By Eric Satz, Founder & CEO of Alto | April 2026
When the executive order directing the Department of Labor to expand 401(k) access to alternative investments was signed last August, I wrote that the road from executive order to real, tangible impact wouldn't be immediate.
On March 30, that road got meaningfully shorter when the DOL published a proposed rule that would give 401(k) plan fiduciaries a formal legal safe harbor for offering alternative assets alongside traditional funds1. The comment period runs through June 1. A final rule could come by year's end, a process I've been watching closely.
The more I read about what this rule actually does, the more it illuminates something about the retirement savings landscape that most investors have never had reason to examine: the structural difference between a 401(k) and a self-directed IRA.
What the rule does, and what it doesn't
The proposed safe harbor establishes a six-factor framework covering performance, fees, liquidity, valuation, benchmarking and complexity. If a plan fiduciary follows this process when selecting alternative investment options, they're presumed to have met their ERISA duty of prudence. The goal is to reduce the litigation risk that has historically made plan sponsors reluctant to offer alternatives at all.
This is a sensible reform, and it matters for the roughly 90 million Americans who save for retirement through a 401(k)2. There's a detail buried in how the rule is structured that deserves more attention.
Under the proposed rule, the decision about whether to offer alternatives, and which ones, belongs to the plan sponsor, typically your employer. Plan participants still choose from a menu, which can get wider if the plan sponsor decides to expand it and a fiduciary process supports that decision. This can add some additional options; however, an individual investor cannot log into their 401(k) and allocate to a specific private equity fund they are interested in.
With a self-directed IRA, investors can do just that. In fact, they've been able to since 1974.
A structural distinction most people have never thought about
The biggest difference between a 401(k) and a self-directed IRA is that the 401(k) is a plan while the self-directed IRA is an account. A plan defines the boundaries of your choices before you make any. An account lets investors define their own boundaries
In a 401(k), the employer selects the custodian, sets the menu and bears fiduciary responsibility for what's available. Participants make choices within that structure. The DOL rule is designed to make it safer for employers to widen the menu.
With a self-directed IRA, the investor is the decision-maker at every step. They identify the investment, evaluate it and direct the custodian to execute it. The account was designed this way from the beginning. When ERISA became law in 1974, it permitted IRAs to hold virtually any asset that isn't explicitly prohibited by the IRS3. The prohibited transaction rules that do exist are narrow and specific, acting as guardrails rather than walls.
I want to be clear that this isn't a reason to dismiss the 401(k). Most Americans do the majority of their retirement saving through their employer plan, and improving those plans matters enormously. However, the cultural conversation it's generating is revealing something important: we've spent decades treating alternatives in retirement accounts as a radical or novel idea, when one of our most widely available retirement vehicles, the self-directed IRA, has permitted it the entire time.
What I'd tell investors, advisors and sponsors right now
For individual investors following the 401(k) debate and wondering whether it affects them: if you have an IRA that's sitting entirely in mutual funds or ETFs, this is a reasonable moment to ask whether you should consider including private markets in your retirement plan. The capability is there in self-directed IRAs. Whether and how to use it requires thoughtful research, genuine risk tolerance and real due diligence. But the vehicle itself isn't the obstacle.
For advisors: the DOL news cycle is handing you one of the clearest conversation starters I've seen in a while. Clients who are curious about alternatives because of the 401(k) headlines are already primed to understand that the self-directed IRA offers even more flexibility.
For plan sponsors: once the rule is finalized, a Self-Directed Brokerage Account (SDBA) window can offer something the standard menu structure cannot. An SDBA gives participants access to a broader investment universe while keeping the sponsor's fiduciary exposure contained. Because participants assume responsibility for investment decisions made within that window, the liability profile looks meaningfully different than it does for core menu options. For sponsors who want to offer more without absorbing more risk, the SDBA window is a logical place to start.
The retirement vehicle hiding in plain sight
More than 50 years after the self-directed IRA was introduced, several indicators are converging around the same conclusion: alternatives belong in retirement accounts. The executive order, the DOL rule, and the ongoing debate about accredited investor definitions are all pointing in that direction. It is encouraging to see the momentum to extend that access into the defined contribution ecosystem, which can ultimately drive better the outcomes for investors.
1 U.S. Department of Labor, Employee Benefits Security Administration. "Fiduciary Duties in Selecting Designated Investment Alternatives." March 30, 2026.
2 U.S. Department of Labor.
3 Employee Retirement Income Security Act of 1974, Pub. L. 93-406, 88 Stat. 829. Prohibited transaction rules for IRAs: Internal Revenue Code §4975.
