New Retirement Investment Rules Raise Concerns for Employers

Proposed regulations aim to open 401(k) plans to private equity and other alternative assets, but employers fear legal risks.

Apr. 10, 2026 at 5:49am

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An extreme close-up of intricate, heavy machinery and equipment used in banking and finance, conveying the complex, industrial nature of the financial system as a metaphor for the challenges employers face in prudently managing workers' retirement accounts.As private equity seeks greater access to workers' retirement savings, employers face growing legal risks in offering alternative investments in 401(k) plans.NYC Today

The U.S. Department of Labor has proposed new regulations that would provide 'safe harbors' for employers to include private equity, private credit, and other alternative investments in workers' 401(k) retirement plans. While the private equity industry has lobbied for these changes, employers remain wary due to concerns about the current turmoil in private credit markets and the potential for costly lawsuits from employees whose retirement savings are put into risky, illiquid investments.

Why it matters

The proposed regulations are seen as a victory for the private equity industry, which has long sought access to the nearly $14 trillion in workers' defined contribution retirement accounts. However, employers, who serve as fiduciaries for these plans, are concerned that adding alternative assets could expose them to legal risks if the investments underperform or become illiquid.

The details

The new Labor Department regulations identify six factors employers must consider when deciding whether to include alternative investments in 401(k) plans: performance, fees, liquidity, valuation, benchmarking, and complexity. The DOL says following these steps will provide a 'safe harbor' from lawsuits. However, the regulations do not ban employee lawsuits, and given the current issues in private credit markets, employers may have a hard time convincing courts they acted prudently in offering these risky investments to workers.

  • In 2024, only 4 percent of defined contribution plans offered alternative investments.
  • In August 2025, President Trump issued an executive order directing federal agencies to develop regulations allowing alternative assets in 401(k) plans.
  • The Labor Department published its proposed regulations on March 30, 2026.

The players

Private Equity Industry

The private equity industry has lobbied hard for regulations that would provide 'safe harbors' to protect employers from being sued for including alternative investments in workers' 401(k) plans.

Employers

Employers serve as fiduciaries for 401(k) plans and must make investment decisions that are in the best interest of their employees. They have been reluctant to include alternative assets due to concerns about legal risks.

Department of Labor

The U.S. Department of Labor has proposed new regulations intended to provide a 'safe harbor' for employers who choose to include private equity, private credit, and other alternative investments in 401(k) plans.

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What they’re saying

“Employers are fiduciaries, which means they must make decisions about retirement investments that are in their employees' best interest. They must be prudent in curating a menu of retirement plan options for their workers.”

— Eileen Appelbaum, Author

“The new regulations do not ban employee lawsuits; only Congress can do that. And given widespread publicity about private equity's travails and the illiquidity of semi-liquid private credit funds, an employer might have a difficult time persuading a court that it was prudent and acting in the best interest of employees when it put their retirement savings into private market investments.”

— Eileen Appelbaum, Author

What’s next

The proposed Labor Department regulations are currently open for public comment before being finalized.

The takeaway

The new rules aim to open the door for private equity and other alternative investments in 401(k) plans, but employers remain wary of the legal risks involved. The current turmoil in private credit markets and the lack of a complete ban on employee lawsuits could make it difficult for employers to confidently offer these risky, illiquid investments to workers counting on a secure retirement.