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Dive Brief:
- President Donald Trump signed an executive order Thursday aiming to “facilitate access to alternative assets” — like private equity, real estate and cryptocurrency — for fiduciaries managing 401(k)s and other defined-contribution plans.
- The order directed the U.S. Department of Labor to reevaluate guidance related to such investments and directed the U.S. Securities and Exchange Commission to revise applicable regulations and guidance.
- “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,” DOL Secretary Lori Chavez-DeRemer said in an agency press release.
Dive Insight:
While cryptocurrency enthusiasts expressed support for Thursday’s executive order, others urged caution.
“401(k) investment selection and management is governed by fiduciary rules, which require an employer — and any advisor they may be working with — to review the investments to ensure they have fair fees and performance in line with general market returns,” Edward Gottfried, VP of product at Betterment at Work, told HR Dive in a prepared statement. “It will be extremely challenging for private securities to meet those standards, and employers should be very cautious to rush to adopt them as new investment options for their employees.”
The Private Equity Stakeholder Project, a nonprofit watchdog, called the executive order a “controversial move” that “poses significant risks” to workers’ retirement savings.
“President Trump’s Executive Order poses a significant risk to the financial security of millions of hardworking Americans. We’ve seen these firms send hospital systems, retailers, and other companies into bankruptcy while they profit and laugh all the way to the bank,” Chris Noble, policy director at the Private Equity Stakeholder Project, said in a statement. “Introducing these investments into 401(k)s, which are meant to be a nest egg for retirement, is a reckless decision that could lead to unnecessary financial harm for unsuspecting savers.”
The Trump administration and Republicans in Congress have signaled their support for cryptocurrency through a variety of actions since January.
Shortly after taking office, Trump signed an executive order intended “to support the responsible growth and use of digital assets, blockchain technology, and related technologies across all sectors of the economy.”
In May, DOL’s Employee Benefits Security Administration rescinded a Biden-era warning that cautioned 401(k) plan fiduciaries to exercise “extreme care” before adding cryptocurrency to their investment menus.
DOL at the time said the decision “reaffirm[ed] its neutral stance, neither endorsing, nor disapproving of, plan fiduciaries who conclude that the inclusion of cryptocurrency in a plan’s investment menu is appropriate.”
Last month, Trump signed into law the GENIUS Act, which created a regulatory framework for stablecoins, a type of cryptocurrency. The White House lauded the signing as a step forward for the U.S. to “lead the global digital currency revolution.”
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