Department of Labor Opens Door to Private Equity Investment in 401(K) Plans
June 5, 2020 | R. Robin McDonald | GlobeSt.com
This week the US Department of Labor released an information letter that opens the door for employee defined-contribution retirement plans to include private equity investments.
The letter said fiduciaries of 401(K) or other similar retirement plans would not violate their duties under federal retirement laws solely by offering a managed asset fund with a private equity component as a designated alternative for individual retirement account plans.
But the letter cautioned that private equity investments do present additional considerations for participant-directed individual account plans. In making such a private equity selection for an individual account plan, the information letter said that the fiduciary must engage in “an objective, thorough, and analytical process that compares the asset allocation fund with appropriate alternative funds that do not include a private equity component, anticipated opportunities for investment diversification and enhanced investment returns, as well as the complexities associated with the private equity component.”
