Trump administration proposes expanding 401(k) alternative asset options; Democrats urge withdrawal

Top Democratic lawmakers urged the Department of Labor on Monday to withdraw a proposal that would permit 401(k) plans to offer investments in cryptocurrency, private equity and private credit. In a letter sent to acting Labor Secretary Keith Sonderling, Sens.

Elizabeth Warren and Bernie Sanders, along with Rep. Bobby Scott, said the rule would remove long-standing investor protections and expose retirement savings to more complex and volatile assets.

Democrats cite risks to retirement savings The lawmakers wrote that the proposal would encourage the use of risky, expensive investments and would be harmful to American workers. They argued the change runs counter to existing statute. The letter noted that the estimated $14.2 trillion held in retirement accounts could face greater financial risk, especially for seniors, if plans shift into assets described as more opaque and volatile than traditional holdings.

Proposal stems from prior executive order The Department of Labor proposal follows an executive order directing the agency and the Securities and Exchange Commission to review regulations and expand access to alternative assets in participant-directed retirement plans. The administration has stated that broader investment options could produce higher returns through diversification.

Democrats reference family crypto activity The lawmakers also pointed to reports that the Trump family’s wealth has grown through cryptocurrency ventures launched during the administration, including allegations involving presidential son-in-law Jared Kushner’s private equity firm. They called on the Labor Department to rescind the proposal in full.

“This would strip long-held investor protections from retirement savers and encourage the use of more risky, complex, and expensive investments.”