The President has signed an executive order entitled “Democratizing Access to Alternative Assets for 401(k) Investors.” The EO requires the Secretary of Labor to reexamine the Department of Labor’s past and present guidance regarding a fiduciary’s duties under the Employee Retirement Income Security Act of 1974, as amended (ERISA), in connection with making available to participants in 401(k) and other defined-contribution retirement plans an asset allocation fund that includes investments in “alternative assets.”
“Alternative assets” include:
- private market investments, including direct and indirect interests in equity, debt, or other financial instruments that are not traded on public exchanges, including those where the managers of such investments, if applicable, seek to take an active role in the management of such companies;
- direct and indirect interests in real estate, including debt instruments secured by direct or indirect interests in real estate;
- holdings in actively managed investment vehicles that are investing in digital assets;
- direct and indirect investments in commodities;
- direct and indirect interests in projects financing infrastructure development; and
- lifetime income investment strategies including longevity risk-sharing pools.
The Secretary is also required to clarify the DOL’s position on alternative assets and the appropriate fiduciary process associated with offering asset allocation funds containing investments in alternative assets under ERISA, and propose rules, regulations, or guidance that clarify the duties that a fiduciary owes to plan participants under ERISA when deciding whether to make available to plan participants an asset allocation fund that includes investments in alternative assets.
You can access a fact sheet here.