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Republican lawmakers who introduced legislation last week that would encourage retirement savings investments in private equity and digital currency hope the measure will be included in an economic bill in a congressional session, but a lack of bipartisan support may prevent it.
Sens. Patrick Toomey, R-Pa., and Tim Scott, RS.C., as well as Rep. Peter Meijer, R-Mich., introduced the Retirement Savings Modernization Act last Thursday. The three-page bill would clarify that company retirement plans can recommend or select alternative investments, including commodities, debt, digital assets, hedge funds, private equity, and real estate, without violating their fiduciary duty.
Retirement plans can invest in such alternative assets now, but generally stick to public stocks and mutual funds due to concerns about the risk of litigation. The Department of Labor earlier this year warned retirement plan trustees to “exercise extreme caution” when considering cryptocurrency investments.
“Our legislation will provide millions of American savers invested in defined contribution plans with the option to grow their retirement savings through access to the same broad range of alternative assets currently available to savers with defined benefit pension plans,” Toomey said in a statement. “This reform will open the door to higher returns and a more secure retirement for millions of Americans.”
Although lawmakers introduced the bill near the end of the congressional session, they hope it can gain momentum in a weaker session after the election.
The goal is for the project to be included in a year-end package, an aide to Toomey wrote in an email. “We are also actively seeking a Democratic co-sponsor.”
If the end-of-year package they have in mind is the retirement savings legislation known as Secure 2.0, Democratic support is paramount. The House overwhelmingly passed the bill in May, and two Senate committees unanimously approved similar legislation.
Any additions to the bill as it moves through the legislative process would have to have bipartisan support.
“It is highly unlikely [to be included in Secure 2.0], as it is late in the process, has not been considered by relevant committees, and does not have bipartisan sponsorship in the House or Senate,” Paul Richman, chief government and political affairs officer at the Secured Retirement Institute, wrote in an email.
This sentiment was echoed by a financial sector lobbyist who questioned why Democrats would agree to add a private equity provision to Secure 2.0. The lobbyist requested anonymity to discuss the bill.
The American Retirement Association has spoken out against the project.
The group “opposes any legislation that undermines the fiduciary protections [of the Employee Retirement Income Security Act] for plans and participants,” said ARA CEO Brian Graff in a statement. “We are concerned, based on the current legislative language in this bill, that this will have that effect and we will discuss these concerns with the bill’s sponsors.”.
The IRI, which represents the annuities sector, has not decided whether to support the project. The authors of the GOP say they have “broad industry support” that includes the Securities Industry and Financial Markets Association, the Institute for Portfolio Alternatives, the American Securities Association, and the CFA Institute.
“We believe [the legislation] should go further to clearly state that fiduciaries have a duty to make investment decisions that maximize the monetary value of retirement plans on behalf of their beneficiaries,” said ASA CEO Chris Iacovella in a statement.
