Proposed rule would clear regulatory burdens, lower litigation risks for prudent fiduciaries<\/p>\n
WASHINGTON \u2013\u00a0The U.S. Department of Labor\u2019s Employee Benefits Security Administration today issued a historic proposed regulation increasing potential retirement investment options for more than 90 million Americans.\u00a0<\/p>\n
The proposed regulation explains the steps that managers of 401(k) plans should take when considering alternative assets as a component in their investment lineups and establishes\u00a0a set of process-based safe harbors for plan fiduciaries to use when selecting designated investment alternatives. The proposal follows President Trump\u2019s Executive Order, \u201cDemocratizing Access to Alternative Assets for 401(k) Investors<\/a>.\u201d\u00a0<\/p>\n \u201cOur goal is to deliver on President Trump\u2019s promise for a new golden age by fostering a retirement system that allows more Americans to retire with dignity,\u201d said U.S. Secretary of Labor Lori Chavez-DeRemer. \u201cThis proposed rule will show how plans can consider products that better reflect the investment landscape as it exists today. This greater diversity will drive innovation and result in a major win for American workers, retirees, and their families.\u201d<\/p>\n \u201cThe Treasury Department is proud of this rulemaking effort, which is another step in ushering in President Trump’s Golden Age,\u201d said U.S. Secretary of the Treasury Scott Bessent. \u201cThis proposed rule is an initial step in implementing the President’s Executive Order in a safe and smart manner, broadening access to additional retirement plan options for millions of Americans while being mindful of the importance of protecting retirement assets. Treasury is grateful for the Department of Labor\u2019s partnership and looks forward to continued engagement as the rulemaking process continues.\u201d<\/p>\n \u201cAmericans\u2019 ability to participate more fully in innovation and economic growth through well-diversified long-term investments is a vitally important priority for effective retirement planning. The Securities and Exchange Commission is pleased to have joined our colleagues at the Department of Labor to help formulate this proposal for these long-overdue improvements. We look forward to continuing our work to expand opportunities for Americans to build wealth and save for the future,\u201d said SEC Chairman Paul S. Atkins.<\/p>\n The proposed regulation\u00a0reflects long-standing retirement law principles. Prudence\u00a0under ERISA is grounded in\u00a0process and\u00a0plan fiduciaries are given maximum discretion and flexibility in selecting any particular investment as a designated investment alternative.\u00a0<\/p>\n Under the proposed rule, when selecting investment alternatives, plan fiduciaries would need to\u00a0objectively, thoroughly, and analytically consider, and make determinations on factors including performance, fees, liquidity, valuation, performance benchmarks, and complexity.\u00a0<\/p>\n While managers of defined contribution plans have always had the authority to consider alternative assets, historically, almost none have done so. In 2022, the Biden Administration further stifled these investments through a rescinded compliance release<\/a>\u00a0that warned fiduciaries about including cryptocurrency options in 401(k) plans. The guidance deviated from the Employee Retirement Income Security Act\u2019s requirements and marked a departure from the department\u2019s decades-long approach to fiduciary investment decisions.\u00a0<\/p>\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 U.S. Deputy Secretary of Labor Keith Sonderling. \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<\/p>\n EBSA\u00a0ensures the security of retirement, health, and other job-based benefits for American workers and their families. The agency\u00a0is responsible for protecting more than 156 million workers, retirees, and their families, who are covered by approximately 2.6 million health plans, 801,000 private retirement plans, and 514,000 additional welfare benefit plans. Together, these plans hold about $13.8 trillion in assets.<\/p>\n Employers and workers can contact EBSA at\u00a0askebsa.dol.gov<\/a>\u00a0or call 866-444-3272 toll-free for help with private sector job-based retirement and health plans.<\/p>\n