Senate bill would increase alternative assets in 401(k) plans

A new bill from Top Republicans on the Senate Banking Committee aims to open up workplace retirement plans to a wider range of investments, making it easier to diversify 401(k) plans with equity stakes -investment, hedge funds, real estate, cryptocurrencies and other alternative assets.

The panel’s top GOP member, Sen. Patrick J. Toomey of Pennsylvania, is leading the bill’s Senate introduction, which comes as lawmakers push to pass sweeping retirement savings legislation. here the end of the year.

Toomey’s bill with Sen. Tim Scott, RS.C., and House Rep. Peter Meijer, R-Mich., would clarify that a range of non-traditional investment options are part of those that workplace plan managers can recommend, select or monitor without breaching their fiduciary duties. The legislation would also specify that expenses related to these investments, which in many cases charge higher fees than traditional mutual funds found in typical 401(k) plans, would be acceptable.

The bill lists certain investments intended to be workplace plan options, although the text indicates that this list is not exhaustive. Private equity and hedge funds as well as venture capital firms that invest in startups are named, as are real estate assets and “related securities” such as real estate investment trusts, which group together a range of income-generating properties. of income. Commodities are named, along with investments in infrastructure, insurance products and annuities, and “digital assets,” including cryptocurrencies.

Although current law does not explicitly prevent these types of investments, the risk of lawsuits has largely deterred managers of 401(k) plans from mixing them, according to a Toomey aide. Traditional defined benefit pension plans, on the other hand, have blended some of these assets together and are less risky doing so because they pay fixed benefits in retirement.

Norman D. Briggs