An executive order signed by President Donald Trump recently will open Americans’ 401(k) plans to alternative assets, including private market investments, real estate, actively managed investments in digital assets, commodities, and infrastructure projects.
The president directed the Labor Department and other agencies to redefine what would be considered a qualified asset under current 401(k) retirement rules.
In the order, titled, “Democratizing Access to Alternative Assets for 401(k) Investors”, Trump stated, “It is the policy of the United States that every American preparing for retirement should have access to funds that include investments in alternative assets when the relevant plan fiduciary determines that such access provides an appropriate opportunity for plan participants and beneficiaries to enhance the net risk-adjusted returns on their retirement assets.”
He called upon the Securities and Exchange Commission to revise its regulations to facilitate access to alternative assets for participant-directed defined-contribution retirement savings plans.
The order notes that alternative investments, including cryptocurrency, are “an increasingly large portion of the portfolios of public pension and defined-benefit retirement plans.”
Fox Business reported that a group of nine Republicans in the House of Representatives wrote to SEC Chairman Paul Atkins expressing their support for the plan and encouraging the SEC to collaborate with the Labor Department to revise relevant regulations in order to give Americans more access to alternative assets in their retirement plans.
“We applaud the EO’s policy ‘that every American preparing for retirement should have access to funds that include investments in alternative assets when the relevant plan fiduciary determines that such access provides an appropriate opportunity… to enhance the net risk-adjusted returns,” the lawmakers wrote.
The president’s executive order states that a “combination of regulatory overreach and encouragement of lawsuits filed by opportunistic trial lawyers” has relegated 401(k) and other defined-contribution retirement plan participants to asset classes with returns that lack the same long-term benefits achieved by public pension plans and other institutional investors.
The order directs the Department of Labor in coordination with the SEC and Treasury Department to reexamine fiduciary guidance, propose new rules and issue clarifications within 180 days.
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