Our final post in the 2025 Regulatory Update series explores industry trends, including the growing role of alternative investments and embedded annuities in defined contribution plans.
Alternative investments are gaining traction in defined contribution plans, driven by both regulatory changes and product innovation. President Trump’s August 2025 executive order encourages the use of private equity and cryptocurrency in retirement plans, directing federal agencies to revise guidance and promote access to these asset classes. While alternative investments have long been used in defined benefit plans, their introduction to DC plans brings new opportunities—and new risks.
Key risks include liquidity, valuation, regulatory oversight, and the complexity of integrating illiquid assets into daily-valued plans. Proponents argue that alternatives can enhance diversification and long-term returns, but sponsors must weigh these benefits against the challenges of administration and participant communication.
The industry is responding with new products, such as managed portfolios that include a sleeve of private equity or cryptocurrency, and collective investment trusts with embedded annuities. Providers like Blackrock, Nuveen, and Vanguard are offering target date funds with fixed annuity allocations, giving participants the option for lifetime income at retirement. However, these products introduce additional complexity, especially for participants defaulted into them as a Qualified Default Investment Alternative (QDIA).
For plan sponsors, the evolving product landscape requires careful due diligence, clear participant communication, and ongoing monitoring to ensure new options align with plan objectives and participant needs.
As the retirement landscape evolves, new investment products offer both promise and complexity. Staying informed is essential for prudent plan governance.
Don’t miss any details—download the full 2025 Regulatory Update for the complete analysis.
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