For years, 401(k) plans have been built around familiar investments, such as mutual funds, stocks and bonds. As of late, a shift is underway. Lawmakers and regulators are now exploring ways to let everyday retirement savers invest in private equity, an asset class that’s traditionally been limited to institutions and the ultra-wealthy.

Here’s what’s happening, why it matters and when you might start seeing it in your 401(k).

What is Private Equity?

Private equity (PE) means investing in companies that aren’t traded on the stock market – think growing startups, family-owned businesses or private funds that buy and improve companies. Historically, PE has delivered higher long-term returns, but it also comes with more risk, less liquidity and higher fees.

Recent Regulatory Milestones

• 2020 – The U.S. Department of Labor (DOL) said 401(k) plans can include private equity, but only as part of diversified funds like target-date or balanced funds, not as a direct investment.
• 2021 – The DOL followed up with a warning: plan sponsors need to be careful, since PE is complex and not every plan may be equipped to handle it.
• 2025 – A new executive order directed regulators (the DOL, SEC – and Treasury) to make it easier for retirement plans to include alternative assets such as private equity – and even cryptocurrency.

When Could It Be Offered to Participants?

Don’t expect to see private equity in your 401(k) menu right away. Here’s the likely timeline:

• Late 2025 – Early 2026: Regulators are drafting new guidance and rules.
• 2026–2027: Financial firms start creating funds that include small doses of private equity within diversified portfolios.
• 2027 and beyond: Some large 401(k) plans might begin offering these funds.

Realistically, most savers could see these options around 2026 to 2028, depending on how quickly the rules and products come together.

What It Means for You

The upside:

• Potential for higher long-term returns.
• More diversification, you’re not just tied to public markets.

The trade-offs:

• Higher fees.
• More complex and less transparent investments.
• Money tied up for longer periods.

If you’re a plan participant, you likely won’t have to pick private equity investments yourself, they’ll just be part of a professionally managed fund.

What Employers Should Know

Plan sponsors (the companies that offer 401(k)s) will have to tread carefully. Under ERISA, they must act “prudently,” meaning they must understand how these investments work, evaluate fees and ensure they’re in participants’ best interests. Smaller plans, especially, may wait to see how early adopters handle it.

The Bottom Line

Private equity in 401(k)s is coming, but slowly. Regulators want to give retirement savers access to more opportunities, while keeping protections in place.  At AmericanTCS, we’re closely monitoring these regulatory developments and the evolving guidance from the DOL and other federal agencies. As soon as private equity investment options become available within qualified 401(k) plans, we’ll notify our clients and provide clear guidance on how these changes could impact plan design and participant investment choices.