Washington has operated for years on the premise that American workers are not sophisticated enough to invest in alternative assets. This paternalistic mindset is too restrictive and has limited financial choice for ordinary, working-class Americans.
The Department of Labor’s new rulemaking to expand access to alternative investments (based on President Donald Trump’s executive order last summer) is a significant victory for America’s private sector workers. The rule clarifies that plan sponsors may offer alternative investments, such as private equity, real estate, and infrastructure, in 401(k) plans if they follow a process that ensures these funds have adequate liquidity and that fees are appropriate given the risk-adjusted returns of the investments.
The rule also includes proposed requirements for valuing investments, such as requiring an independent third-party valuation. These are exactly the kind of reforms I spent years fighting for, and I’m glad it’s finally taking shape.
President Trump’s rule delivers for every American with a 401(k) plan and for anyone tired of Washington’s overregulation holding back opportunity. I would know. As Chairman of the House Financial Services Committee in the years following the enactment of the Dodd-Frank Act, I saw how Washington’s one-size-fits-all approach to financial regulation limited opportunity, discouraged innovation, and effectively told millions of Americans they could not be trusted to make their own investment decisions.
Outdated regulations have created a retirement system that is missing out on alternatives — not because they are inherently inappropriate, but because regulators decided they are too complex for ordinary Americans.
For decades, institutional investors, high-net-worth individuals, and public sector workers with pensions have benefited from exposure to alternative assets, while private sector workers have been left behind. This is about to change.
We don’t have to look further than my home state of Texas to understand how well these investments work: the Texas County & District Retirement System (TCDRS) and the Employees Retirement System of Texas (ERS) prove the power of thinking beyond stocks and bonds. By investing in a diversified portfolio including private equity, real estate, and strategic credit, TCDRS achieves stronger returns and long-term growth, and recently reported a 10.3 percent net annual return, with long‑term averages near 8 percent (by contrast, a typical 401(k) portfolio — usually a mix of stocks and bonds — earns about 5 percent to 8 percent annually over time after fees) Additionally, it was recently reported that the ERS put over $1 billion in alternative assets in the final quarter of 2025.
The pension funds’ focus on private markets is logical given the performance of private equity over the years. Private equity has outperformed the S&P 500 over the last 5-, 10-, 15-, and 20-year periods. One analysis found that after fees, private equity outperformed public stocks by over 4 percent from 2000 to 2024. Another study found that adding private equity and real estate to a 401(k) plan can increase a retiree’s spending power by $2,400 annually. The benefits are evident.
Why should one subset of workers have access to these returns, while the other set of workers is restricted to public stocks and bonds? President Trump’s rulemaking will offer all American workers the same benefit these Texas county and local government workers have had access to for years.
This rule also successfully addresses the primary reason 401(k) sponsors have historically avoided alternatives: not because they were unsafe, but because unclear rules made offering them a legal minefield. Plan sponsors have avoided including alternatives in their 401(k) plans due to litigation risk, and in turn have left workers with fewer choices and up to 14 percent less retirement wealth.
The Department of Labor’s rule provides plan sponsors with a clear legal framework that could mitigate frivolous Employee Retirement Income Security Act of 1974 (ERISA) litigation. For the past twenty years, opportunistic trial attorneys have filed wave after wave of lawsuits against plan sponsors, punishing anyone who offered private market investment options to their plan participants. This rule aims to make it easier for plan sponsors to broaden investment opportunity while keeping ERISA’s protections intact — giving workers access to a wider range of retirement tools and sponsors the confidence to finally innovate safely.
This newfound regulatory clarity restores freedom and expands choice in a safe, accountable way. This isn’t just about higher returns — it’s about fairness, empowerment, and trusting Americans to make informed decisions about their own financial future. I applaud President Trump and his administration for making this investment in our country’s future a priority.
Rep. Jeb Hensarling served as a U.S. representative from Texas and as Chairman of the House Financial Services Committee.
