Reply to Private Equity inclusion in 401k / 403b's

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Reply to "Private Equity inclusion in 401k / 403b's"

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[quote=Anonymous]Apparently Trump is on the verge of signing an EO that would allow private equities to be included in defined-benefit plans (e.g., 401(k) and 403(b) plans,) as part of some kind of managed fund. It also says that plan participants [b]should not[/b] allowed to directly access private equity investments. I'm not sure why this isn't at the forefront or every discussion. I've posted here along with the Political Discussion forum but [b]I removed my speculation as to why this is occurring in this post so we can have a discussion strictly about the financial implications here[/b].

I'm all for giving people options and the potential of greater returns but at what cost - increased fees, lack of control, inability to sue, loss of liquidity, long term capital gains tax implications...also what about conflicts of interest? what about if these private companies file for bankruptcy?

Here are a variety of different resources:
https://money.com/trump-401k-private-equity-investment-plan/
https://finance.yahoo.com/news/trump-401-k-overhaul-retirement-121640519.html
https://www.fastcompany.com/91373389/heres-why-trumps-proposed-401k-executive-order-may-be-very-bad-news-for-your-retirement
https://www.cnn.com/2025/06/13/business/private-equity-401k-investing-explained
https://finance.yahoo.com/news/trump-401-k-overhaul-retirement-121640519.html
https://www.forbes.com/sites/hanktucker/2025/07/24/private-equitys-29-trillion-retirement-savings-opportunity-under-trump/

Along with Elizabeth Warren's letter to one of the firms lobbying for this: https://www.banking.senate.gov/imo/media/doc/Warren%20letter%20to%20Empower%20on%20PE.pdf

Finally, the Employee Retirement Income Security Act (ERISA) is a federal law that sets minimum standards retirement and health plans and protections for users. It requires employers to set standard, ensure the fees aren't burdensome and that the investments are prudent - most employers have stayed away from private equity because of this AND because ERISA allows users (i.e., you and I) to sue to ensure that we are getting benefits from our plans. Trump's EO will remove the ability for us to sue or file grievances.  ERISA source = https://www.dol.gov/general/topic/retirement/erisa

And if that's not enough, the S&P said that corporate bankruptcies hit a 4 year high in 2024. I'm concerned about what would happen if our retirement plans are tied up in that. As it stands already, S&P has reported that bankruptcy filings by private equity firms are already up 10% year over year from 2024
https://www.spglobal.com/market-intelligence/en/news-insights/articles/2025/7/us-bankruptcies-flat-for-private-equitybacked-companies-up-overall-in-h1-2025-91526144?utm_source=chatgpt.com
https://www.spglobal.com/market-intelligence/en/news-insights/articles/2025/1/us-corporate-bankruptcies-soar-to-14-year-high-in-2024-61-filings-in-december-87008718[/quote]

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