Several U.S. lawmakers have introduced the Retirement Savings Modernization Act to provide 401(k) retirement savers access to a wide range of investments including crypto assets. U.S. Senator Pat Toomey said, “With record inflation, a weak stock market, and a potential recession on the horizon, many Americans are rightfully concerned about their financial future.”
The Retirement Savings Modernization Act was introduced.
The U.S. Senate Banking, Housing and Urban Affairs Committee announced Thursday that U.S. Senators Pat Toomey (R-PA) and Tim Scott (R-PA) and Representative Peter Majors (D-MI) have introduced a bill called the Retirement Savings Modernization Act.
The bill would “strengthen Americans’ retirement savings by allowing them to diversify the assets included in defined contribution plans like 401(k) plans,” details of which have been released. The bill “would amend the Employee Retirement Income Security Act of 1974 (ERISA) to clarify that private retirement plan sponsors can offer plans that are carefully diversified across all asset classes, including both pensions and 401(k)s.
Senator Toomey opined that “many Americans are rightfully concerned about their financial future in the face of record inflation, a weak stock market, and a potential recession,” and elaborated as follows.
By providing 401(k) savers access to the same asset classes as pension plans, my bill will open the door to a more secure retirement for millions of Americans.
The same laws apply to pension plans and 401(k) plans, but the former have incorporated non-public market asset classes since 1982. The latter, on the other hand, “rarely incorporate exposure to alternative assets due to anticipated fiduciary litigation risk,” the announcement explained. The bill lists “digital assets” as “eligible investments.”
Senator Scott explains.
“Inflation has eroded and devalued the savings that many Americans have built up over their lives. This bill will modernize our retirement system and allow it to offer a variety of investments with higher returns. American workers and their families deserve the security of knowing that their hard-earned money is safe when they choose to retire.”
Until the 1970s, most Americans working in the private sector relied on pension plans for retirement. Today, most private-sector workers rely on 401(k) plans. The lawmakers noted, “But pension plans consistently outperform 401(k) plans because they diversify across all asset classes and put $1 out of every $5 in alternative asset classes such as private equity.”
Representative Meijer emphasized.
Americans deserve flexibility in their retirement options, especially in times of financial instability.
The U.S. Department of Labor (DOL) issued anoticein March warning about crypto investments in 401(k) plans.” The Department has serious concerns about the prudence of fiduciary decisions that expose 401(k) plan participants to direct investments in cryptocurrencies, or other instruments whose value is associated with cryptocurrencies,” the DOL wrote.” These investments present significant risks and challenges to participants’ retirement accounts, including significant risks of fraud, theft, and loss.”
Despite the Department of Labor’s warning, leading 401(k) plan administrator Fidelity announced in April that it would allow bitcoin as an investment option in its new 401(k) product. The financial giant’s decision raised concerns at the Department of Labor. Senator Elizabeth Warren (D-MD) is also concerned and has demanded answers from Fidelity regarding its decision to allow bitcoin in 401(k) plans.
In May, U.S. senators introduced a bill that would prohibit the Department of Labor from interfering with retirement account investments; in June, U.S. Treasury Secretary Janet Yellen said crypto is “very risky” and stressed that it is not suitable for most retirement savers.
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