US President Donald Trump has signed an executive order designed to unlock access to alternative assets for millions of Americans who invest in 401(k) and other defined-contribution retirement plans.
This directive signals a major shift in investment policy, previously limiting such opportunities primarily to the wealthy and government workers.
Why alternative assets?
For years, more than 90 million Americans participating in employer-sponsored defined-contribution plans have largely been restricted to traditional investments like stocks and bonds, the White House noted on Thursday.
Meanwhile, wealthy investors and retirement plans for government workers have leveraged alternative assets such as private equity, real estate, and digital assets (cryptocurrencies), which offer competitive returns and diversification benefits.
Regulatory hurdles and litigation risks have historically limited ERISA-governed plan fiduciaries from including these alternative assets in their investment portfolios, hindering the growth of workers’ retirement savings.
The new order’s directives
President Trump’s executive order initiates a reevaluation of the regulatory landscape:
- Department of Labor (DOL) reexamination: The order directs the Secretary of Labor to re-examine DOL guidance on a fiduciary’s duties regarding alternative asset investments in ERISA-governed 401(k) and other defined-contribution plans. The goal is to establish clear parameters for offering asset allocation funds that include these non-traditional funds.
- Inter-agency consultancy: The order also directs the Secretary of Labor to consult with the Secretary of the Treasury, the Securities and Exchange Commission, and other federal regulators to identify and implement parallel regulatory changes to fulfil the order’s purpose.
- SEC’s role: The order directs the SEC to facilitate access to alternative assets for participant-directed defined-contribution retirement savings plans by revising its applicable regulations and guidance.
Building wealth, securing retirement
This executive order is the beginning of President Trump’s broader agenda to enhance financial opportunities and secure retirement for all Americans. The administration believes that expanding investment choices is crucial for building wealth.
This move builds on previous actions, including the Trump DOL’s prior cancellation of guidance regarding digital assets, which was put in place by the Biden administration.
The Biden administration adopted a cautious approach to digital assets, seeking to balance innovation with consumer protection. This stance was guided by an Executive Order issued by the former president in March 2022.
Furthermore, the initiative aligns with the president’s vision to establish the US as the “crypto capital of the world,” and his commitment to “Make America Wealthy Again” through tax cuts and deregulation, allowing users to save and invest more effectively for their retirement.
What this means for American savers
The order lays the foundation for a future where average Americans have a wider range of choices to invest for their retirement. This aims to provide opportunities for enhanced returns and diversification, ensuring a “dignified and comfortable retirement for all Americans,” the White House said.
However, this will only happen after full implementation, which will require federal agencies to revise rules and regulations, a process that could take months or even years.