Key Takeaways
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- Senators say Trump’s August executive order opens 401(k)s to higher-risk private equity and crypto with weaker disclosure and oversight.
- Letter urges DOL and SEC to scrutinize fiduciary duties and guidance under ERISA for asset-allocation funds using alternatives.
- Industry sees access to ~$13T in defined-contribution plans as a growth frontier as institutional flows slow.
- Regulators have not commented amid the federal shutdown; rulemaking reviews are directed within six months.
What Happened?
Senators Elizabeth Warren and Bernie Sanders sent an Oct. 28 letter to Labor Secretary Lori Chavez-DeRemer and SEC Chairman Paul Atkins warning that President Trump’s August executive order eases the path for private equity, crypto, and other alternatives in 401(k)s. They argue these assets are volatile, less transparent, and may not suit average retirement savers. The order instructs the Labor Department to reevaluate ERISA guidance and clarify fiduciary responsibilities for plans offering asset-allocation funds with alternative holdings, coordinating with Treasury, the SEC, and other regulators.
Why It Matters?
Defined-contribution plans now anchor U.S. retirement savings. Expanding alternatives could improve diversification and potential returns but raises risks around fees, liquidity, valuation, and governance. Sponsors and recordkeepers face higher compliance burdens to document prudence, monitor managers, and explain complex products to participants. For private-markets and digital-asset managers, DC access is a major addressable market, but political scrutiny and fiduciary liability may slow adoption. For plan fiduciaries, the bar for due diligence, fee benchmarking, liquidity terms, and participant education will be material.
What’s Next?
Watch for DOL guidance updates within the six-month window, potential SEC actions to “facilitate access,” and any parallel Treasury input. Expect comment periods on fiduciary standards for alternatives in QDIAs or model portfolios, plus possible limits on crypto exposure. Plan sponsors should prepare impact assessments on fees, liquidity, valuation frequency, and participant outcomes, and engage counsel on ERISA duty of prudence and loyalty. Congressional oversight and state-level responses could further shape implementation timelines.
