Nick Neffous, Global Head of Retirement Solutions at BlackRock, joins Varney & Company to discuss a proposed rule expanding 401(k)s into crypto and real estate.
The Trump administration on Monday released a proposed rule to allow alternative assets such as private equity and cryptocurrencies to be offered as part of investment options in retirement plans. 401(k) accounts.
The Labor Department rule is intended to reduce long-standing barriers to the inclusion of alternative assets in retirement plans and follows an executive order signed by the President. donald trump On this topic last summer.
Advocates of the rule change argue that including alternative assets in 401(k) plans could help promote better long-term returns and make diversification easier. Skeptics say alternative assets may be less liquid, more complex and have higher fees, creating risk while limiting profits.
Under the proposed rule, plan trustees would be required to consider and make determinations objectively, thoroughly, and analytically about performance, fees, liquidity, valuation, performance benchmarks, and complexity. Trustees who follow those rules will be provided safe harbor that will protect them from lawsuits.
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The Labor Department’s proposed rule will go into a public comment period before being reviewed and potentially finalized. (Celal Gans/Anadolu via Getty Images)
manager of Defined Contribution Plans Historically there is a right to consider alternative investments, although most have opted out of doing so.
In 2022, the Biden administration issued a rescinded compliance release warning fiduciaries against engaging in cryptocurrency Options in 401(k) plans, which the Trump administration criticized as a “deviation from the Department’s decades-old approach to fiduciary investment decisions.”
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President Donald Trump and Treasury Secretary Scott Besant have worked to expand the ability to invest in alternative assets. (Anna Moneymaker/Getty Images)
Labor Secretary Lori Chavez-DeRemer said the agency’s new proposed rule “will show how plans can consider products that better reflect today’s investment landscape. This greater diversity will spur innovation and be a big win for American workers, retirees, and their families.”
Treasury Secretary Scott Besant said the pending regulation is “an initial step toward implementing the President’s executive order in a safe and smart way, expanding access to additional resources.” retirement planning options “While remaining mindful of the importance of protecting retirement assets for millions of Americans.”
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The proposed rule would open 401(k) plans to alternative investments such as cryptocurrencies if the fiduciary has performed due diligence. (iStock)
After the Department of Labor issues the proposed rule, the agency will open a 60-day comment period before making a decision to finalize the rule.
alternative assets Managers such as Blackstone and Apollo Global Management may benefit from the opportunity to attract new pools of capital. Many industry members and groups applauded the rule.
Apollo CEO Mark Rowan said the change is “a deliberate step toward addressing the growing retirement crisis,” noting that “Americans lack the savings and income needed for a secure retirement” and that the change “could meaningfully improve retirement outcomes.”
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If the rule is adopted, Erin Cho, a partner at the Mayer Brown law firm, said it would not “open the door for private equity, private credit or crypto funds to move into the retirement space” because it would only provide a process to do so.
Reuters contributed to this report.
