DOL's 401(k) private equity rule draws 47,000 comments, most opposed

The Labor Department's push to open 401(k) plans to private equity and alternative assets has generated one of the largest public comment responses in the agency's history — and most of it is negative.

The proposed rule, published March 30 by the Employee Benefits Security Administration, would create a legal "safe harbor" for plan fiduciaries who include private equity, cryptocurrency, and other alternative investments in workplace retirement plans. Meeting six specified criteria — performance, fees, liquidity, valuation, benchmarks, and complexity — would shield fiduciaries from lawsuits over those investments, even if they later lose money.

"The volume and substance of comments matter, but not necessarily in the way many people assume," said Lisa Gomez, who led EBSA during the Biden administration. The department is not conducting a "popularity contest," she said. The key question is "whether the comments raise substantive legal, operational, economic, or policy concerns that the agency must consider and address."

By the June 1 deadline, 47,103 comments had been submitted — far exceeding the few dozen a typical EBSA rule receives, according to a Barron's analysis. Roughly 75% opposed the proposal in some form. The single largest campaign, accounting for more than 28,000 submissions, argued the rule would expose workers to higher fees and greater risk. Another 13,000 comments, organized by different advocacy groups, supported the measure. Among more than 4,000 organic submissions — those not part of form-letter campaigns — more than 9 in 10 individual commenters voiced opposition.

The rule targets the roughly $14 trillion 401(k) market, which has remained largely closed to private equity and other illiquid assets. Current ERISA fiduciary standards, unchanged since the 1970s, have discouraged plan sponsors from adding alternatives because of litigation risk. The safe harbor is designed to remove that barrier.

The fee question

Critics argue the proposal's structure could undermine the protections it claims to offer. Morningstar, in its comment letter, said the safe harbor "allows fiduciaries to rely on claims from parties with the strongest commercial interest in the investment's selection" — namely asset managers such as BlackRock Inc., which have "a structural incentive to increase the distribution of higher-fee products."

BlackRock has pushed back on that characterization. In his 2026 annual letter, Chief Executive Officer Larry Fink said "private markets offer the potential to enhance retirement outcomes for participants when thoughtfully and responsibly incorporated into a professionally managed target-date fund." Last year, BlackRock partnered with Great Gray Trust Co. to launch the Panorix Target Date Series, a group of collective investment trusts that incorporate private investments. The funds carry an average expense ratio of 0.42%, roughly 50% higher than the industry average for target-date funds.

The fee differential matters because private markets generate roughly four times the profit per billion dollars of assets under management as traditional asset management, according to PricewaterhouseCoopers. By 2030, private markets are projected to account for more than half of industry revenue despite representing just 13% of total AUM.

The CFP Board warned in its letter that the proposal's prescribed process and safe harbor "create a serious risk that prudence will be reduced to a check-the-box exercise." Without revision, the board said, the rule "could facilitate the entry of more complex, higher-cost, and less liquid investments into retirement plans without adequate justification."

What happens next

A Labor Department spokesperson told Barron's that EBSA staff are "hard at work reviewing all comments to craft the best possible investment selection rule." The final rule is expected before the end of the year.

The safe harbor's placement of examples — included in the regulatory text rather than in a preamble or separate guidance — has drawn particular attention. Industry groups including the Investment Company Institute and the ERISA Industry Committee have urged the department to clarify that the examples are illustrative, not prescriptive. "There are trade-offs depending on where examples are included," said Elena Barone Chism, deputy general counsel for retirement policy at ICI.

The Supreme Court's 2024 Loper Bright ruling, which eliminated the Chevron doctrine requiring judicial deference to agency interpretations, adds another layer of complexity. "Here it seems like some of the examples are designed so that the courts understand the reasoning," said Kevin Walsh, a principal at Groom Law Group. "That's actually helpful for them in persuading a court that the underlying principle itself is valid."

Only 1 in 4 plan fiduciaries say they are likely to recommend alternative investments in workplace retirement plans, according to market research firm Escalent. Even if the rule is finalized, adoption may be slow — but the regulatory door that has kept private equity out of 401(k)s for decades is closer to opening than it has ever been.

This article is for informational purposes only and does not constitute investment advice.