The American Bankers Association said today that while it supports a proposed rule to provide 401(k) plan managers a safe harbor for investing in a broader range of alternative assets, it has key concerns about the proposal’s consistency and workability.
President Trump last year directed the Labor Department to explore allowing investments in private equity, cryptocurrency, and other alternative assets in ERISA-governed 401(k) and other defined-contribution plans. The proposed rule would establish “a process-based safe harbor” for 401(k) plan fiduciaries when they select designated investment alternatives, according to the agency.
In a letter to the Labor Department, ABA said it generally supports the establishment of a safe harbor, but there are problems with how the rule would implement it. The association made a number of recommendations for addressing its concerns, such as not subjecting bank collective investment funds, or CITs, to the proposal’s “substantially similar” liquidity risk management program and to other proposal requirements applicable to mutual funds.
Other recommendations include deleting the 20 examples – intended to flesh out the meaning of the investment factors – that otherwise would engender confusion over interpretation of their meaning or applicability, adding language confirming the department will not bring enforcement action against any fiduciary regarding investment selection or investment strategy, and refraining from issuing guidance that would address the manner of curating a prudent menu of plan investments.
