Key Takeaways
- • The Department of Labor released a proposed rule on Monday that could shield retirement plans offering private assets from lawsuits, following a February executive order from President Trump directing the DOL to open 401(k)s to private assets.
- • The proposed rule faces a 60-day public comment period before a final review by the Office of Information and Regulatory Affairs.
- • The $12 trillion defined-contribution market is presented as a massive pool of capital for private markets, even as major private credit vehicles face record investor redemptions.
- • Investors are seeking to withdraw 11% or more of their funds from certain non-traded retail private credit vehicles, a key test of the liquidity narrative used to pitch private credit to retirement savers.
- • Critics such as the Private Equity Stakeholder Project call the 401(k) push a bailout for struggling private capital, while industry voices argue retail semi-liquid funds and institutional 401(k) channels are different.
Summary
The Department of Labor released a proposed rule on Monday that could protect retirement plans offering private assets from lawsuits. The rule stems from President Donald Trump's executive order of last August, which instructed the DOL to help open 401(k) plans to private assets, with the SEC consulting as one agency. The proposal opens a 60-day public comment period, followed by a final review by the Office of Information and Regulatory Affairs. The timing is notable: the push comes as the biggest names in private credit face record investor redemptions and criticism of their valuation policies and exposure to troubled software companies. SEC Commissioner Mark Uyeda's March 19 speech on the agency's priorities mentioned private credit only once, while calling for private-market access in retirement plans, according to the report.
The $12 trillion defined-contribution market represents a large pool of capital for an industry that some institutional investors have begun to scale back from in private equity allocations. Under ERISA, plan sponsors are fiduciaries, and the standard has historically favored low-cost, liquid structures such as mutual funds. Private fees are substantially higher than those in traditional 401(k) plans, which have been reduced by participant lawsuits. Uyeda described a "disparity" between investors with access to private markets, such as public pension beneficiaries, and private-sector workers in 401(k) plans. The proposed rule outlines six factors fiduciaries must weigh, including liquidity, and acknowledges that younger workers could benefit from an "illiquidity premium."
Liquidity remains the central objection. Hardship withdrawals from Vanguard 401(k) plans reached a record in 2025, with 6% of participants withdrawing early. Industry responses have included packaging private assets within target-date funds and relying on repayments and contributions to meet withdrawals. Jim Baker, executive director of the Private Equity Stakeholder Project, argued the sector's liquidity has been tested in recent weeks, and characterized the 401(k) push as a bailout for private equity and private credit funded by retirement savings. Kevin Walsh of Groom Law said retail semi-liquid evergreen funds use gates to protect long-term investors, and that the 401(k) space is an institutional channel. Jonathan Epstein of the Defined Contribution Alternatives Association said no one proposes adding semi-liquid retail assets directly to retirement lineups. Michelle Capezza of Mintz noted plan sponsors remain cautious even when safe harbors exist. Craig Copeland of the Employee Benefit Research Institute said momentum is unlikely to slow absent a severe event.
The $12 trillion defined-contribution market represents a large pool of capital for an industry that some institutional investors have begun to scale back from in private equity allocations. Under ERISA, plan sponsors are fiduciaries, and the standard has historically favored low-cost, liquid structures such as mutual funds. Private fees are substantially higher than those in traditional 401(k) plans, which have been reduced by participant lawsuits. Uyeda described a "disparity" between investors with access to private markets, such as public pension beneficiaries, and private-sector workers in 401(k) plans. The proposed rule outlines six factors fiduciaries must weigh, including liquidity, and acknowledges that younger workers could benefit from an "illiquidity premium."
Liquidity remains the central objection. Hardship withdrawals from Vanguard 401(k) plans reached a record in 2025, with 6% of participants withdrawing early. Industry responses have included packaging private assets within target-date funds and relying on repayments and contributions to meet withdrawals. Jim Baker, executive director of the Private Equity Stakeholder Project, argued the sector's liquidity has been tested in recent weeks, and characterized the 401(k) push as a bailout for private equity and private credit funded by retirement savings. Kevin Walsh of Groom Law said retail semi-liquid evergreen funds use gates to protect long-term investors, and that the 401(k) space is an institutional channel. Jonathan Epstein of the Defined Contribution Alternatives Association said no one proposes adding semi-liquid retail assets directly to retirement lineups. Michelle Capezza of Mintz noted plan sponsors remain cautious even when safe harbors exist. Craig Copeland of the Employee Benefit Research Institute said momentum is unlikely to slow absent a severe event.
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