The Trump administration on Monday issued a proposed rule to allow retirement plans to offer alternative assets like private equity and cryptocurrencies as part of the investment options in 401(k) accounts.
The Labor Department’s rule aims to ease longstanding barriers to incorporating alternative assets into retirement plans and follows an executive order signed by President Donald Trump last summer on the subject.
Advocates for the rule change argue that including alternative assets in 401(k) plans can help foster better long-term returns and make diversification easier. Skeptics note that alternative assets can be less liquid, more complex and have higher fees, which can limit gains while also introducing risk.
Under the proposed rule, plan fiduciaries would have to objectively, thoroughly and analytically consider and make determinations about performance, fees, liquidity, valuation, performance benchmarks and complexity. Trustees who abide by those rules will be granted safe harbor that protects them from lawsuits.
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Managers of defined contribution plans have historically had the authority to consider alternative investments, though most have opted against doing so.
The Biden administration in 2022 issued a rescinded compliance release that warned fiduciaries against including cryptocurrency options in 401(k) plans, which the Trump administration criticized as a “departure from the department’s decades-long approach to fiduciary investment decisions.”
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Labor Secretary Lori Chavez-DeRemer said that the agency’s newly proposed rule “will show how plans can consider products that better reflect the investment landscape as it exists today. This greater diversity will drive innovation and result in a major win for American workers, retirees, and their families.”
Treasury Secretary Scott Bessent added that the pending regulation “is an initial step in implementing the President’s Executive Order in a safe and smart manner, broadening access to additional retirement plan options for millions of Americans while being mindful of the importance of protecting retirement assets.”
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Following the Labor Department’s release of the proposed rule, the agency will open a 60-day comment period ahead of a decision to finalize the rule.
Alternative asset managers like Blackstone and Apollo Global Management could benefit from the opportunity to draw on a new pool of capital. Several industry members and groups applauded the rule.
Apollo CEO Marc Rowan said that the change is a “thoughtful step toward addressing the growing retirement crisis,” noting that “Americans increasingly lack the savings and income needed for a secure retirement” and that the shift could “meaningfully improve retirement outcomes.”
If the rule is adopted, Erin Cho, a partner at the Mayer Brown law firm, said that it “will not open the floodgates for private equity, private credit or crypto funds to move into the retirement space” as it will only provide a process for doing so.
Reuters contributed to this report.
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