Aug. 7 (UPI) — President Donald Trump is scheduled to sign an executive order Thursday to allow cryptocurrencies, private equity and real estate into 401(k)s, a senior White House official said.
The order will direct the U.S. Secretary of Labor to create fiduciary guidance on private market investments in 401(k)s and other defined-contribution plans governed by the Employee Retirement Income Security Act of 1974. The law sets standards for retirement plans.
The signing is scheduled for noon EDT Thursday. It was first reported by Bloomberg News.
The alternative asset industry has pushed for greater adoption of private assets in defined-contribution plans during recent months. The private equity and credit industry want access to the more than $12 trillion market in defined-contribution workplace savings plans.
There is no law banning plan sponsors from offering private market investments to employees, but they have traditionally avoided them because they have a fiduciary duty to offer a menu of prudent, reasonably priced investments.
Private equity and private credit options have been riskier, more expensive, less transparent and less liquid than publicly traded stock and bond funds.
In 2020, the Department of Labor in the first Trump administration created an information letter that said it could be OK for defined-contribution plans under certain conditions. The guidance was later affirmed under the Biden administration.
The executive order doesn’t change policy but clarifies Trump’s position to the government, Jaret Seiberg, a financial services policy analyst at TD Cowen Washington Research Group, said in a research note.
“It will still require the agencies to craft new rules, Seiberg said. “That could take into 2026,” he said.
After the rules are written, employer plan managers will need to do their own research about those new investments.
Lisa Gomez, who served as the assistant secretary of labor for employee benefits security at the Labor Department from October 2022 until January, said plan sponsors will have to be extra careful to remember their fiduciary responsibilities for plan participants.
“It’s going to be more complicated,” Gomez told CNN. She recommends plan sponsors find fiduciary advisers and lawyers with experience in private equity.
She said to consider what the potential downsides may be. “If anyone says there are none, I would question that,” she said. “Be careful to not get caught in the hype. But we also shouldn’t be afraid. We should learn.”
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