U.S. Sen. Steve Daines (R-MT) led his Republican colleagues in urging the U.S. Department of Labor (DOL) to expand Americans’ access to a modern retirement framework by increasing investment choice and diversification through implementation of a recent presidential executive order.
“Like the president, we believe this is a critical step in leveling the playing field for the 90 million American workers with a 401(k) or other defined contribution retirement plan who lack the freedom to invest in private equity, cryptocurrency, and other alternative assets,” wrote the nine senators in an Aug. 22 letter sent to DOL Secretary Lori Chavez-DeRemer.
“We urge you to work expeditiously to implement the [Aug. 7] executive order with a regulatory safe harbor through a formal notice and comment rulemaking,” they wrote. “Doing so will maximize the order’s effectiveness and ensure industry has the certainty needed to deliver on behalf of American retirees.”
Sen. Daines and his colleagues pointed out that there are currently more than eight times as many workers who have defined-contribution plans than defined-benefit plans, a significant reversal from 1975 when defined-benefit plans outnumbered defined-contribution plans.
However, whereas defined-benefit plans allocate roughly one-third of their $12 trillion in retirement assets to alternative assets, these same assets are unfairly unavailable to those with defined-contribution or 401(k) plans — which are America’s preferred retirement savings vehicle, they wrote.
“This disparate treatment is especially unfair considering the lack of material differences between the average characteristics or risk profiles of workers with a 401(k) versus those with a defined-benefit plan,” wrote the senators. “As the preference for defined-contribution plans has continued to grow, modernizing the regulatory framework and addressing the lack of equal access has become even more essential to enhancing the retirement security of America’s workers.”
Sen. Daines and the lawmakers also noted that the relegation of 401(k) participants to commoditized mutual funds that mimic public markets — and whose returns generally lag the long-term net returns achieved by public pension plans and other institutional investors — is the product of years of meritless litigation that ignores the interest of the American worker.
“Such weaponization of the legal process has chilled the willingness of employers to offer alternative asset investment options,” according to the letter, which was also signed by U.S. Sen. Bill Cassidy (R-LA).
The secretary’s success in implementing the executive order, they added, will enable highly skilled plan fiduciaries to offer “prudent allocations to alternatives” without fear of frivolous lawsuits, aligning private-sector workers’ opportunities with those of institutional investors.