President Donald Trump today signed an executive order that will direct government officials to reexamine the usage of private equities, real estate investments, and cryptocurrencies in 401(k) and other defined contribution (DC) plans.
The U.S. Department of Labor (DOL) and industry officials issued their statements of support following news of the signing.
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DOL Secretary Lori Chavez-DeRemer and Deputy Secretary of Labor Keith Sonderling applauded the executive order, adding that it would expand retirement investment options for over 90 million participants currently enrolled in workplace DC plans.
In her statement, Chavez-DeRemer celebrated the new executive order for its leniency towards alternative investments, before touching on Trump’s May decision to rescind former guidance that previously warned fiduciaries from including cryptocurrency options in 401(k) plans. The move would later prompt Senate Democrats to issue a letter calling on the Labor Department to reinstate the guidance.
“The federal government should not be making retirement investment decisions for hardworking Americans, including decisions regarding alternative assets,” said Chavez-DeRemer in a statement. “The Department of Labor already took action to rescind the Biden Administration’s guidance that disadvantaged crypto investments. This Executive Order further supports our efforts to improve flexibility and eliminate unfair one-size-fits-all approaches, and I applaud President Trump for taking decisive action.”
“All American workers should be able to look forward to a secure and prosperous retirement. Today’s Executive Order directs the Department of Labor to level the playing field for all Americans saving for retirement by breaking down barriers to investment opportunities previously accessible only to certain pension plans and the very wealthy,” added Sonderling in his statement.
Under the executive order ordered by Trump, the Department of Labor will now review its guidance on alternative investments in retirement plans and clarify its position surrounding the private market. The agency is also directed to explain the appropriate fiduciary process in offering alternative investments under ERISA.
While many celebrated the news, others sparked concern over the complexity behind adding private market funds to 401(k) plans, noting that participants, and their employers, are often met with confusion when introduced to the funds due to its opaqueness and lack of transparency.
Lisa Gomez, the former assistant secretary of labor for the Employee Benefits Security Administration (EBSA) under the DOL, and now a strategic advisor to Pontera, touched on the importance in providing participant-centered education and professional financial advice when offering alternative investment options.
“As the 401(k) plan investment landscape changes with the expansion of access to private investments, it’s essential that retirement savers are equipped to navigate an evolving set of options through strong fiduciary guidance and a holistic approach to financial planning …To ensure this policy shift truly benefits workers, we need infrastructure that supports responsible implementation. I expect a wave of technology solutions to help bridge this gap,” she said in a statement.
Industry leader reactions
Meanwhile, organizations and firms in the retirement industry released their statements of support for the executive order. Read on to hear what these leaders had to say.
Jaime Magyera, head of BlackRock’s Retirement Business
“BlackRock helps about 35 million people across the country save for life after work and so we applaud President Trump’s executive order which marks a major step forward in modernizing the retirement plans of everyday savers. Expanding access to investments long out of reach will help ensure millions of Americans build stronger, more diversified portfolios designed to increase savings and address the practical considerations of DC plan fiduciaries.”
Edmund F. Murphy III, president and CEO of Empower
“We support the administration’s efforts to expand investment choice, increase portfolio resilience, and improve long-term growth potential for retirement savers,” Murphy added. “When implemented with proper safeguards, this move will transform how Americans build wealth for retirement.”
Brian Graff, CEO of the American Retirement Association
“For over five decades, fiduciaries have prudently selected financial products for retirement plans through the ERISA fiduciary process. The decision to include various assets—whether public, private, or digital—should be guided by this rigorous process, rather than by regulatory limitations.”
TIAA
“We believe end investors can benefit from the advantages that private investments can offer when embedded within professionally managed vehicles like target date funds or through guaranteed annuity products, and we have long incorporated alternative investments in our guaranteed income products.”
Sean McKee, global head of asset management, Audit, at KPMG:
“The doors to alternatives are opening wider than ever. Many leaders will see this not just as a regulatory change, but as a business model opportunity—one that demands reimagining access, building for retail from the ground up, and using tech to make the complex simple.”
Josh Lichtenstein, partner and head of ERISA fiduciary practice at Ropes & Gray
“We expect the new executive order will make it easier for plan sponsors evaluating funds with alternative exposure to make confident decisions about their appropriateness for their particular plan populations. Longer-term, we expect that future guidance from regulators may inform fund designs and assist plan fiduciaries evaluating investment options, be we do not believe that any new rules or guidance are necessary for 401(k) plan fiduciaries to decide to offer funds to participants that include alternative asset exposure. Instead, we think the main impact of the executive order in the short to medium term will be providing directional support from the administration that, consistent with traditional understandings of fiduciary duties under ERISA, plan fiduciaries can consider the full range of investment options based on what is appropriate for their own plan participants.”
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