By Elijah Nicholson-Messmer
President Donald Trump promised last year to "democratize access" to private markets and cryptocurrency for 401(k) investors. Now, with a proposed rule from the Labor Department moving forward, that promise is closer to reality.
There's just one problem. The workers and retirees it's meant to help are pushing back in large numbers, according to a Barron's analysis of public comments on the proposal.
The rule would make it easier for companies and organizations to include alternative investments in 401(k)s or other workplace retirement plans. The advisors of those plans, known as fiduciaries, would receive a legal "safe harbor" if they include such alternatives. That would help shield them from potential lawsuits over the investments, as long as fiduciaries meet specified selection requirements.
The rule is controversial because private equity and other alternatives tend to be highly opaque and carry high fees. They have a checkered performance history and can be difficult to sell. All of it makes them ill-suited for retirement accounts, opponents argue.
Supporters, including asset managers and private equity firms, say the change would give individual investors access to opportunities already available to large institutions such as pension funds and universities.
Here's a look at how the comments break down and why there's so much opposition.
What does the opposition mean for the rule's future? Not much, experts say.
"The volume and substance of comments matter, but not necessarily in the way many people assume," says Lisa Gomez, who led EBSA during the Biden administration. The department isn't conducting a "popularity contest." The key question is "whether the comments raise substantive legal, operational, economic, or policy concerns that the agency must consider and address."
Still, the Labor Department received no shortage of substantive comments. Alongside individual savers, organizations including Morningstar and the CFP Board submitted detailed critiques. In its letter to the Labor Department, Morningstar said that the rule's safe harbor carveout "allows fiduciaries to rely on claims from parties with the strongest commercial interest in the investment's selection."
Those parties, including asset managers like BlackRock, "have a structural incentive to increase the distribution of higher-fee products, " Morningstar said.
BlackRock has said that its retirement products, including private assets, are about much more than fees. In his 2026 annual letter to investors, BlackRock CEO Larry Fink said that "private markets offer the potential to enhance retirement outcomes for participants when thoughtfully and responsibly incorporated into a professionally managed target-date fund."
Last year, BlackRock partnered with Great Gray Trust Company to launch Panorix Target Date Series -- a group of target-date funds structured as collective investment trusts or CITs , incorporating BlackRock's private investments. The CITs carries an average expense ratio of 0.42%, about 50% higher than the industry average for target-date funds. The exact allocation to private markets varies, but BlackRock has said that it sees the traditional 60/40 split between equities and fixed income changing to a 50/30/20 split in the future, with private markets making up a fifth of the allocation.
Fee-intensive private markets are far more lucrative than traditional asset management, generating roughly four times the profit per billion dollars of assets under management (AUM), according to PricewaterhouseCoopers. By 2030, they're projected to account for more than half of industry revenue, despite representing just 13% of total AUM.
Those fees will play a decisive role in determining whether private market investments enhance or hinder returns for 401(k) participants. Although adding private assets to a target-date fund may provide a modest boost to overall performance, retail investors would bear an additional layer of fees associated which could erode real-world returns, according to Hal Ratner, head of research at Morningstar Investment Management.
Fee evaluation is critical when selecting private investments. Yet the proposed rule does little to require it. In a letter to the Labor Department, the CFP Board warned that the proposal's prescribed process and safe harbor "create a serious risk that prudence will be reduced to a check-the-box exercise."
"Without revision, the proposal could facilitate the entry of more complex, higher-cost, and less liquid investments into retirement plans without adequate justification -- potentially exposing participants to greater risk while limiting the remedies available to them," the CFP Board said.
Whether those critiques result major revisions remains to be seen. A Labor Department spokesperson told Barron's that EBSA staff are "hard at work reviewing all comments to craft the best possible investment selection rule."
The Labor Department will need to carefully consider the concerns raised and clearly justify its reasoning in any final rule, but there is little indication that it will not issue a final rule in some form.
"I think it's fair to recognize that there is likely significant pressure within the administration to move this rule-making forward and publish a final rule," Gomez says.
Write to Elijah Nicholson-Messmer at elijah.nicholson-messmer@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
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June 16, 2026 02:45 ET (06:45 GMT)
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