The "Golden Age" of 401(k) Investments

“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.

The answer to your question is YES.

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.

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...

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.

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.

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

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

Thanks for posting this though!

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

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.

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.

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

Oh right Chevron 🤣

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.