Just read the umpteenth article on the DOL's investment Selection Proposal. In this case, Congressional Democrats become State Attorney Generals and Pennsylvania's Department of Labor and Industry have sent two letters opposing this proposal. As in all things politics, it is difficult to know what is real and what is smoke and mirrors. Here are my two cents, or is it now 63 cents with inflation?
The proposal addresses private equity, private credit, and other alternative investment classes that have been used by pensions and other institutional investors for decades. Should these be included in retirement plans and what is the impetus for this push right now?
I tend to be skeptical when a "NEW! MUST HAVE!" innovation hits the 401k market and I think my skepticism is warranted, but I would separate the proposal or issue into two questions:
Is the private markets industry lobbying for broader access to 401(k) assets?
Does that automatically mean private equity and private credit are inappropriate for retirement plans?
The answer to the first is almost certainly yes. The answer to the second is much less clear.
The proposal itself is technically asset-neutral. The Department of Labor and industry groups such as the American Retirement Association have emphasized that the rule does not require fiduciaries to offer private equity, private credit, crypto, or any other specific asset class. Instead, it creates a process-oriented framework focused on performance, fees, liquidity, valuation, benchmarking, and complexity.
However, it is difficult to ignore the broader context.
This proposal did not arise in a vacuum. It followed a 2025 executive order specifically aimed at "democratizing access to alternative assets," and many legal and industry observers have noted that the practical effect would be to make fiduciaries more comfortable including private market exposure in defined contribution plans.
The more interesting question is why the push is occurring now.
For decades, private equity and private credit were primarily the domain of pensions, endowments, sovereign wealth funds, and wealthy accredited investors. Today, however, the private markets industry faces several structural challenges:
Public pension allocations are already very high.
Many institutional investors are overallocated to private assets because distributions have slowed.
Fundraising has become more difficult.
The defined contribution market represents trillions of dollars of largely untapped capital.
From the industry's perspective, 401(k) plans are the largest remaining pool of retirement assets that has not been fully penetrated.
That does not mean firms are trying to "dump bad assets" into 401(k)s. In fact, many private equity firms would strongly object to that characterization. Their argument is that public investors have been excluded from growth opportunities that institutions have enjoyed for years because companies remain private longer. Supporters argue that a modest allocation to private assets could improve diversification and long-term returns.
But my concern is around the central fiduciary issue.
Private markets have characteristics that create potential conflicts between what is good for asset managers and what is good for participants:
Limited liquidity.
Complex fee structures.
Subjective valuations.
Difficult benchmarking.
Less transparency.
Greater reliance on manager skill.
Ironically, those are the exact six areas that the DOL proposal identifies as requiring fiduciary analysis.
For my plan committees or if I were addressing a prospective client's plan committee, my concern would not be that private equity or private credit are inherently imprudent. Large pension plans have used them for decades.
My concern would be whether the average 401(k) fiduciary truly possesses the expertise to evaluate them.
A committee can compare a large-cap index fund to another large-cap index fund relatively easily. Comparing a private credit strategy with quarterly valuations, lockups, side pockets, leverage, and bespoke fee arrangements is an entirely different exercise. This is particularly true with smaller plans. The Investment Committee might only meet once a year for one hour. Can we really do justice to the private credit topic while discussing other investments and other retirement plan topics?
That is why I find the political debate somewhat misleading. Critics often frame this as "Wall Street greed," while supporters frame it as "expanding investor choice." Both contain some truth.
The more important question is whether the average small and mid-sized plan sponsor can prudently evaluate these investments. For many committees, the answer today is probably no.
The Parting Glass
As a 401(k) advisor, my thoughts are whenever a new asset class is being aggressively marketed to retirement plans, fiduciaries should ask not only "What benefit does this provide participants?" but also "Who benefits most from opening this market?" If the primary beneficiaries appear to be the manufacturers of the product, that is a signal to slow down and perform even more rigorous due diligence.
That does not prove private markets are inappropriate. It does suggest that fiduciaries should approach the current enthusiasm with a healthy degree of skepticism rather than assuming that greater access automatically means better outcomes for participants.