Investor Protection

Worker and Investor Advocates Urge DOL to Withdraw Policy Allowing Private Equity Investments in 401(k) Plans

Nineteen individuals and organizations that advocate on behalf of workers, consumers, investors and retirees wrote to Secretary of Labor Eugene Scalia urging withdrawal of the department’s controversial policy opening the door to private equity investments in workplace retirement plans, such as 401(k) plans.

The groups criticized the DOL policy for being based on a one-sided consideration of the risks and benefits of investing in private equity, containing inadequate protections to ensure appropriate use of private equity in plan investments, and placing too much reliance on often financially unsophisticated plan sponsors to ensure funds’ use of private equity is appropriate and a good value for plan participants.

“Far from providing the benefits touted without any supporting evidence by the private equity industry, these investments are likely to saddle middle-class retirement savers with high costs and lock them into unnecessarily complex investments that underperform publicly available alternatives,” the groups wrote. They urged DOL to withdraw its information letter until it “can conduct a more careful and balanced analysis of the potential risks and benefits of including a private equity component in retirement plan investments.”