The US Department of Labor has proposed a new rule laying out how 401(k) plan providers should select alternative investments, including private credit.
The US Department of Labor’s Employee Benefits Security Administration (EBSA) has proposed a regulation outlining the steps managers of 401(k) plans should take when considering alternative assets as part of their investment line-ups.
It also establishes a set of process-based “safe harbours” for plan fiduciaries to use when selecting designated investment alternatives.
The plan follows an executive order signed by President Donald Trump in August last year, which allowed private credit and other alternative assets to be included in 401(k) retirement accounts.
“Our goal is to deliver on President Trump’s promise for a new golden age by fostering a retirement system that allows more Americans to retire with dignity,” said US Secretary of Labor Lori Chavez-DeRemer. “This proposed rule will show how plans can consider products that better reflect the investment landscape as it exists today.”
Under the proposed rule, when selecting investment alternatives, plan fiduciaries would need to objectively, thoroughly and analytically consider factors including performance, fees, liquidity, valuation, performance benchmarks and complexity.
Overall, the rule is intended to clear regulatory burdens and lower litigation risks for fiduciaries, the department said.
The department added that prudence under the Employee Retirement Income Security Act of 1974 is grounded in process, and plan fiduciaries are given maximum discretion and flexibility in selecting any particular investment as a designated alternative.
In total, EBSA is responsible for protecting more than 156 million workers, retirees and their families, with plans under its protection holding approximately $13.8tn (£10.5tn) in assets.
“The Treasury Department is proud of this rulemaking effort, which is another step in ushering in President Trump’s golden age,” said US Secretary of the Treasury Scott Bessent. “This proposed rule is an initial step in implementing the president’s executive order in a safe and smart manner, broadening access to additional retirement plan options for millions of Americans while being mindful of the importance of protecting retirement assets.”
This development comes as many alternative managers have been seeking access to 401(k) retirement accounts. Alternatives giants Blackstone, Apollo and Ares have partnered with OneDigital to offer private markets to 401(k) plan sponsors, while Blackstone has also partnered with US retirement plan administrator Empower as part of the 401(k) push.
