On August 7, President Trump issued a much-anticipatedexecutive order, directing the Labor Department to (re)consider barriers to defined contribution plans accessing alternative investments.  Nevin & Fred check it out – and theimplications.

More specifically, an executive order directed the Secretary of Labor to, among other things, “reexamine the Department of Labor’s guidance on a fiduciary’s duties regardingalternative asset investments in ERISA-governed 401(k) and other defined-contribution plans” – a stance widely seen as encouraging the consideration of alternative assets in defined contribution plans, including 401(k)s and 403(b)s.

The EO states as “the policy of the United States that everyAmerican preparing for retirement should have access to funds that include investments in alternative assets…”

That policy is, however, conditioned to situations “when therelevant plan fiduciary determines that such access provides an appropriate opportunity for plan participants and beneficiaries to enhance the net risk-adjusted returns on their retirement assets.”

While the Executive Order doesn’t immediately changeanything, it sets in motion the possibility of a less restrictive regulatory view on so-called, “alternative” assets, including private markets, real estate, digital assets, and lifetime income.

The Executive Order calls out “burdensome lawsuits that seek to challenge reasonable decisions by loyal, regulated fiduciaries,” as well as “stifling Department of Labor guidance” that is says has “denied millions of Americans opportunities to benefit from investment in alternative assets.”

Episode Resources

BreakingNews: Trump Signs EO to Advance Private Market Investments in 401(k)s

LifetimeIncome Also Cited in Private Markets Executive Order

TalkingPoints: Pandora’s Box

ThingsI Worry About (12): Private Funds and 401(k) Plans - Fred Reish

DOLPulls Guidance Cautioning Fiduciaries About Private Equity in 401(k)s