proposed rule<\/a> gives plan fiduciaries \u201cmaximum discretion and flexibility in selecting any particular investment as a designated investment alternative,\u201d according to the DOL.\n <\/p>\n\n \u201cThe department\u2019s days of picking winners and losers are over. Our rule clearly spells out that managers must evaluate any and all potential product offerings by following a prudent process,\u201d said Deputy Secretary of Labor Keith Sonderling in a statement. \u201cThis proposal is decidedly neutral and refrains from saying that any asset class is any better or worse than other investment types, as the law requires.\u201d\n <\/p>\n
\n That may be welcome news to the private equity and credit industries, which have long sought access to the trillions of dollars invested in workplace retirement plans.\n <\/p>\n
\n Employers have technically always been free to offer alternative investment options in their 401(k)s. But very few have done so to date because such investments have been more opaque and expensive than publicly traded options, and the threat of being sued by participants or penalized by the DOL for not providing a menu of prudent, reasonably priced investments was a deterrent.\n <\/p>\n
\n \u201cFiduciaries don\u2019t need permission to consider different types of investments. They need clarity on how to do it prudently and confidence that a sound process will be respected,\u201d said Lisa Gomez, assistant secretary of labor for employee benefits security during the Biden administration, in an email.\n <\/p>\n
\n And, in her view, the proposed rule offers a new level of detail on what constitutes that sound process.\n <\/p>\n
\n But even if the DOL\u2019s proposed rule makes it clearer how to decide whether to include alternative investments, that doesn\u2019t mean private equity and crypto will appear on your menu of investments anytime soon.\n <\/p>\n
\n Why?\n <\/p>\n
\n Because employers are not required to offer the option. And even if they want to, they still need to go through a careful process to determine if an investment meets their standards. They must \u201cobjectively, thoroughly, and analytically consider, and make determinations on factors including performance, fees, liquidity, valuation, performance benchmarks, and complexity,\u201d as the DOL put it.\n <\/p>\n
\n Whether the new rule will make employers feel safe enough from outside litigation remains a question. \u201cOur initial read is the Department of Labor appears to have gone as far as it could using its regulatory authority to protect fiduciaries,\u201d said Jaret Seiberg, a financial services policy analyst at TD Cowen Washington Research Group, in an analyst note. \u201cYet we remain skeptical that this will encourage fiduciaries to include alternatives in 401(k) plans until the courts have concurred that this language protects advisors from litigation. That means it could be several years before we see the real impact from this proposal.\u201d\n <\/p>\n
\n The DOL\u2019s proposed rule, which may take months to finalize, was issued at the behest of President Donald Trump<\/a>, who last August issued an executive order seeking, among other things, to \u201crelieve the regulatory burdens and litigation risk\u201d on 401(k) plan sponsors.\n <\/p>\n\n Sen. Elizabeth Warren, a staunch critic of giving those in private equity, private credit and crypto easier access to retirement plans, came out in opposition to DOL\u2019s proposed rule, especially given recent poor performances in those markets.\n <\/p>\n
\n \u201cAmericans facing an uncertain future in Trump\u2019s economy will now have more reasons to question the security of their retirement savings \u2013 all so that Trump\u2019s Wall Street buddies have another pile of cash to play with,\u201d Warren said in a statement. \u201cAnyone who cares about the financial security of working people should oppose this proposed rule.\u201d\n <\/p>\n","protected":false},"excerpt":{"rendered":"The Department of Labor unveiled on Monday a new proposed rule for 401(k) plan sponsors that want to…\n","protected":false},"author":2,"featured_media":575668,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[64,63,99,186,184,185],"class_list":["post-575667","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-au","tag-australia","tag-business","tag-finance","tag-personal-finance","tag-personalfinance"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/575667","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=575667"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/575667\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/575668"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=575667"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=575667"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=575667"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}