Trump rule for private equity in 401(k)s gets 40k comments
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The Department of Labor received nearly 40,000 comments on a proposed rule that would help 401(k) plans invest in alternative assets, including private equity and private credit.
- Yes, that is a lot.
State of play: Staffers now will sift through the responses, a process that typically takes months, before finalizing the rule.
The big picture: Thousands of the pro-rule comments mentioned "democratization" of alternative assets, while the American Investment Council shared academic studies arguing that alt assets outperform public benchmarks over long-term horizons.
- Many anti-rule commenters highlighted opaque fees, potential conflicts of interest, and different performance data.
Zoom in: One area where commenters may have an impact is around safe harbor provisions.
- 401(k) plans alrready are allowed to include many alternative assets, but don't because of the massive litigation risk.
- The rule seeks to preempt lawsuits by creating a process-based safe harbor, which basically means that plans are protected so long as they consider certain factors.
- Commenters like SIFMA want the final rule to provide more flexibility, by explicitly stating that "fiduciaries should have discretion to determine whether a particular factor is relevant and should have deference in making this determination."
- CFP Board, on the other hand, argues that all listed factors should be required considerations. It also takes issue with the rule's presumption of prudence, writing: "A plan fiduciary who 'considers' these factors should not benefit from a safe harbor when the plan fiduciary's decision falls outside the range of reasonableness."
The bottom line: President Trump has made it clear what he wants, so expect that comments will inform implementation of the rule rather than determine if the rule will be implemented.
