Proposed Legislation Would Make Explicit that ERISA Plan Fiduciaries Can Offer Diversified Investments
Commentary by Andrea L. Pollak
Senator Pat J. Toomey (R-PA) introduced the Retirement Savings Modernization Act, which would make explicit the authority of defined contribution retirement plan fiduciaries to invest in a wide variety of assets, including commodities, digital assets, private equity and real estate. The bill was co-sponsored by Senator Tim Scott (R-SC) and Representative Peter Meijer (R-MI).
The bill amends the Employee Retirement Income Security Act of 1974 ("ERISA") and clarifies "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." Under the bill, a fiduciary choosing or recommending an alternative investment would remain subject to all existing obligations under ERISA, including the duties of care, prudence and loyalty, to the extent applicable. The bill makes clear that investment in a non traditional asset would not be a per se violation of fiduciary obligations under ERISA.
Commentary
Senator Toomey's bill may have been prompted by a letter sent by Senator Elizabeth Warren (D-MA) to Fidelity Investments challenging the wisdom of Fidelity allowing its customers to make investments in Bitcoin from their 401(k) plans, and by a DOL warning that it would have "serious concerns" about the prudence of a plan fiduciary's decision to expose participants to the risks associated with investments in cryptocurrencies.