The Trump administration is proposing to allow crypto, private equity in 401(k)s
BlackRock Global Head of Retirement Solutions Nick Nefouse joins ‘Varney & Co.’ to discuss proposed legislation to expand 401(k)s to crypto and real estate.
The Trump administration on Monday released proposed legislation to allow retirement plans to offer other assets such as private stocks and cryptocurrencies as part of their investment options. 401(k) accounts.
The Department of Labor’s rule aims to ease longstanding barriers to retirement plans and follows an executive order signed by the President. Donald Trump last summer for a story.
Proponents of the rule change argue that including other assets in 401(k) plans would help promote better long-term returns and make diversification easier. Skeptics note that some assets may be less liquid, more complex and have higher fees, which can limit returns while also introducing risk.
Under the proposed rule, plan fiduciaries would be required to consider and make decisions about performance, fees, liquidity, valuation, performance measures and complexity in an unbiased, holistic and analytical manner. Trustees who comply with those rules will be given a safe harbor that protects them from lawsuits.
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The Department of Labor’s proposed rule will enter a public comment period before it is revised and potentially finalized. (Celal Gunes/Anadolu via Getty Images)
The management of defined contribution plans historically they have had the authority to consider other investments, although many have chosen not to.
Biden administration in 2022 issues repealed compliance exemption that warned fiduciaries to include crypto currency options in 401(k) plans, which the Trump administration criticized as “a departure from the department’s decades-long approach to reliable investment decisions.”
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President Donald Trump and Treasury Secretary Scott Bessent have worked to expand the ability to invest in other assets. (Anna Moneymaker/Getty Images)
Labor Secretary Lori Chavez-DeRemer said the agency’s proposed new rule “will show how plans can consider products that better reflect today’s investment climate. This greater diversity will drive innovation and result in greater benefits for American workers, retirees, and their families.”
Treasury Secretary Scott Bessent added that the pending legislation is “the first step in implementing the President’s Executive Order in a safe and prudent manner, expanding access to more. retirement plan options millions of Americans while remembering the importance of protecting retirement assets.”
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The proposed rule would open 401(k) plans to other currencies such as cryptocurrencies if the fiduciary acted in its discretion. (Stock)
After the Department of Labor’s release of this proposed law, the agency will open a 60-day comment period before finalizing the law.
Another inheritance managers like Blackstone and Apollo Global Management could benefit from the opportunity to use the new pool of capital. Many industry members and groups applauded the legislation.
Apollo CEO Marc Rowan said the change is a “thoughtful step to address the growing retirement crisis,” noting that “Americans increasingly lack the savings and income needed for a secure retirement” and that the change “could significantly improve retirement outcomes.”
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If the law is adopted, Erin Cho, a partner at the Mayer Brown law firm, said that “it will not open the floodgates of private equity, private debt or crypto-currencies to enter the retirement space” as it will only provide a process to do so.
Reuters contributed to this report.
