The "Golden Age" of 401(k) Investments

[austin3515]

“Our goal is to deliver on President Trump’s promise for a new golden age by fostering a retirement system that allows more Americans to retire with dignity,” said U.S. Secretary of Labor Lori Chavez-DeRemer. “This proposed rule will show how plans can consider products that better reflect the investment landscape as it exists today. This greater diversity will drive innovation and result in a major win for American workers, retirees, and their families.”

 https://www.dol.gov/newsroom/releases/ebsa/ebsa20260330

 What I do not understand is, if you make private equity funds available to the public, that would make the private equity funds publicly traded.  Wouldn’t that mean we need all of the protections that public investors receive through SEC filings, etc.?  Imagine the disclosures needed for liquidity restrictions.  I can see the place for this in a pooled, trustee directed plan (especially defined benefit), but not a participant directed one.

 I don’t get it.

[david rigby]

The answer to your question is YES.

[QDROphile]

If you make private equity funds available to the public, then you create money making opportunities for the private equity fund managers by opening up a category of money and unsophisticated investors that would not otherwise be preyed upon.

[austin3515]

10 hours ago, QDROphile said:

If you make private equity funds available to the public, then you create money making opportunities for the private equity fund managers by opening up a category of money and unsophisticated investors that would not otherwise be preyed upon.

🙄  Well I can't seem to find a way to rule this out...

[Paul I]

The decision to add private equity investments to a plan's investment menu belongs to the plan fiduciaries. The plan fiduciaries will be hearing from their service providers and investment advisors about what to consider when looking to include private equity in the plan's investment menu.

My experience is when plan fiduciaries are making investment decisions, they give greater weight to the opinions of the investment advisors.

The fiduciaries do give greater weight to opinions about operational and recordkeeping issues from the other service providers. Being conversant in how characteristics of private equity investments impacts individual participant's accounts will help earn a seat at the table.

If we think about issues associated with other non-traditional assets like gold bullion, real estate, private placements, art, collectibles among others, we know that the:

• periodic valuation of the asset is a concern in plans that are daily-valued,
• level of liquidity across all assets is necessary for smooth inter-investment transfers and timely payment of distributions and loan proceeds, 
• timely implementation of changes in investment elections depends on the two items above,
• plan limits on the percentage of assets a participant can be held in a participant's account (e.g., no more than xx% of the participant's total account can be held in certain investments) are difficult to administer particularly when the investments are highly volatile,
• in-kind distributions of certain investments may be precluded based permissible ownership rules associated with that investment.

Certainly our BL colleagues have other points to contribute to inform plan fiduciaries that the attraction of extreme returns of private equity is like drawing moths to a flame.

[austin3515]

I'll be curious to hear Empower and Fidelity's response.  If they say this is a no go, then that's the end of that.  Have they said anything?  This is not a new topic of course.

[Peter Gulia]

Empower has been on the train since early 2025.

Empower expects to include private investments within Empower collective trust funds.

https://www.empower.com/press-center/empower-offer-private-markets-investments-retirement-plans

Empower has supported making it feasible to include private-equity and alternative investments.

https://www.empower.com/press-center/empower-responds-senator-elizabeth-warrens-inquiry

https://www.empower.com/press-center/empower-applauds-executive-order-supporting-broader-investment-access-401k-plans

Yesterday, Empower’s news release praised the proposed rulemaking.

https://www.empower.com/press-center/empower-applauds-dol-proposal-supporting-responsible-flexibility-investment-choices

[austin3515]

I can see for sure how including it as a single holding within a CIT is feasible, FWIW.

Thanks for posting this though!

[Dare Johnson]

If someone doesn't know what the exit strategy is, they are the exit strategy.

[ErnieG]

This is all good until the first wave of lawsuits hits.  Despite the "safe harbor" there remains the procedural prudence of why this type of investment is good for the rank-and-file not just the owners now have access to these investments with much lower thresholds to get in.

[Peter Gulia]

For an interpretive, not legislative, rule, I don’t see how there can be a “safe harbor”.

Rather, a Federal court interprets a statute, and does not defer to, and might not be persuaded by, an executive agency’s interpretation.

[austin3515]

What was it the Citgo Doctrine?  Or was it the Valero Doctrine?

Oh right Chevron 🤣

[Peter Gulia]

The Supreme Court overruled Chevron deference.

For a question of law not already answered by a judicial precedent, a court must decide a dispute with the court’s interpretation of the statute. A Federal court may consider, but must not defer to, an executive agency’s interpretation of a statute.

Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (June 28, 2024).

Consider, too, that a Federal district court’s decision is not a precedent, not even within the same district, and a Federal appeals court’s decision is a precedent only for courts in that circuit’s geographic territory.

[AlbanyConsultant]

I'm waiting for the day that casinos convince the government that allowing participants to "invest" in a spin on the roulette wheel is a prudent investment.

[Paul I]

You may have seen the American Retirement Association's posting https://www.asppa-net.org/news/2026/3/why-ara-supports-the-proposed-investment-selection-rule/

They are highlighting the fact the the content of the proposed rule does not explicitly address private equity investments but rather emphasizes that plan fiduciaries must use due diligence and perform a reasonable analysis in deciding on funds that can be included in a plan's investment menu.  The emphasis is on the selection process that is not really new.  Here is the ARA teaser.

Why ARA Supports the Proposed 'Investment Selection Rule'

Process, not politics, should guide 401(k) investments. By providing vital asset-neutral, process-driven clarity to 401(k) investment selection, the proposed rule will help America’s retirement plan system remain strong and durable.

[Peter Gulia]

About Fiduciary Duties In Selecting Designated Investment Alternatives, the Labor department’s proposed interpretation focuses on a fiduciary’s process and capabilities for evaluating the investment merits of something considered for a designated investment alternative.

The explanation confirms this proposed rulemaking does not interpret a fiduciary’s other responsibilities in designing a menu of investment alternatives for participant-directed investment.

Another BenefitsLink discussion asks: Must a fiduciary consider whether a participant can understand an investment alternative? https://benefitslink.com/boards/topic/81087-must-a-fiduciary-consider-whether-a-participant-can-understand-an-investment-alternative/.

Even if a fiduciary has done a prudent-expert job in evaluating the investment merits of a designated investment alternative that is or includes private equity (or debt), a participant decides whether and how to use an investment alternative.

In deciding whether to designate an investment alternative that is or includes private equity (or debt), must a fiduciary consider whether a participant is less able to evaluate that investment than she is able to evaluate a simpler investment, such as shares of an SEC-registered mutual fund?

Assuming an investment alternative otherwise would be prudently selected, is a typical participant’s ability to understand the investment at least a factor a fiduciary must consider?

Or, is it unnecessary to consider whether a participant can understand a more complex investment alternative because a typical participant cannot understand even the simpler alternative, shares of a publicly available mutual fund regulated by Federal securities laws.

What do you think: Is an evaluation of participants’ capabilities in evaluating investment alternatives necessary? Or a useless distraction?