A number of U.S. lawmakers introduced the Retirement Savings Modernization Act, which gives 401(k), retirees access to many investments including crypto assets. “With inflation at record highs, a stock market downturn, and a potential recession on the horizon, many Americans are rightfully concerned about their financial future,” said U.S. Senator Pat Toomey.
Retirement Savings Modernization Law Introduced
U.S. Senate Committee on Banking, Housing, and Urban Affairs (US Senate Committee on Banking, Housing, and Urban Affairs) announced that Representative Peter Meijer (R.MI), and Senator Tim Scott (R.SC) had introduced the Retirement Savings Modernization Bill.
The bill aims “to bolster Americans’ retirement savings by allowing workers to diversify assets included in defined contribution plans, such as 401(k) plans,” the announcement details. “This legislation will amend the Employee Retirement Income Security Act of 1974 (ERISA) to clarify that private sector retirement plan sponsors may offer plans, including both pensions and 401(k)s, that are prudently diversified across the full range of asset classes.”
Senator Toomey opined, “With inflation at record highs, a stock market downturn, and a potential recession on the horizon, many Americans are rightfully concerned about their financial future,” elaborating:
My legislation provides 401(k), pension plan savers access to the same assets as the other asset classes. This will allow millions to enjoy a secure retirement.
Although pension plans and plans for 401(k), are both covered under the same law since 1982, they have been incorporating asset classes that are not available in the public market. Meanwhile, the latter “almost never incorporate exposure to alternative assets due to fiduciaries’ anticipated litigation risk,” the announcement explains. The bill lists “digital assets” as a “covered investment.”
Senator Scott described: “Inflation has eroded and devalued the savings many Americans spent their lives accumulating. The bill modernizes retirement plans so they are able to offer divers investments that provide higher returns. American workers and their families deserve to go about their lives with peace of mind, knowing their hard-earned money will be secure when they choose to retire.”
The majority of Americans who worked in the private sector depended on their pension plans to retire until the 1970s. The majority of employees in private sectors rely today on 401 (k) plans. “However, pension plans have consistently outperformed 401(k) plans because they diversify across the full range of asset classes, putting one of every five dollars in alternative asset classes like private equity,” the lawmakers noted.
Representative Meijer stressed:
Americans need flexibility when it comes to their retirement options in these uncertain times.
U.S. Department of Labor (DOL), issued in March a notice warning of crypto investment in 401(k). “The department has serious concerns about the prudence of a fiduciary’s decision to expose a 401(k) plan’s participants to direct investments in cryptocurrencies, or other products whose value is tied to cryptocurrencies,” the DOL wrote. “These investments present significant risks and challenges to participants’ retirement accounts, including significant risks of fraud, theft, and loss.”
Fidelity was a prominent 401k plan administrator and announced in April it would allow bitcoin to be an investment option within its new 401k products. The financial giant’s decision caused concerns for the Labor Department. Senator Elizabeth Warren (D. MA) also is concerned, and has asked Fidelity for clarifications on its decision to accept bitcoin in 401k plans.
One U.S. Senator proposed a bill that prohibits the Labor Department interfering in investments in retirement accounts. In June, U.S. Treasury Secretary Janet Yellen said that crypto is “very risky,” emphasizing that it is unsuitable for most retirement savers.
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