Senator Elizabeth Warren, a Democrat, and Senator Bernie Sanders, an independent, say President Donald Trump’s executive order could harm everyday savers. The order, signed in August, makes it easier for companies to add private equity, cryptocurrency, and other non-traditional investments to retirement plans.
The lawmakers say these products are too dangerous for 401(k) accounts. They point to weak rules and bigger price swings compared to regular stocks and bonds.
Warren and Sanders sent a letter on Oct. 28 to Labor Secretary Lori Chavez-DeRemer and Securities and Exchange Commission Chairman Paul Atkins. Five other Democratic senators signed the letter too: Ron Wyden, Dick Durbin, Jeffrey Merkley, Chris Murphy, and Tina Smith.
“The Executive Order exposes these hard-earned savings to volatile financial instruments, while attempting to rebrand them as ‘alternative assets,’ although they lack transparency and have exaggerated claims of high returns,” Warren and Sanders wrote.
Retirement plans face new risks
Most American workers now rely on 401(k) plans to save for retirement instead of traditional pensions. The senators say putting risky investments into these accounts is a bad idea.
The executive order was a big win for companies that want access to the roughly $13 trillion sitting in 401(k) and similar retirement accounts across the country. Investment firms that handle alternative assets want a piece of this money. They see it as their next growth opportunity as money from large institutions dries up.
But the senators warn that private market products have fewer rules and less required information sharing than public market investments. They also argue that cryptocurrency is more like gambling than a real investment.
Government shutdown blocks official response
Representatives from the SEC and Labor Department could not respond to questions because of the ongoing government shutdown.
Trump’s order told the Labor Department to review its guidance on alternative assets in retirement plans covered by the Employee Retirement Income Security Act of 1974. The department has six months to complete this review. The order also asked the department to explain the government’s view on the duties of those who offer funds that include alternative investments.
Chavez-DeRemer must work with officials from the Treasury Department, SEC, and other agencies to decide if rule changes are needed. The SEC was asked to make alternative assets easier to access for retirement plans where workers choose their own investments.
Warren has been vocal about cryptocurrency regulation, arguing that stronger oversight is needed to protect consumers from market volatility and potential fraud in the digital asset space.
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