The Labor Department released Monday its proposed regulation and the steps that managers of 401(k) plans should take when considering alternative assets as part of their investment lineups.
The proposal — which follows President Donald Trump's executive order "Democratizing Access to Alternative Assets for 401(k) Investors" — establishes a set of process-based safe harbors for plan fiduciaries to use when selecting designated investment alternatives, Labor said.
"Our goal is to deliver on President Trump's promise for a new golden age by fostering a retirement system that allows more Americans to retire with dignity," Labor Secretary Lori Chavez-DeRemer said in a statement.
"This proposed rule will show how plans can consider products that better reflect the investment landscape as it exists today," she added. "This greater diversity will drive innovation and result in a major win for American workers, retirees, and their families."
The Office of Management and Budget finished its review of Labor's plan on March 25.
The Securities Industry and Financial Markets Association said that it looks forward to reviewing the proposal in detail and engaging constructively with regulators during Labor's 60-day comment period.
The proposed rule is scheduled to be published in the Federal Register on Tuesday, according to a Labor spokesperson. If published tomorrow, the comment period would close on June 1.
"Policy changes to expand access to private markets investments could serve to improve diversification, democratize access, and offer more investment choices to the benefit of everyday retirement savers," SIFMA said in a statement.
Paul Atkins, chairman of the Securities and Exchange Commission, added in a separate statement that "Americans' ability to participate more fully in innovation and economic growth through well-diversified long-term investments is a vitally important priority for effective retirement planning."
The SEC, Atkins said, "is pleased to have joined our colleagues at the Department of Labor to help formulate this proposal for these long-overdue improvements."
Under the proposed rule, "when selecting investment alternatives, plan fiduciaries would need to objectively, thoroughly, and analytically consider, and make determinations on factors including performance, fees, liquidity, valuation, performance benchmarks, and complexity," according to Labor.
"While managers of defined contribution plans have always had the authority to consider alternative assets, historically, almost none have done so," Labor said.
In 2022, the Biden administration "further stifled these investments through a rescinded compliance release that warned fiduciaries about including cryptocurrency options in 401(k) plans," according to Labor.
"The guidance deviated from the Employee Retirement Income Security Act's requirements and marked a departure from the department's decades-long approach to fiduciary investment decisions," Labor added.
Sen. Elizabeth Warren, D-Mass., balked at Labor's plan.
"As cracks emerge in the private credit market, private equity returns fall to 16-year lows, and crypto keeps tumbling, President Trump has decided now is the time to stick all of these risky assets into Americans' 401(k)s," she said in a statement.
"Americans facing an uncertain future in Trump's economy will now have more reasons to question the security of their retirement savings — all so that Trump's Wall Street buddies have another pile of cash to play with," she added. "Anyone who cares about the financial security of working people should oppose this proposed rule."
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