- The order instructs the Labor Department to update guidance on alternative asset investments in 401(k)s and clarify fiduciary responsibilities for plan administrators.
- Federal agencies, including the SEC and Treasury, will work together to explore additional rule changes that could expand retirement plan access to private markets.
- Supporters say the policy expands investment options and potential returns. Critics warn of higher risks, fees, and legal exposure for administrators.
President Donald Trump signed an executive order Thursday aimed at opening the $12.5 trillion 401(k) market to alternative assets, per Bloomberg. The policy would allow investments in private equity, real estate, cryptocurrencies, and other non-traditional products. It is the administration’s most significant move yet to integrate private markets into defined-contribution retirement plans.
What The Order Does
The Labor Department now has six months to review rules under the Employee Retirement Income Security Act of 1974. It must also clarify its stance on fiduciary duties for sponsors offering funds that include alternative holdings. The order calls for coordination with the Treasury Department, SEC, and other regulators to explore additional rule changes.
The Backstory
This policy revives a 2020 Trump-era decision that permitted limited private equity in retirement portfolios. That guidance was later rolled back under President Biden. Most 401(k) funds still focus on stocks and bonds because plan administrators have avoided illiquid and complex products.
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Industry Impact
Asset managers see 401(k)s as a major growth opportunity. Public markets are shrinking, and the number of publicly listed US companies has dropped sharply since the 1990s. Private equity assets have more than doubled in the past decade. Many pension funds and endowments have already reached their internal limits for such investments.
Crypto Connection
The order aligns with Trump’s broader pro-crypto agenda. His administration recently hosted a “Crypto Week” and announced the creation of a Strategic Bitcoin Reserve. The White House has pledged to elevate crypto-friendly regulators and scale back enforcement actions against major firms. Trump and his family have launched several crypto ventures, adding an estimated $620M to his net worth in recent months.
Why It Matters
Proponents believe the change will give savers more choices and potentially higher returns. Critics warn of higher fees, greater risk, and possible legal challenges for plan administrators. The next stage will be how regulators implement the order and whether the benefits outweigh the risks for American retirement savers.
