In addition to health insurance and paid vacation time, one of the best aspects of being a full-time employee for a company is getting financial benefits geared toward retirement. As one of the most popular types of work-sponsored savings programs, 401(k) plans often receive a matching contribution from their employer. The plans are administered by a fiduciary, who is required by law to act in the best interests of their clients.
It will be interesting to see how 401(k) managers react to the presidential executive order issued on August 7, 2025. In Democratizing Access to Alternative Assets, President Donald Trump promises to have the U.S. Department of Labor examine and reduce the "regulatory burdens and litigation risk" for fiduciaries regarding managing retirement accounts. The order indicates a belief that this will encourage those in charge of the plans to consider investing in cryptocurrency, real estate, and private equity.
Although there were no prohibitions in the Employee Retirement Income Security Act (ERISA) against investing in alternative assets before the executive order, fiduciaries traditionally stayed away from the riskier investments of their own volition. While much will depend on the changes the Department of Labor makes, there's no guarantee that fund managers are eager to expand their portfolios into these financial fields.
Is It Bad if My Retirement Funds Are in Something Called LoserCoin?
While Social Security is deducted from every worker's paycheck to provide retirement funds, it is not ideally a retiree's sole source of income. Most full-time employees have a retirement plan through their employer that they can contribute to.
In addition to having funds matched by the employer, retirement plans offer other benefits toward retirement. Traditional individual retirement accounts (IRAs) cashed out after retirement are often done so in a less costly tax bracket due to a lower income level. Other funds, such as a Roth IRA, are tax-free when accessed after retirement. Since the allocated money is being placed into investments by the fiduciary, the portion of salary an employee allocates can end up being a small percentage of the amount the fund can swell to.
Under the tenets of ERISA, fiduciaries are required to act in the best interests of their clients. If they lose money through poor and/or risky investments, they can face being fired, civil lawsuits holding them personally liable, or even criminal charges. As one can imagine, this has resulted in the usual practice being safer investments with lower but more reliable results. A 4% yearly return may not sound exciting, but over a lifetime of employment, it can accrue into a respectable amount of money to allow a retirement without serious financial concerns.
ERISA also safeguards against shady deals or outright corruption. It doesn't ban fiduciaries from investing in options like crypto, but it has punishments in place for those who make bad choices for their clients due to a lack of due diligence or questionable moral decisions. What protections will still exist after the Department of Labor makes its changes could affect the retirement security of tens of millions of workers. However, ERISA is a federal law; the DOL is tasked only with enforcing it. Significant changes to the enforcement of ERISA without Congressional action could lead to litigation.
Executive Intuition, Ambition, or Overreach?
Trump's executive order continues a complete reversal of the policies of the Biden administration, which viewed crypto as ripe for scamming and not to be rushed into heedlessly by fiduciaries. While there's been some concern that an executive order shouldn't potentially upset decades of fiduciary laws and penalties, there's speculation that it's unlikely that 401(k)s and their ilk will invest heavily into volatile offerings like private equity, real estate, and crypto.
Perhaps further tarnishing crypto's allure to fiduciaries is its lack of government backing, making it the sort of risk they generally avoid. Some financial services companies are reportedly including private equity opportunities in funds scheduled for future release, but that doesn't ensure they'll be embraced by IRA fund managers.
You can lead a horse to water, but you can't make it drink. The Trump administration believes it can make alternative assets more attractive to fiduciaries, but it remains to be seen whether the money managers will be interested in imbibing.
Related Resources
- Crypto Firms Bullish as SEC Drops Lawsuits and Investigations (FindLaw's Law and Daily Life)
- 401(k) Plans for Employers (FindLaw's Employment Law and Resources)
- Social Security and Financial Planning (FindLaw's Retirement Planning)
