- Labor’s proposal gives 401(k) fiduciaries a defined path for carefully reviewing crypto.
- The rule weighs fees, liquidity, valuation, benchmarks, and asset complexity first.
- Advisors say most savers may still prefer low-cost broad market index funds today.
The US Labor Department has proposed a rule that could open 401(k) plans to alternative investments, including crypto assets such as Bitcoin. The Employee Benefits Security Administration described the measure as historic. It said the rule gives fiduciaries a clear process for reviewing non-traditional assets. The proposal sets safe-harbor procedures for plan managers.
Those steps cover performance, fees, liquidity, valuation, benchmarks, and asset complexity. If finalized, the rule would give fiduciaries a structured path to consider crypto without the compliance risks that discouraged adoption in recent years. Could crypto soon move from the market fringe into mainstream retirement menus?
How the Proposal Would Work
At the center of the proposal are safe-harbor rules for designated investment alternatives in defined contribution plans. Under those rules, fiduciaries would need to review each option through a documented process. The department said the framework remains neutral on asset classes.
Instead of backing one type of investment, the rule sets out how plan managers should assess choices. They would weigh expected performance and costs first. They would also examine liquidity, valuation methods, suitable benchmarks, and the complexity of crypto assets.
In turn, the Labor Department said the proposal aims to reduce uncertainty for fiduciaries. The EBSA said the Biden administration’s 2022 compliance guidance discouraged crypto offerings in retirement plans. It added that the earlier guidance diverged from ERISA requirements and limited the use of alternatives.
Labor Secretary Lori Chavez-DeRemer said, “This proposed rule will show how plans can consider products that better reflect the investment landscape as it exists today.” Her statement framed the rule as a way to align retirement plans with current markets.
Officials from other agencies also backed the move. Treasury Secretary Scott Bessent called the rulemaking “another step in ushering in President Trump’s Golden Age.” He said the proposal seeks to broaden retirement choices for “millions of Americans” while protecting retirement assets.
Support, Warnings, and Broader Policy Moves
The SEC also took part in developing the proposal, according to the text. SEC Chairman Paul Atkins said retirement planning should let Americans take part in innovation and economic growth through diversified, long-term investments. He said the SEC helped formulate the rule.
Supporters argue that alternative investments could give retirement savers broader diversification away from public markets. They also say those assets may offer higher returns. At the same time, some financial advisors say many 401(k) investors lack the experience needed for more complex products.
Those advisors also point to higher risk and higher costs. Josh Brown, chief executive of Ritholtz Wealth Management, told CNBC in October that most 401(k) investors would likely fare better without alternative assets. He said a broad stock market index fund often beats professional investors and keeps expenses low.
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Brown said, “The average investor by definition does not need alternative assets in their portfolio.” He also said there is “absolutely no chance” that 401(k) investors would gain access to the best alternative managers or the best funds.
Even in that case, Brown said, investors would still face steep costs. He said they would “pay through the nose for it” because they lack the buying power to negotiate lower fees. He added, “You are not the sovereign wealth fund of Norway. You will not be treated that way.”
Even so, the proposal fits a wider policy direction. The text said the Trump administration has taken other steps to ease broader retail access to nontraditional asset classes. In that setting, the Labor Department’s plan marks a new stage in the debate over crypto in retirement accounts.
