The landscape of retirement plans is evolving, and one of the more recent developments involves the discussion of private equity and other private market investments within 401(k) plans.
Employers sponsoring defined contribution plans may be hearing about opportunities to add private assets—such as private equity, private credit, or other alternative investments—into retirement plan lineups.
While these investment options may sound appealing, especially when positioned as a way to deliver higher returns or diversification, plan fiduciaries must weigh the evidence and regulatory context carefully.
At Plancorp, where our Corporate Retirement Plans team manages hundreds of 401(k) plans and other employer-sponsored retirement accounts, our stance is clear: private market investments do not belong in a 401(k). Let’s unpack why.
The Regulatory Landscape: Trump vs. Biden Administrations
Private equity investments have always been permitted in 401(k) accounts and other retirement plans under ERISA. However, the tone from the Department of Labor (DOL) has recently shifted.
In August 2025, President Donald Trump signed an executive order aiming to facilitate greater access to alternative investments, including private equity, in 401(k) and other defined-contribution retirement plans.
The order directs the DOL to reexamine its guidance on fiduciary duties concerning alternative asset investments, ensuring that asset allocation funds containing these investments are available to plan participants.
Following this executive order, the DOL rescinded its December 2021 supplemental statement, initially put in place by the Biden administration, which had cautioned fiduciaries against including private equity investments in 401(k) plans. The indicates a shift in regulatory stance, encouraging broader inclusion of private market investments in retirement plans
While the political context has shifted, the fiduciary duties of plan sponsors have not. Under ERISA, fiduciaries are obligated to act prudently and solely in the interest of plan participants.
What Are Private Market Investments?
Private markets include investments in private equity funds, private credit, and other alternative assets that are not traded on public markets like the stock market. Unlike fixed-income or traditional equity funds, these private equity investments are:
- Illiquid – Employees cannot buy and sell at will.
- Opaque – Valuations are less transparent than public securities.
- Expensive – They carry higher fees, management fees, and complex cost structures.
Private equity firms often market these investments as opportunities for higher returns and diversification beyond traditional asset classes. But those potential benefits come with significant trade-offs.
The Risks and Challenges for 401(k) Investors
For retirement savings, especially in defined contribution plans, these risks are amplified:
- Higher fees and management fees: Compared to low-cost index funds, private equity funds impose high fees that erode net returns.
- Illiquidity: Unlike target-date funds or mutual funds in 401(k) plans, private assets cannot be easily converted to cash. Liquidity is critical for retirement accounts.
- Valuation complexity: Private assets lack the daily pricing transparency of public markets, making it difficult for plan participants to understand the true value of their 401(k) accounts.
- Oversight burden: Plan fiduciaries must have the expertise and resources to evaluate and monitor private equity investments—something most employers are not positioned to do.
Fiduciary Duties and the Role of Employers
Plan fiduciaries are held to the highest legal standard under ERISA. They must:
- Ensure investment options are prudent and in the best interest of plan participants.
- Provide reasonable costs compared to available alternatives.
- Monitor investments on an ongoing basis.
Adding private equity investments or other alternative assets creates new layers of complexity and fiduciary risk. Even with recent encouragement from the Department of Labor and the Securities and Exchange Commission’s oversight of private equity firms, the burden remains with employers sponsoring 401(k) plans.
Evidence-Based Investing: Why Private Equity Doesn’t Belong in 401(k)s
Plancorp’s evidence-based investment philosophy emphasizes diversification, transparency, and low costs. When applied to retirement accounts:
- The stock market already offers broad diversification across asset classes and geographies.
- Target-date funds and index-based strategies provide age-appropriate asset allocation and efficient rebalancing.
- Public markets offer liquidity and transparent pricing that private equity cannot match.
Research on private equity performance shows mixed results. After accounting for high fees and illiquidity, private equity funds have not consistently outperformed public markets in a way that justifies their inclusion in retirement savings vehicles.
For 401(k) investors, simplicity and clarity are essential. Adding complex, illiquid, and high-fee investment options undermines retirement readiness rather than supporting it.
Our Fiduciary Recommendation
As fiduciaries ourselves, we believe there is no scenario where private equity investments or other private assets make sense within a 401(k) plan. Employees need straightforward, cost-efficient, and liquid investment options in their 401(k) accounts.
Employers should focus on:
- Offering diversified, evidence-based investment options.
- Keeping management fees low.
- Ensuring plan participants have clear, transparent choices aligned with long-term retirement savings.
Final Thoughts
Private equity firms may present private equity investments as innovative opportunities for retirement plans, but when viewed through the fiduciary lens, the risks outweigh the potential benefits.
For employers sponsoring 401(k) plans, the priority should remain on protecting participants, simplifying investment options, and aligning with evidence-based strategies.
At Plancorp, our Corporate Retirement Plans team helps employers design retirement plans that serve employees’ best interests, comply with ERISA fiduciary standards, and support long-term financial well-being.
If you’re evaluating new investment options for your company’s retirement plan, we can help you navigate the regulatory landscape and stay focused on what matters most: helping your employees build secure retirement savings.
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