Executive Order Clears Path for Alternative Assets in 401k Plans
|
Newsletter Sponsor Celebrating 25 Years -- The 401k Averages Book 25th Edition is Here! We're excited to announce the release of the 25th Edition of the 401k Averages Book! This edition includes key data on Advisor Compensation, comprehensive recordkeeping administration fees (encompassing hard dollar and asset-based), and revenue sharing allocations. Whether you need 401k fee comparisons or reliable benchmarking tools, this book is an indispensable asset for your business! Click here to order your copy. Headlines Fiduciary and Plan Governance
General Items
Insight: Studies, Research, Analysis, or Papers
Court and Legal
Legislative or Washington DC Compliance and Regulatory
Marketplace News Summaries Fiduciary and Plan Governance Executive Order Clears Path for Alternative Assets in 401k Plans On August 7, 2025, President Trump signed an Executive Order aimed at increasing access to alternative assets for 401k plan investors. While the Order allows the DOL to provide guidance on these matters, it is viewed as unlikely to fulfill the Order's objectives. A formal rule, which would involve a comprehensive notice-and-comment process and be subject to greater judicial scrutiny, would be more effective. As a result, plan fiduciaries would prefer a regulatory safe harbor over mere guidance to reduce liability concerns. Source: Debevoise.com The Trump Private Equity Order: What Plan Fiduciaries Need to Know Now On August 7, 2025, the president issued an executive order aimed at expanding the types of holdings in 401k, 403b, and other defined contribution plans. This policy seeks to align the investment opportunities for participants in these plans with those in public and defined benefit plans by increasing access to alternative assets. The order emphasizes that while it allows for the offering of these investments, the existing ERISA fiduciary framework remains in place. It instructs the DOL, in collaboration with the Treasury and the SEC, to review and update prior guidance regarding these investments. Source: Bsk.com The President has issued an executive order asking the DOL and other regulatory bodies to create guidelines that would permit 401k plans to include riskier investments like private equity and cryptocurrency. Critics argue that these alternative investments are unnecessary and too risky, contradicting the prudence requirements outlined in ERISA. The author suggests that prudent plan sponsors should disregard the executive order and focus on ensuring their plans remain compliant with ERISA standards. Source: Fiduciaryinvestsense.com Plan Sponsor and Asset Manager Considerations Under 401k Alternatives Executive Order On August 7, 2025, President Trump signed the executive order that aims to expand the availability of alternative investments, such as private equity and actively managed funds in digital assets, within 401k plans. Although alternative investments are not explicitly prohibited under ERISA, they have been largely overlooked in practice. The order emphasizes the administration's support for these investments but does not mandate the DOL to consider direct stand-alone alternative investments. Instead, it instructs the DOL to provide guidance on selecting funds that incorporate alternative assets. Plan sponsors and fiduciaries are advised to pay close attention to the executive order's specific language. Source: Carltonfields.com Trump Administration Executive Order on Adding Private Equity Investments to 401k Plans The Trump administration is increasingly pushing to incorporate private equity investments into 401k plans, a topic that has been discussed since at least last November but is now receiving heightened media attention. The author emphasizes that the recent executive order is just an initial move in a larger debate and should not be misinterpreted as the first step in a new process. Efforts to introduce such investments into retirement plans have been ongoing for a while, and the current developments are part of that longstanding discussion. The author provides resources for those looking to understand the issue better. Source: Bostonerisalaw.com »» Click here for more Fiduciary and Plan Governance Material General Items What Is a "Trump Account," and How Does it Impact Employers? The so-called "One Beautiful Bill" has paved the way for the establishment and management of "Trump Accounts." These accounts feature both an individual component and the option for employer sponsorship. Although numerous questions about their administration and eligibility still linger, employers must grasp the fundamental aspects of Trump Accounts outlined here. Source: Barran.com Social Security COLA Forecast Boosts Slightly to 2.7% The forecast for the Social Security cost-of-living adjustment for 2026 has slightly increased to 2.7% as of July, reflecting ongoing high prices for items frequently purchased by seniors. With the official announcement approaching in two months, predictions have risen; The Seniors Citizen League initially estimated a 2.6% increase in June, while analyst Mary Johnson maintains her prediction at 2.7%. Source: 401kspecialistmag.com Insight: Studies, Research, Analysis, or Papers Growing Advisor Support for Private Market Investments in Retirement Plans: Survey A recent survey by Empower reveals strong interest among financial advisors in incorporating private market investments, such as private equity, real estate, and credit, into defined contribution portfolios. The July 2025 survey found that 68% of advisors already use these investments, mostly in high-net-worth accounts. Notably, 58% of those who use private market investments would recommend them for retirement plans, a figure that rises to 75% among advisors serving pension plans. Overall, 43% of advisors show increasing interest in this area. Source: Empower.com The New Priorities: Why Plan Sponsors Are Shifting Focus from Cost-Cutting to Cybersecurity and AI The focus of 401k plan sponsors is shifting away from prioritizing cost reduction, which was previously their top concern. According to Escalent's 2025 Retirement Planscape report, only 40% of plan sponsors now list cutting expenses as a priority, down from 50% the previous year. Instead, concerns about cybersecurity and artificial intelligence have taken center stage, indicating a significant change in priorities driven by fear rather than cost. Source: Jdsupra.com »» Click here for More Studies, Research, and White Papers Court and Legal Supreme Court Shows Interest in ERISA Pleading Standard Circuit Split Earlier this year, Parker-Hannifin, a defendant in an ERISA fiduciary breach case, filed a petition for a writ of certiorari to the U.S. Supreme Court. This petition could resolve a circuit split regarding the pleading standard for ERISA class actions that challenge the investment performance of defined contribution plans, highlighted by the Sixth Circuit's decision in Johnson v. Parker-Hannifin. The Seventh, Eighth, and Tenth Circuits require plaintiffs to allege that alternative, similarly positioned investment options outperformed those offered in the plan, a standard referred to as "meaningful benchmarks." The Sixth Circuit's ruling in Johnson deviates from this established consensus. If the Supreme Court agrees to hear the case, it could provide clarity on this important legal issue. Source: Erisalitigationadvisor.com Federal Judge Rejects Motion to Dismiss Stable Value Investment Case A federal judge in Virginia has denied Sentara Healthcare Inc. and its fiduciary committee's motion to dismiss a lawsuit alleging breach of fiduciary duty regarding its 403b plan. The plaintiffs claim that the plan sponsor and committee failed to adequately monitor an underperforming stable value investment option. While one plaintiff, Bonny Davis, was initially found to lack standing because she was not a participant in the investment, the court permitted the plaintiffs to amend the complaint to demonstrate that she had, in fact, enrolled in the investment option, thus allowing her to establish standing in the case. Source: Planadviser.com District Court Denies Bank of America's Motion to Dismiss 401k Forfeitures Case A federal judge in North Carolina has allowed a lawsuit against Bank of America to proceed, denying the bank's motion to dismiss the case. The lawsuit, filed by plaintiffs in August 2024 and amended in March, claims that Bank of America improperly utilized forfeited retirement plan assets to offset its contributions instead of paying plan expenses, which the plaintiffs argue violates fiduciary duties under ERISA. U.S. District Judge Max Cogburn Jr. stated that there have been varying judicial interpretations of what constitutes a fiduciary breach under ERISA and rejected the bank's claim that its actions fell outside ERISA's fiduciary standards. Source: Planadviser.com »» Click here for more Court and Other Legal Issues Legislative or Washington DC DOL Decides to Keep Annuity Safe Harbor, Separate Account Rules The DOL has decided not to eliminate its safe harbor guidance on selecting annuity providers for individual 401k plans after receiving significant negative feedback. Although EBSA previously argued that the guidance was unnecessary due to a 2019 amendment to ERISA that introduced a more streamlined fiduciary safe harbor, the backlash led them to maintain the existing regulations as part of their effort to minimize burdensome federal regulations. Source: Psca.org »» Click here for more on Legislative and Washington Actions Compliance and Regulatory IRS Guidance on Uncashed and Reissued Checks: An Opportunity to Review Payment Practices The IRS issued Revenue Ruling 2025-15, which clarifies tax withholding and reporting obligations for stale and reissued retirement plan distribution checks. The ruling reaffirms that payors who have been following previous guidance (Revenue Ruling 2019-19) do not need to change their existing practices. It also states that payors cannot reverse required withholding or adjust notifications due to checks not being cashed. While the content was expected, the Ruling provides necessary clarity for payors and plan administrators by summarizing these principles in one release. Source: Morganlewis.com IRS Issues Proposed Automatic Enrollment Guidance The IRS recently released proposed guidance regarding the automatic enrollment requirements introduced by SECURE 2.0 for new 401k and 403b plans established after December 29, 2022. This guidance, referred to as "Mandatory Auto Enroll," mandates that employers automatically enroll employees at a minimum rate of 3% of their compensation, with annual increases of at least 1% up to a cap of 10%. Since the original legislation lacked detailed operational specifics, this IRS Guidance aims to clarify those details. However, it's important to note that the guidance is still in proposed form, and changes may occur before it is finalized. Source: Legacyrsllc.com »» Click here for more Compliance and Regulatory Material Marketplace News SageView Advisory Group Enhances Services and Midwest Footprint With Acquisition of Cap Strat
This eNewsletter is a digest of information published by a variety of web-based sources on 401k and related issues and is published as a service to our users. 401khelpcenter.com, LLC is not the author of the material unless specifically noted. Articles are copyrighted to their publishers. If you believe that your work has been copied in a way that constitutes copyright infringement, please contact the source site immediately. Hyperlinks in this document are provided as a convenience and we disclaim any responsibility for information, services, or products found on websites linked hereto. All links were tested before this eNewsletter was e-mailed to you to ensure that they are still functional, but publishers do move or delete articles. Therefore, we can't guarantee that the links provided will remain operational. 401khelpcenter.com does not endorse, approve, certify, or control this material and does not guarantee or assume responsibility for the accuracy, completeness, efficacy, or timeliness of the material. Use of any information obtained from this material is voluntary, and reliance on it should only be undertaken after an independent review of its accuracy, completeness, efficacy, and timeliness. Reference to any specific commercial product, process, or service by trade name, trademark, service mark, manufacturer, or otherwise does not constitute or imply endorsement, recommendation, or favoring by 401khelpcenter.com. Opinions expressed are those of the author of the article and do not necessarily reflect the positions of 401khelpcenter.com. THIS NEWSLETTER IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE INVESTMENT, TAX, ACCOUNTING, OR LEGAL ADVICE. Copyright © 2025 by 401khelpcenter.com, LLC. All rights reserved. No reproductions without prior authorization, but you are free to email this copy (in its entirety) along to colleagues or clients. This newsletter may not be posted on any website. 401khelpcenter.com, LLC
|
