A new proposal could expose 90 million Americans to private equity in retirement accounts, despite trailing S&P 500 returns.
The Department of Labor proposed a rule on March 30, 2026, creating a safe harbor for 401(k) plans to include private equity, private credit, and other alternative assets. The change, prompted by an August 2025 executive order, could impact over 90 million Americans in defined-contribution plans.
Private equity returns have underperformed the S&P 500, with an MSCI index of U.S. private equity funds delivering 5.8% annualized returns from 2022 through Q3 2025, compared to 11.6% for the S&P 500. In 2024, private market funds returned 7.08%, while the S&P 500 gained 25.02%. Critics argue the opacity and illiquidity of private equity introduce unnecessary risk to retirement savings.
The rule could lead to automatic allocations in target-date funds, shifting retirement assets into alternative investments without active participant choice.