The US Department of Labor's (DOL) proposed rules to open 401(k) and other defined contribution plans more fully to alternative assets go to the heart of how insurers, asset managers and intermediaries manufacture, distribute and support retirement products.
The proposal is intended to reduce what the DOL sees as excessive regulatory litigation friction that has discouraged fiduciaries from using alternatives, even where those assets could improve diversification and risk-adjusted returns, according to a report from BestWire.
In practice, it seeks to give plan sponsors and advisers more confidence to allocate to private markets and insurance-backed income solutions, provided they follow a clearly defined process.
For insurers and asset managers, the core of the proposal is a process-based safe harbor.
Fiduciaries considering alternatives would need to evaluate them “objectively, thoroughly and analytically” against factors such as performance, fees, liquidity, valuation, benchmarks and complexity. That effectively codifies what due diligence on alternatives should look like under ERISA and creates a framework that carriers and managers will need to reflect in product design, disclosure and ongoing support.
If fiduciaries follow this prescribed process, the DOL said they should be confident their decisions “will not draw undue litigation.” That is a key point for plan committees and their advisers, who have faced a steady flow of ERISA class actions over fees, underperformance and alleged imprudence. It will also be closely watched by fiduciary liability and E&O underwriters considering how courts interpret the new safe harbor.
For insurers, the bar will likely be higher rather than lower, with products needing clear, defensible narratives on cost, liquidity, valuation and benchmarking to sit comfortably within the safe harbor framework.
According to the report, the proposal lands as the so-called “Peak 65” wave accelerates, with more than four million Americans expected to reach retirement age each year over the next several years. That puts longevity and sequence-of-returns risk at the center of retirement planning and reinforces the strategic position of life insurers.
David Chavern, president and CEO of the American Council of Life Insurers, described the DOL move as "the right idea at an important time," arguing that it would give this cohort more tools to secure income alongside 401(k)s, IRAs and other savings. He emphasized that annuities “are the only financial products that can guarantee income for life - much like a traditional pension,” underscoring the potential role for life carriers if plans make greater use of guaranteed income and private-market strategies.
Meanwhile, insurers will have a clearer path to offering annuities and alternative strategies in defined contribution plans, which dovetails with the direction of SECURE and SECURE 2.0, which already encourage in-plan lifetime income. If the safe harbor meaningfully reduces fiduciaries’ fear of litigation over adding guaranteed income or private-market sleeves, life carriers could see a meaningful expansion of defined contribution distribution and assets under management.
That opportunity will sit alongside closer scrutiny of insurer balance sheets, capital and counterparty risk, particularly where guarantees are involved. Ratings, risk-based capital, reinsurance structures and asset-liability management are all likely to feature in fiduciaries’ “objective” assessments.
Defined contribution plans hold around $10 trillion in 401(k) assets alone. Historically, most of that money has been invested in mutual funds and index strategies; private credit, private equity, real estate and insurance-linked income products have generally been absent from mainstream plan menus, the report said.
If the rule is finalized largely as proposed, insurers and private-markets managers will be competing to capture a slice of that pool. To do so, they will need DC-friendly structures that can support daily valuation, participant-level liquidity and clear fee transparency, often delivered through target-date or managed-allocation frameworks rather than as stand-alone alternative options.
Robust governance will also be central. Fiduciaries will expect documented processes around valuation, capacity limits, secondary liquidity and participant communication that help them evidence compliance with the DOL’s process test. Insurers offering fixed, indexed and variable annuities inside defined contribution plans will need to consider how their guarantees interact with higher-volatility or less liquid alternative allocations over time.
If implemented, the DOL’s rule could, over time, redirect a meaningful share of 401(k) assets toward strategies where life insurers and private-markets managers have an advantage. At the same time, it will raise expectations for process, transparency and participant protection.
Insurers will have a clear opportunity in expanding access for annuities, private-credit-backed income solutions and other insurance-linked structures inside defined contribution plans.
However, the challenge is also clear - building products, governance frameworks and support models that will help fiduciaries operate comfortably within the new safe harbor and stand up to scrutiny if those decisions are ever tested in court.
