Most 401(k) plans stick to traditional investment vehicles like publicly traded stocks and bonds. However, private equity historically reserved for institutional and wealthy investors — is now being considered for inclusion in workplace retirement accounts. This shift has sparked both excitement and concern as financial companies aim to “democratize” access to private investments.

The Growing Push to Expand Access

Empower, a major player in the retirement services industry, recently made headlines by offering employers the option to include private equity in 401(k) plans. Empower CEO Ed Murphy likened this move to the revolutionary introduction of 401(k) accounts decades ago, which opened the public markets to millions of Americans.

Murphy argues that the investing landscape has shifted. Today, fewer companies are publicly traded compared to 30 years ago, and capital is increasingly flowing into private markets. The global private equity market now boasts around $13 trillion in assets. According to Murphy, excluding private investments from retirement plans limits access to innovative and high-growth companies.

Lawmakers Raise Red Flags

Despite Empower’s optimism, not everyone is convinced this move benefits retirement savers. Senator Elizabeth Warren, a leading voice on financial regulation, expressed deep concern over the inclusion of private equity in 401(k) plans. As the top Democrat on the Senate Banking Committee, Warren sent a detailed letter to Empower questioning their motivations and risk management strategies.

In her response, Warren emphasized that private investments tend to be more expensive, opaque, and volatile than public securities. She questioned whether Empower’s plan truly protects investors or mainly benefits private equity firms. Warren also criticized Empower for failing to disclose details about fees, partnerships, and incentive structures.

Empower’s Guardrails and Disclosures

To address some of these concerns, Empower clarified that only managed account participants would gain access to private equity options. Managed accounts involve professional oversight to tailor investments to an individual’s goals, time horizon, and risk tolerance.

Private equity exposure would be part of a broader collective investment trust (CIT), not a standalone asset. The CIT would also include publicly traded investments. Empower emphasized that this structure adds layers of oversight and adheres to the fiduciary standards set by ERISA (Employee Retirement Income Security Act).

“We believe that professionally managed solutions are the best way to offer private assets, as they offer an additional layer of analysis and fiduciary protection,” Empower stated in an email.

A Delicate Balancing Act

Murphy insists Empower is not advocating unregulated access to complex investments. “Private markets investing is not for everyone,” he wrote. Instead, he sees the initiative as a carefully monitored opportunity to expand financial access, especially at a time when public market options are shrinking.

Still, critics worry that even with safeguards, introducing private equity to workplace retirement plans could expose everyday investors to excessive risk. The lack of transparency, higher fees, and unpredictable returns associated with private investments could erode retirement savings rather than enhance them.

Ongoing Oversight and Regulatory Attention

Warren’s pushback has not ended. She gave Empower until July 25, 2025, to respond in detail to her follow-up questions about their private equity strategy. Her concerns signal that regulatory scrutiny will continue as retirement plan providers explore alternative investment options.

Meanwhile, the Securities and Exchange Commission’s Office of the Investor Advocate has announced its intention to study the broader implications of including private assets in retirement plans. In fiscal year 2026, the agency plans to examine how such investments affect retail investors and whether stronger protections are needed.

Is Private Equity the Future of Retirement Investing?

The question remains: Do private investments belong in your 401(k)? The answer depends on your perspective. Supporters argue that private equity can offer new opportunities for growth and diversification. Critics fear it could put retirement savers at unnecessary risk.

At present, most employers do not offer private equity in their 401(k) plans. But that could change as financial service providers continue to develop professionally managed vehicles for alternative investments.

What Retirement Savers Should Know

If your employer ever offers private equity through a managed account, here are some key points to consider:

• Risk Profile: Private investments can be less liquid, more volatile, and harder to value than public securities.
• Fees: Management fees tend to be higher with private equity.
• Transparency: Disclosures may be limited compared to public investments.
• Fiduciary Oversight: Ensure that any private investment is professionally managed and subject to ERISA standards.

Final Thoughts

The inclusion of private equity in 401(k) plans marks a potential turning point in retirement investing. While the promise of expanded access is appealing, the risks demand careful consideration. Regulatory oversight, fiduciary safeguards, and investor education will play a crucial role in shaping the future of this evolving investment option.

As the debate continues and more details emerge, retirement savers should stay informed and consult financial professionals before navigating this new frontier.