be required to provide more oversight and may have more fiduciary obligations to explain the assets in the plans. Additionally, the SEC needs to be aware that including more volatile investments may expose employers and 401(k) plan providers to litigation, especially if workers lose investment income due to a lack of communication or clarity about specific investment types.

What happens next?

As of right now, there have been no official changes to the current 401(k) plan rules. Employees will still have access to their 401(k) retirement plans, and companies will still be able to offer other job benefits, such as employer matches. What will likely happen is that the SEC will take time (possibly months) to research the impact of changing 401(k) asset availability. The SEC will need to answer to lawmakers and provide a clear plan for how 401(k) plan providers will maintain their fiduciary obligations if alternative assets are allowed in the future.

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How to protect your own 401(k) assets

It's important for workers to stay informed about their 401(k) plans. If there is something you don't understand about your 401(k) plan, including your benefits, your employer match, how your contributions affect your taxes, or anything else, consult with your Human Resources department, an accountant, or a financial planner.

Bottom line

Regulators and government leaders have a responsibility to the American people to offer them the opportunity to save and invest so they can retire comfortably. Over the past few decades, investing in employer-sponsored 401(k) plans has been the most common way for workers to save for retirement. Now, with new proposals to include additional asset types in 401(k)s, government leaders are tasked with deciding whether to expand 401(k)s to allow other asset types or keep them the same.

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