President Donald Trump is weighing an executive order which would allow 401k funds to make private-market investments in a huge shakeup to retirement packages.
Trump is expected to announce the new policy soon, but precise details are being kept tightly under wraps and are still subject to change, the Wall Street Journal reported.
The executive order is expected to instruct the Labor Department to begin working with the Securities and Exchange Commission on guidance for employers and plan administrators.
It would represent a huge victory for the private equity industry, which has long been lobbying to gain access to workers' 401k plans, which currently is worth about $12.5 trillion.
These portfolios have long been primarily comprised of stocks and bonds, largely because they carry less risk than other forms of investment.
Private markets would give accountholders greater opportunity for growth and long-term rewards, allowing investors to capitalize on private equity, venture capital, real estate and hedge funds which aren't on public exchanges.
But there are also major risks associated with private equity investments.
These types of investments are less secure and more dependent on external factors, opening accountholders up to the possibility that they could lose their hard-earned retirement nests.
Plan administrators and legal experts have expressed concern about potential ramifications if investments perform poorly or if fees eat into savings.
Top officials in Washington have been considering how to avoid legal risks.
Bryan Corbett, president and CEO of MFA, a trade association that represents alternative asset management options, hailed the expected order.
'Expanding access to alternative investments in 401(k) retirement plans will provide more Americans with the diversification and investment options needed to build wealth and save for successful retirement,' he said.
The executive order would build upon guidance from Trump's first stint in the White House which maintained retirement plan administrators could include private equity in their portfolios.
That guidance was rolled back when Biden entered the White House.
