Proposed Rule Would Ease Private Equity in 401(k)s

A Labor Department proposal would give employers legal protection for adding private equity funds to retirement plan menus.

Updated on Nov. 7, 2026 in Retirement Planning

Proposed Rule Would Ease Private Equity in 401(k)s

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Would you be comfortable having private equity funds in your own 401(k)?

On March 30, 2026, the Department of Labor proposed a safe harbor rule that would give plan fiduciaries legal protection for adding private equity to 401(k) investment menus. The proposal follows an August 2025 executive order directing the department to reduce barriers to alternative assets in retirement plans.

Why it matters

The private equity industry seeks access to more than $14 trillion held in 401(k) and other defined contribution plans, a shift that would change what ordinary savers can invest in. Critics argue that higher fees and reduced liquidity could weigh on workers' retirement balances.

A private equity evergreen fund has a 3.9% average expense ratio plus 3% to 5% in potential sales charges, compared with 0.40% for the average 2025 equity mutual fund. The median retirement account balance was $106,000 among account holders in 2025, and just over half of American families held retirement accounts.

The players

U.S. Department of Labor

The federal agency that oversees private retirement plans under the Employee Retirement Income Security Act and proposed the safe harbor rule.

Morningstar

An investment research firm that simulated private equity performance inside 401(k) accounts and concluded that semi-liquid vehicles may need liquidity sleeves of up to 40% of assets.

Warren Buffett

The chairman of Berkshire Hathaway, who criticized private equity return calculations at the company's 2019 annual meeting.

The details

The proposed safe harbor would give plan fiduciaries a legal shield when adding private equity to 401(k) menus, provided they follow prescribed evaluation steps. In a simulation modeled on the 2022 downturn, assets in a private equity collective investment trust declined by nearly 40%.

August 2025: An executive order directed the Department of Labor to reduce barriers to alternative assets in retirement plans.
March 30, 2026: The Department of Labor proposed the safe harbor rule.

Roadmap

The proposal builds on ERISA's fiduciary framework by defining a safe harbor for alternative investments in workplace plans. It marks a departure from the traditional emphasis on low-cost, liquid index funds in 401(k) menus.

If the rule is finalized, employers could add private equity options to 401(k) menus, which may carry higher expense ratios than index funds. Workers choosing among these options would need to compare fees and liquidity constraints before allocating retirement savings.

The takeaway

Higher fees and limited liquidity can compound against a retirement balance over decades, so workers should compare expense ratios before choosing alternative funds. Reviewing plan menus during open enrollment helps reveal whether private equity options are offered.