The U.S. Department of Labor has proposed a rule that would ease restrictions on including cryptocurrency and other alternative assets in retirement plans.

The proposal would not require plans to add these investments, but it would make it easier for fiduciaries to do so without fearing lawsuits or regulatory scrutiny. At the same time, it raises important questions for participants about risk, transparency and long-term retirement outcomes.

The rule centers on a new “safe harbor” framework under the Employee Retirement Income Security Act that focuses on process rather than specific types of investments. If fiduciaries select investments “objectively, thoroughly and analytically” using six factors — performance, fees, liquidity, valuation, benchmarking and complexity — they would be presumed to have acted prudently.

What it means for workers

For employees investing through a 401(k), the rule could open the door to new opportunities — but also new risks.

Potential upsides include:

Diversification: Alternative assets may not move in lockstep with stocks and bonds, which could help reduce overall portfolio volatility.

Access to new markets: Workers could gain exposure to private markets and emerging asset classes that have historically been unavailable in retirement plans.

Long-term growth potential: Some alternatives, particularly private equity, have historically offered higher returns over long time horizons.

Some experts have raised concerns about how the rule would work in practice, particularly around transparency. For example, it is unclear how complex fee structures, such as carried interest in private funds, would be disclosed to participants or reflected in reported expense ratios.

There is also skepticism about whether fiduciaries will consistently apply the rigorous analysis the rule requires or whether some may treat the safe harbor as a box-checking exercise while retaining costly or underperforming investments.

Potential risks include:

Complexity: Many alternative investments are difficult for average investors to understand and evaluate.

Illiquidity: Some assets cannot be easily sold, which may pose challenges in a participant-directed plan.

Higher fees: Private market investments often carry layered or performance-based fees that can erode returns.

Volatility and speculation: Cryptocurrency remains highly volatile and subject to rapid price swings.

A shift in policy direction

The proposal marks a clear shift from prior guidance that cautioned against cryptocurrency and other alternatives in retirement plans. It reflects a broader federal policy push to expand access to a wider range of investments.

For now, the rule remains a proposal, with comments due by June 1. If finalized, it could reshape how 401(k) plans are constructed and how millions of workers invest for retirement by bringing more complex and potentially higher-risk assets into the fold.