President Donald Trump recently issued an executive order (EO) to facilitate retirement plans' investments in a wider range of assets, including cryptocurrency and private equity. The purpose of the EO is to allow the more than 90 million Americans with defined-contribution retirement plans to access the same range of assets as public and government pension plan workers. Removal and modification of existing regulations are aimed at easing the regulatory burdens and liability risk often associated with alternative, riskier assets such as cryptocurrency.
The EO charges the U.S. Department of Labor (DOL) and the U.S. Securities and Exchange Commission (SEC) to review existing regulations and guidance to help retirement plan participants access alternative investments. To that end, DOL must reexamine all guidance concerning alternative assets in 401(k) and other defined-contribution plans within 180 days. Within that same timeframe, the DOL is also to clarify guidance on the fiduciary duties involved with retirement plans offering alternative investments.
Furthermore, the SEC, in coordination with the Treasury Department, must consider how to facilitate access to investments in alternative assets in defined-contribution retirement plans. Facilitation may include revising existing SEC regulations and guidance.
The EO defines alternative assets as private equity, holdings in actively managed investment vehicles investing in digital assets, real estate, direct and indirect investments in commodities, direct and indirect interests in projects financing infrastructure, and so-called "tontines," which are "lifetime income investment strategies including longevity risk-sharing pools." Cryptocurrency is one type of digital asset, though not mentioned by name in the definition.
The DOL characterized the EO as allowing individuals, rather than the federal government, to make investment decisions for themselves, including decisions about alternative assets. In May, the DOL rescinded guidance from the Biden administration that discouraged cryptocurrency investments as too risky for defined-contribution plans.
The securities industry also applauded the move as expanding investment opportunities for American workers. Financial industry groups also praised the EO, but private equity critics warned of the substantial risks for investors, including poor returns and hefty fees.
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