US paves way for private assets to be included in 401(k) retirement plans

WASHINGTON: The Trump administration on Monday issued long-awaited proposed rules to open up retirement plans to alternative assets, paving the way for private equity and cryptocurrencies to be added to 401(k) accounts. The measure, announced by the US Department of Labor, is intended to ease longstanding barriers to incorporating these less liquid and less transparent assets into American retirement plans. It follows an executive order from President Donald Trump last summer and could clear the way for alternative asset management firms to tap a large new source of capital. Industry groups have argued that private market investments can enhance long-term returns and diversification for retirement savers, while skeptics warn that higher fees, complexity and limited liquidity could pose risks for retail investors. Some private market funds that are already available to wealthier individual investors have shown signs of strain in recent months. Private credit funds known as business development companies have seen a wave of withdrawals. Treasury Secretary Scott Bessent said the proposed rule was “an initial step” and aimed to be “mindful of the importance of protecting retirement assets.” The guidance lays out how plan trustees, who have a legal fiduciary duty to act in the best interest of members, can incorporate these assets. They would have to “objectively, thoroughly, and analytically consider, and make determinations on factors including performance, fees, liquidity, valuation, performance benchmarks, and complexity,” the DOL said. Trustees who abide by them will be granted safe harbor that protects them from lawsuits, it added. A Labor Department official said the rule was not telling providers how to invest. “We’re giving them the toolkit so that they can follow an analytical, thorough and objective process,” the official said. The rule “would have been the same regardless of whether stocks are up or stocks are down, PE (private equity) is up or PE is down, private credit is up or private credit is down,” the official added, speaking on condition of anonymity.

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