The U.S. Department of Labor’s Employee Benefits Security Administration has withdrawn a supplemental statement issued on December 21, 2021, that had discouraged fiduciaries from including alternative assets in 401(k) retirement plan investment options.
The rescinded statement had warned that most plan fiduciaries would be “not likely suited to evaluate the use of PE investments in designated alternatives in individual account plans.” This guidance, which contrasted with an earlier information letter from June 3, 2020, was seen as limiting the consideration of alternative assets and questioning the ability of plan fiduciaries to assess such investments.
U.S. Secretary of Labor Lori Chavez-DeRemer commented on the decision: “This is just another example of how the Biden administration put their thumb on the scale to pick winners and losers. Instead of allowing Washington bureaucrats to call the shots, we believe plan fiduciaries should decide which retirement investment options are best for hardworking Americans.”
Deputy Secretary Keith Sonderling added: “Retiring with dignity is a key part of the American Dream, but far too few Americans have the opportunity to realize that dream today due to unnecessary government overreach. By repealing the Biden administration’s stifling guidance, we look forward to a future where innovative retirement products can deliver increased upside, diversification, and security to the American worker.”
The move comes after President Trump issued an Executive Order titled “Democratizing Access to Alternative Assets for 401(k) Investors,” directing the Department of Labor to review its guidance so that asset allocation funds with alternative asset investments remain available for retirement plan participants.
According to department norms established by previous policy and consistent with requirements under the Employee Retirement Income Security Act (ERISA), decisions about investment types should be made based on all relevant facts and circumstances specific to each situation. The department’s approach emphasizes that no particular investment or strategy should receive extra scrutiny unless warranted by those facts.
