GOP Senators Urge DOL to Mandate Safe Harbors in Private Equity EO
A group of nine Republican U.S. Senators last week wrote a letter to the Department of Labor (DOL) urging the agency to implement regulatory safe harbors for an executive order that would expand alternative assets into defined contribution (DC) retirement plans.
UPDATE – SEC Working with DOL to Develop ‘Guardrails’ for Private Equity in 401(k)s
The letter, sent to Labor Secretary Lori Chavez-DeRemer, advises the DOL to implement a regulatory safe harbor “through a formal notice and comment rulemaking,” in order to “maximize the order’s effectiveness and ensure industry has the certainty needed to deliver on behalf of American retirees.”
The Senators argued that safe harbor protections are necessary for plan sponsors and admonished past litigation and regulations that have “disincentivized” employers and fiduciaries from offering alternative funds in 401(k) plans.
“We request that the process be done expeditiously through a formal rulemaking that establishes essential critical safe harbor protections,” the Senators wrote. “Your success will enable highly skilled plan fiduciaries to offer prudent allocations to alternatives without fear of frivolous lawsuits, aligning private-sector workers’ opportunities with those of institutional investors.”
It also coined alternative assets as a “compatible” and “safe” option for retirement plans, noting that the products can be tailored. It cited a 2018 study by Georgetown University which estimated that access to retirement plans with alternative asset investment options could grow plan values by 17% over the life of a plan and reduce losses in a downturn.
The Aug. 22 letter was signed by Sens. Steve Daines (R-MT), Markwayne Mullin (R-OK), Jim Banks (R-IN), Bernie Moreno (R-OH), Cynthia Lummis (R-WY), Bill Hagerty (R-TN), Katie Britt (R-AL), Eric Schmitt (R-MO), and Bill Cassidy (R-LA), with Sen. Daines leading.
President Donald Trump signed his executive order on Aug. 7, following months of speculation. The executive order directs the DOL and the Securities and Exchange Commission to review and provide fiduciary guidance to employers on including private market investments in workplace DC plans governed by ERISA.
It also directs Secretary Chavez-DeRemer to consult with the Treasury Department, the SEC and other federal regulators on whether regulatory changes should be implemented at those agencies, among other orders highlighted in a White House fact sheet.
The executive order has been met with mixed criticism, with supporters celebrating its growth potential for retirement plan participants’ savings, while opponents caution adoption due to the fund’s complex and illiquid nature.
SEE ALSO:
Trump: Regulatory Overreach, Opportunistic Lawsuits Have Stifled Investment Innovation
Trump’s Private Equity 401(k) Push: 12 Legal Views
Borzi Sounds Alarm on Trump’s 401(k) Alternatives Order
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news. She is originally from Queens, New York, but now resides in Denver, Colorado.
