The Retirement Savings Modernization Act has been put forward by a number of lawmakers in the US to offer 401(k) retirement savers access to different kinds of investments, including that of crypto assets.
US Senator Pat Toomey said that due to the downturn in the stock market, inflation reaching decade highs and a looming economic recession, lots of Americans were rightfully worried about their financial future.
On Thursday, the Committee on Banking, Housing and Urban Affairs of the US Senate announced that a new bill called the Retirement Savings Modernization Act had been introduced recently.
Republic Senators Tim Scott and Pat Toomey and Representative Peter Meijer introduced the bill, which is aimed at bolstering the retirement savings of Americans by enabling them to diversify their assets.
These include defined contribution plans, such as the renowned 401(k) plans. The legislation will involve making amendments to the 1974 Employee Retirement Income Security Act.
This amendment will give clarification that private sector sponsors of retirement plans can offer those that are diversified prudently across various asset classes, such as 401(k)s and pensions.
Senator Toomey said that people had become concerned about their financial future and they had every right to be, given the high inflation, stock market downturn and the potential recession.
He added that when 401(k) savers would be granted access to the same asset classes as provided in pension plans, they would be able to enjoy a more secure retirement.
The senator said that it would benefit millions of Americans. 401(k) plans and pension plans fall under the same law.
But, the difference is that the asset classes incorporated in pension plans are outside the public markets and this has been happening since 1982.
But, 401(k) plans do not offer exposure to alternative assets because of the litigation risks anticipated by fiduciaries. Digital assets are listed in the new bill as ‘covered investment’.
According to Senator Scott, many investors had had their savings devalued and eroded because of inflation.
He stated that the new bill would help in modernizing retirement plans to ensure that people can benefit from diverse investments that generate higher returns.
He said that people deserved to have peace of mind and they would have it when they know that their hard-earned money would be secure by the time they retire.
Until the 1970s, most people depended on pension plans for their retirement, but 401(k) plans have become the go-to option of most private sector workers.
But, the lawmakers did not that pension plans still managed to outperform 401(k) plans and this was primarily because of their diversification across asset classes.
They said that they invested one of five dollars in alternative asset classes, such as private equity.
Representative Meijer said that when it comes to retirement options, people deserve some flexibility, especially when there is fiscal uncertainty.
In March, a notice was issued by the US Department of Labor that contained warnings related to crypto investments included in 401(k) plans.