Key facts
- Democrats oppose a Department of Labor proposal to allow alternative assets, including crypto, in 401(k) plans.
- Lawmakers warn the proposal could jeopardize an estimated $14.2 trillion in retirement savings.
- Concerns include excessive risks, high fees, price volatility, and potential fraud associated with alternative assets.
- Critics argue the proposal strips long-held investor protections and may not survive legal challenges.
- The Trump administration defends the proposal as a way to expand investment choices.
Democrats in Congress are voicing strong opposition to a proposed rule from the US Department of Labor that could permit the inclusion of alternative assets, such as cryptocurrencies, within 401(k) retirement accounts. Senators Bernie Sanders and Elizabeth Warren, along with Representative Bobby Scott, have argued in a letter that this change would jeopardize an estimated $14.2 trillion in retirement savings. They contend that the proposal would weaken existing investor protections, encourage investments in complex and costly assets, and expose workers to significant price volatility and higher fees. The lawmakers also expressed skepticism about the proposal's legal viability and highlighted concerns about cryptocurrency fraud, citing FBI data on substantial losses. The Trump administration, through acting labor secretary counterpart Keith Sonderling and Treasury Secretary Scott Bessent, has defended the initiative, stating it aims to expand investment choices by requiring managers to follow a prudent evaluation process rather than picking winners and losers. The administration views the rule as a step towards economic growth. The U.S. fund management industry supports the proposal, with over 37,000 comments submitted to the Department of Labor, reflecting a range of opinions from risk concerns to opportunities for investors and funds. The Democratic lawmakers also raised conflict-of-interest concerns, noting that Trump's adult sons manage the family's crypto business, which has raised significant funds. They argue the rule change could allow the Trump family to profit at the expense of workers and retirees. Top Democrats on three House and Senate committees called on the US Labor Department to halt its plans to allow digital assets and “alternative assets” to be held in Americans' retirement plans. In a Tuesday letter, Senator Bernie Sanders, Senator Elizabeth Warren and Representative Bobby Scott asked acting Labor Secretary Keith Sonderling to rescind the department's proposal to allow private equity, digital assets, private credit, and other “alternative assets” to be included in 401(k) plans.