DOL Rescinds Biden-Era Guidance on Alternative Investments in 401(k) Plans 

The Department of Labor’s Employee Benefits Security Administration rescinded on Tuesday a 2021 supplemental statement issued under then-President Joe Biden that questioned whether private investments belonged in 401(k) plans. 

In the Biden-era letter, the department had warned that many plan fiduciaries were “not likely suited to evaluate the use of [private equity] investments in designated alternatives in individual account plans.” 

It was a reversal from a prior letter issued by then-President Donald Trump’s DOL in 2020 that encouraged the inclusion of alternative investments in defined contribution plans. Current DOL leaders serving under Trump said the Biden-era message had a “chilling effect” on private equity investments. 

“This is just another example of how the Biden administration put their thumb on the scale to pick winners and losers,” said Secretary of Labor Lori Chavez-DeRemer in a statement. “Instead of allowing Washington bureaucrats to call the shots, we believe plan fiduciaries should decide which retirement investment options are best for hardworking Americans.” 

The decision to rescind the 2021 letter follows an executive order from Trump last week that requires the DOL to “clarify” its stance on alternative investments in 401(k) plans. Industry insiders have likened the executive order, and the future guidance the DOL is likely to provide, to the 2020 letter issued during Trump’s first term that had been toned down by the now rescinded 2021 letter. 

The 2020 DOL information letter stated that retirement plan administrators would not be violating their fiduciary duties under ERISA if they included private equity in their plan’s portfolios. 

“The speed at which the Department has moved following President Trump’s recent executive order is an encouraging sign of its commitment to implementing the order in full and offering millions of American retirees the chance to participate in private market offerings through their professionally managed workplace retirement plans,” the Investment Company Institute stated.