President Donald J. Trump signed an Executive Order aimed at expanding the range of investment options available within 401(k) plans. The initiative opens the door for plan participants to potentially access alternative assets such as cryptocurrency, private equity, real estate, and privately held companies.

Key Provisions of the Executive Order

• Review of Fiduciary Guidance: The Secretary of Labor is directed to reexamine the Department of Labor’s (DOL) guidance on fiduciary duties related to alternative asset investments in ERISA-governed 401(k) and other defined-contribution plans.
• Clarification of Fiduciary Process: The Secretary of Labor must clarify the DOL’s position on alternative assets and the fiduciary process for offering asset allocation funds that include these investments.
• Interagency Coordination: The Secretary of Labor will consult with the Secretary of the Treasury, the Securities and Exchange Commission (SEC), and other federal regulators to assess whether similar regulatory changes are needed across agencies.
• SEC Action: The SEC is instructed to revise regulations and guidance to facilitate access to alternative assets for participant-directed defined-contribution plans.

Considerations and Risks

Alternative investments typically carry higher risk and fee structures than traditional assets and often provide less daily performance transparency. Many employers may hesitate to offer these options due to potential fiduciary liability under ERISA, which requires that retirement plan investments serve the best interests of employees.

Implementation Timeline

With approximately $12 trillion currently in Americans’ employee-sponsored retirement accounts, the potential impact is significant. However, the rollout will take time. The DOL must first issue guidance, followed by plan providers designing compliant investment options, and employers evaluating options and updating plan documents. This process could easily take one to two years before participants see these changes in their plans.