A sign is displayed in the Frances Perkins Department of Labor Building in June 2025, in Washington.
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The Ministry of Labor proposed on Monday a ruler this would allow 401(k) plans to more easily include alternative assets such as cryptocurrency, real estate, and private market assets.
THE proposal is in response to the president Donald TrumpIt is decreeissued in August, which directed the Department of Labor and the Securities and Exchange Commission to facilitate expanded access to alternative assets in 401(k)s.
“This proposed rule will show how plans can consider products that better reflect the investment landscape as it exists today,” Labor Secretary Lori Chavez-DeRemer said in a statement.
Supporters say that including alternative investments in 401(k)s could offer retirement savers greater diversification outside of the public markets and potentially higher returns. But some financial advisors have expressed concerns that many 401(k) investors lack of knowledge or the experience needed to integrate these more sophisticated investments, which may be riskier and more expensive.
The proposal from the Ministry of Labor comes as private credit markets are under pressure due to investor buyouts and concerns about overexposure to software investments amid artificial intelligence disruptions.
Read more of CNBC’s personal finance coverageAlthough 401(k) plans While it’s already not prohibited from including alts, fears of lawsuits challenging their investment decisions have kept most plan sponsors away, Department of Labor officials said on a press call Monday morning.
The Department of Labor’s rule creates what’s called a safe harbor that can help protect plan sponsors from litigation. It identifies six factors that a plan fiduciary should “consider objectively, thoroughly and analytically” when selecting alternative investments. The six factors are performance, fees, liquidity, valuation, performance benchmarks and complexity.
The rule is subject to further review, including a 60-day public comment period, before it can be finalized.
The typical investor is best suited to own an index fund with broad exposure to the stock market, a strategy that often outperforms professional investors and helps keep investment expenses low, said Josh Brown, CEO of Ritholtz Wealth Management. in an interview with CNBC in October.
“The average investor, by definition, does not need alternative assets in their portfolio,” Brown said.
There is “absolutely no chance” that 401(k) investors will have access to the best alternative managers or funds, Brown said. Even if they did, they would “pay top dollar” because they don’t have the purchasing power to reduce investment costs, he said.
“You are not Norway’s sovereign wealth fund,” he said. “You will not be treated this way.”
The Labor Department’s proposal builds on other steps taken by the Trump administration to facilitate the adoption of nontraditional asset classes among a broader pool of retail investors.
For example, the Ministry of Labor in May rescinded guidelines put in place under the Biden administration which urged employers to be cautious before adding cryptocurrency and related digital assets such as bitcoin, non-fungible tokens and meme coins to 401(k) plans.
At the time, Biden labor officials warned employers to exercise “extreme caution” before making such investments available to their workers, citing “serious concerns” about the prudence of exposing investors’ retirement savings to crypto, given the “significant risks of fraud, theft and loss.”