Should you fear private market assets in your 401(k)? Georgetown Retirement Research says no

The Department of Labor will soon finalize a rule that will meaningfully benefit retirement savers. Originally proposed in March, the rule provides safe harbor for fiduciaries selecting investment options for 401(k)s and other defined contribution plans, thereby expanding access to alternative investments for savers and investors. The Department has received more than 46,000 comments in response to its initial proposal, many asserting the rule is too novel of a step. Yet the Department of Labor is simply allowing America’s main retirement law to work as intended—for workers’ benefit.

The Employee Retirement Income Security Act (ERISA), the fiduciary framework Congress created in 1974, established commonsense standards for private-sector retirement plans. It gave freedom and flexibility to plan sponsors, empowering them to innovate and better serve workers. Yet over the past 50 years, the law has been eroded because of uncertainty, litigation risk, and constant regulatory second-guessing. As a result, too many retirement plan sponsors are now afraid to use tools that can improve plan design and retirement income outcomes, including private market assets.

The proposed federal rule addresses these challenges for 401(k) and other defined contribution plans.  It is principles-based and asset-neutral, setting out six factors—risk-adjusted performance, fees, liquidity, valuation, benchmarks, and complexity—for fiduciaries to consider objectively and document. A fiduciary who follows this process then earns a legal presumption of prudence, allowing them to create new options for........

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