White House Executive Order Expands Crypto Access in 401(k) Plans
On August 7, the White House issued an executive order to accelerate access to alternative investments in defined contribution retirement plans, such as 401(k)s. These investments now include digital assets among others.
Key points:
- The crypto industry views this order positively, as it opens a $12 trillion investment market.
- Concerns exist that many 401(k) participants do not actively make investment decisions, often defaulting to employer-selected options.
- The Pension Protection Act of 2006 allows employers to offer "Qualified Default Investment Alternatives" (QDIA), typically target-date funds, reducing liability concerns.
- Vanguard's report shows 61% of plans use automatic enrollment, leading to high participation rates but also to reliance on default options.
- 84% of participants use target-date funds, with many holding only one fund and rarely making changes.
- There is little incentive for stakeholders to include digital assets in QDIAs, as current systems benefit from maintaining the status quo.
- While some employees may seek alternative options, most participants tend to operate on autopilot regarding their investment choices.
The situation raises questions about the accessibility of high-performing asset classes like digital assets for the majority of 401(k) participants who rely on defaults.