The Rosenbaum Law Firm P.C. Blog

Something meaningful is happening in the retirement plan world, and it has nothing to do with another round of Roth versus pre-tax debates. Some of the biggest names in private markets — Blackstone, Apollo, and Ares — are making a concerted push to bring private equity and private credit into U.S. retirement plans. Not just pensions. Not just endowments. 401(k) plans.

That alone should make plan sponsors, advisers, and participants pause. For decades, 401(k)s lived in a relatively narrow investment universe. Public stocks, public bonds, mutual funds, target-date funds. Predictable. Familiar. Now that universe is starting to stretch.

What’s Actually Being Proposed

Despite the headlines, this isn’t about letting participants click a button and buy private equity alongside their index fund. The structure being discussed is far more controlled. Private market exposure would live inside professionally managed account programs, where advisers — not participants — decide whether private assets belong in a portfolio.

That distinction matters. This is not a free-for-all. It’s a model where private markets become one component of a broader strategy, typically for participants with long time horizons and appropriate risk profiles. In theory, that adds a layer of protection. In practice, it shifts more responsibility onto advisers and plan fiduciaries.

Why Private Markets Are Suddenly So Attractive

The pitch is simple and seductive. Private equity and private credit are often described as offering diversification beyond traditional stocks and bonds. Proponents argue these investments may deliver returns that don’t move in lockstep with public markets, especially over long periods.

There’s truth there. Institutional investors have used private markets for years.

But there’s a reason those assets rarely showed up in 401(k) plans. Private investments can be illiquid, complex, difficult to value, and more expensive. None of that disappears just because the asset is wrapped inside a managed account. Complexity doesn’t vanish — it just gets outsourced.

Why This Is Happening Now

This push didn’t appear overnight. Policymakers and regulators have been signaling for years that alternative investments may be permissible in defined contribution plans if fiduciaries follow a prudent process. At the same time, the retirement industry is under constant pressure to innovate.

With trillions of dollars sitting in 401(k) plans, private market firms see an opportunity that’s impossible to ignore. For them, this isn’t about ideology. It’s about access to capital. For plan sponsors and participants, the question is whether innovation actually improves outcomes or simply adds another layer of risk.

The Fiduciary Reality Check

This is where enthusiasm needs to slow down.

ERISA doesn’t ban private markets. But it demands prudence, diligence, and a relentless focus on participants’ best interests. Introducing private assets — even indirectly — raises real fiduciary questions.

Are fees reasonable and transparent? How is liquidity handled for loans, distributions, and rollovers? What happens during market stress when pricing is unclear? Do participants understand what exposure they actually have?

Private markets aren’t inherently bad investments. But they are less forgiving when governance is sloppy. Plan sponsors can’t hide behind big names or glossy presentations. If something goes wrong, fiduciaries still own the decision.

What This Means for Most 401(k) Plans

Despite the noise, most plans are not about to overhaul their investment menus. This is not a tidal wave. It’s a measured rollout likely limited to larger plans, managed account users, and participants with long investment horizons.

But even if a plan never adopts private market exposure, this trend still matters. It signals that the traditional boundaries of 401(k) investing are loosening. That has implications for adviser responsibility, fiduciary liability, and participant expectations going forward.

Once the door opens — even a crack — it rarely closes.

The Bottom Line

The push by private market giants into the 401(k) space is a reminder that retirement plans evolve alongside markets and regulation. Innovation can be healthy. But retirement plans aren’t laboratories for financial experimentation.

Every change should be judged by one standard: does it meaningfully improve retirement outcomes without exposing participants to risks they don’t understand or can’t afford?

Private markets may eventually earn a place in defined contribution plans. Or they may prove too complex for broad adoption. Either way, plan sponsors and advisers shouldn’t be swayed by brand names alone.

In the 401(k) world, process still matters more than promises.

One of the first people I met at Stony Brook was a kid I’ll call Avi. We met at orientation, became friends, and for two years were even suite mates. At the time, he was just another college friend. It wasn’t until much later—long after graduation—that I understood what the real dynamic was. Avi was deeply competitive with friends and quietly jealous of other people’s progress. Back then, I didn’t have the language for it. Years later, I did: narcissism.

After college, our lives went in different directions. I went on to law school. Avi took five years to graduate and eventually became a teacher. Years later, we reconnected on Facebook, and that’s when everything crystallized. Every positive post I shared was met with a jab. Why didn’t my kids go to Hebrew day school? Why didn’t we keep kosher? With narcissists, nothing exists in a vacuum. Everything is filtered through their own insecurities. They don’t celebrate others; they measure themselves against them.

When political disagreements surfaced, things escalated. And instead of getting past political differences, Avi did what narcissists often do when challenged—he defriended me. It was abrupt, petty, and revealing. Years later, he tried to reconnect, but I declined. I didn’t need that energy in my life. Cutting off negativity isn’t bitterness; it’s clarity.

I’ve spoken openly about my own struggles working at law firms. For a long time, I thought partnership was the ultimate goal. Eventually, I realized it wasn’t for me—unless I built my own firm. And that realization brought peace.

Here’s the contrast that matters. My wife has been at her firm for three years, and she recently became a partner. I’m incredibly proud of her. Truly happy for her—maybe even happier than she is. It wasn’t my path, but it was hers.

That’s graciousness. Understanding that someone else’s success isn’t a verdict on your own life. Narcissists can’t do that. But the rest of us can choose better.

Chief Justice John Marshall famously wrote in McCulloch v. Marylandthat “the power to tax is the power to destroy.” In today’s retirement plan business, I’d argue there’s a modern parallel: the power to assign a financial advisor to a particular Pooled Plan Provider (PPP) can be the power to get you fired.

Trust is everything in this business. Advisors hand over their clients, their reputation, and their livelihood to providers they assume are acting in good faith. When that trust is misplaced—especially in the PEP space—the consequences can be brutal. Pick the wrong PPP, or worse, one aligned with an unscrupulous TPA that has its own conflicts, and you may find yourself suddenly unnecessary.

That’s why the current PEP landscape sometimes feels like the TV show Survivor. Everyone smiles. Alliances are formed. And all the while, you’re just trying to make sure you don’t get voted off the island.

I know this from experience. I worked for years on a Multiple Employer Plan as a plan fiduciary and sponsor, alongside an advisor, trying to build something meaningful and sustainable. Then one advisor decided the plan should be converted to a PEP and expected me to “volunteer” to give up my fiduciary role—for nothing. That didn’t happen. And it never should.

Any transition—MEP to PEP or otherwise—has to preserve existing interests, roles, and value. If it doesn’t, someone is getting squeezed out, and it’s usually not the provider with the marketing budget.

The lesson is simple. Before signing onto any PEP arrangement, consult with ERISA counsel. Make sure assignment rights, fiduciary roles, and economic interests are clearly defined and protected. Because in this business, the wrong deal doesn’t just hurt—it can end your seat at the table.

Every few years, a new investment trend arrives with the same promise: higher returns, innovation, and the fear of being left behind. Bitcoin is the latest example, and while it may have a place in speculative portfolios, its volatility should give every 401(k) plan sponsor serious pause.

Plan sponsors are not venture capitalists. Under ERISA, their job isn’t to chase headlines or experiment with emerging assets. It’s to act prudently and in the best interests of participants—many of whom have limited investment knowledge and depend on their retirement savings for future income.

Bitcoin’s price swings are extreme, even by equity market standards. Double-digit gains and losses in short periods are not uncommon. That kind of volatility may be tolerable for investors who understand the risks and can afford to lose capital. For retirement plan participants—especially those nearing retirement—it can be devastating.

Sponsors also need to consider participant behavior. Even if Bitcoin is offered as a small, self-directed option, market hype can drive poor decision-making. Participants tend to buy high, sell low, and panic during downturns. When that happens inside a 401(k), the sponsor doesn’t get to shrug and say, “They chose it.” Fiduciary responsibility doesn’t disappear because an investment was optional.

Then there’s the litigation risk. Courts and regulators have made it clear that plan fiduciaries must carefully evaluate investment suitability. When a volatile, speculative asset is added to a retirement plan, sponsors should expect that decision to be second-guessed—especially after a market crash.

Bitcoin may be innovative. It may be fascinating. But innovation is not a fiduciary defense. For most 401(k) plans, stability, diversification, and long-term retirement security still matter more than chasing the next financial trend.

PEPs were sold to the retirement plan industry as the answer to everything—lower costs, better governance, and less fiduciary risk for employers. What doesn’t get enough attention is the new layer of conflicts that PEPs can introduce, especially when the same small circle of providers controls too much of the operation.

In many PEP arrangements, the Pooled Plan Provider, the TPA, the recordkeeper, and sometimes even the investment manager are economically tied together. That doesn’t automatically violate ERISA, but it should immediately raise fiduciary eyebrows. When oversight and execution live under the same roof, independence becomes a fiction.

Conflicts show up in subtle ways. Provider selection becomes “preferred” rather than prudent. Fees get justified as bundled efficiencies rather than benchmarked against the market. Advisors are told the arrangement is turnkey, while critical decisions are made without meaningful input. And when something goes wrong, accountability becomes a game of finger-pointing.

The danger for plan sponsors and advisors is assuming that PEP status magically eliminates fiduciary responsibility. It doesn’t. ERISA still requires a prudent process, and conflicts of interest are exactly the kind of issue plaintiff attorneys love to exploit. A PEP with conflicted providers isn’t safer—it’s riskier, because problems can scale quickly across dozens or hundreds of adopting employers.

For advisors, conflicts can be existential. If the PPP controls advisor assignment and also benefits from internal provider relationships, loyalty may run to the platform, not the advisor who brought the business.

PEPs can work. But only when conflicts are disclosed, managed, and monitored—not ignored. In the rush to scale, providers should remember that efficiency never excuses self-interest, and trust is the one asset a PEP can’t afford to lose.

If there’s one thing plan sponsors should never forget, it’s this: innovation doesn’t suspend fiduciary responsibility. With all the recent buzz about private equity, private credit, and other alternative investments creeping into 401(k) plans, regulators are reminding the industry that ERISA still runs the show.

The Department of Labor is working toward clearer guidance on how fiduciaries evaluate and monitor alternative investments inside defined contribution plans. That timing is no coincidence. As Wall Street pushes more complex products into retirement plans, the DOL wants to make sure plan sponsors don’t confuse “permitted” with “prudent.”

Alternative investments are not illegal under ERISA. They never were. But ERISA requires a disciplined process: understanding fees, risks, liquidity, valuation methods, and how an investment fits the needs of the participant population. That burden doesn’t disappear because a fund has a famous name or because it’s wrapped inside a managed account.

For plan sponsors, this is where trouble can start. Alternatives often come with higher fees, limited liquidity, and opaque pricing. If participants can’t easily understand what they own, fiduciaries need to understand it even better. Documentation, committee minutes, and advisor analysis will matter more than ever.

This regulatory focus should also be a warning shot to advisors. Recommending alternatives isn’t about being cutting-edge or trendy. It’s about proving that the decision improves retirement outcomes and not just marketing brochures.

The takeaway is simple. The door to alternative investments may be opening wider, but the fiduciary standard isn’t loosening. If anything, it’s tightening. In the 401(k) world, complexity demands caution—and prudence is still the law of the land.

Some plan sponsors believe that holding committee meetings automatically makes them good fiduciaries. I’ve sat through enough meetings to know that’s not true. A calendar invite doesn’t fulfill fiduciary duties. What matters is what actually happens in the room—and what gets written down afterward.

Too many committees meet just to meet. They review reports nobody understands, listen politely to providers who never get challenged, and approve recommendations without asking hard questions. Then they congratulate themselves for checking the fiduciary box and move on until the next quarterly meeting. That’s not governance. That’s theater.

ERISA doesn’t require perfection, but it does require process. A good committee meeting involves engagement. Why are fees structured this way? Why is this fund still on the lineup? Why hasn’t participation improved? Why are forfeitures being used—or not used—in a particular manner? Silence is not prudence.

Documentation matters just as much as discussion. If it’s not in the minutes, it might as well not have happened. I’ve seen excellent fiduciary decisions undermined because no one bothered to memorialize the reasoning. Plaintiffs’ lawyers don’t attack intentions; they attack paper—or the lack of it.

Committee meetings should be purposeful, focused, and honest. Sometimes that means uncomfortable conversations. Sometimes it means telling a long-time provider that change is necessary. That’s not disloyalty; that’s fiduciary responsibility.

Good fiduciaries aren’t defined by how often they meet. They’re defined by the quality of the decisions they make when it counts.

There’s a growing belief in the retirement industry that technology equals quality. Sleek dashboards, mobile apps, and automation are valuable, but technology alone doesn’t make a great plan provider. If it did, fiduciary breaches would have disappeared years ago.

Technology processes data efficiently, but it doesn’t question it. A system will happily run nondiscrimination testing on flawed payroll data or produce reports that look compliant on the surface while masking deeper issues underneath. Human judgment is still required to recognize when something doesn’t make sense and to ask the uncomfortable follow-up questions.

Great providers use technology as a tool, not a substitute for expertise. They understand that automation works best when paired with experienced professionals who can interpret results, spot anomalies, and explain implications in plain English. Clients don’t just need reports; they need context.

Over-reliance on technology can also create complacency. When everything appears automated and seamless, plan sponsors may assume compliance is guaranteed. That false sense of security is dangerous. Providers play a critical role in reminding sponsors that fiduciary responsibility can’t be outsourced to a platform.

The most effective providers strike a balance. They invest in technology to improve efficiency and accuracy, while maintaining a culture that values experience, skepticism, and communication. The future of plan services isn’t man versus machine—it’s knowing when the machine needs a human to step in.

One of the hardest parts of being a plan provider isn’t the complexity of ERISA—it’s the incomplete information. Providers are often asked to solve problems without being given the full picture, and that’s a recipe for compliance failures that no service agreement disclaimer can truly fix.

Plan providers rely on plan sponsor data to perform testing, draft amendments, determine eligibility, and spot compliance risks. Controlled group ownership, affiliated service groups, other retirement plans, payroll practices, mergers, acquisitions—none of this is optional context. When sponsors leave out details, whether intentionally or accidentally, providers are forced to work with blind spots that can undermine even the best systems and expertise.

The frustrating reality is that when issues surface years later, providers are often pulled into the blame cycle despite never having the facts needed to prevent the problem. The IRS and DOL don’t audit based on what the provider was told; they audit based on what actually happened. That disconnect creates unnecessary exposure for everyone involved.

Providers need to be proactive in setting expectations. Data-collection processes should emphasize completeness, not convenience. Annual questionnaires shouldn’t feel like busywork; they should be framed as risk-management tools that protect the sponsor and the provider alike. Educating sponsors on why certain questions matter can reduce resistance and improve accuracy.

Plan providers aren’t miracle workers. They can’t fix problems they don’t know exist. The best provider-client relationships are built on transparency, not assumptions. When providers insist on better information up front, they’re not being difficult—they’re doing their job.

I understand why some plan sponsors withhold information from their plan providers. Sometimes it’s embarrassment. Sometimes it’s fear of added cost. Sometimes it’s just not knowing what matters. Unfortunately, in the retirement plan world, hiding information never protects you—it only delays the damage.

Controlled group issues, affiliated service groups, other retirement plans, ownership changes, payroll quirks—these aren’t “nice to know” details. They are foundational facts that determine compliance. When a provider doesn’t have the full picture, they can’t give accurate advice, and the plan sponsor is still the one holding the fiduciary bag.

I’ve seen plan sponsors omit information unintentionally and end up with failed testing, missed coverage issues, or deduction problems that snowballed over multiple years. I’ve also seen sponsors intentionally stay quiet, hoping a problem wouldn’t surface. It always does—usually during an audit, a transaction, or litigation, when the stakes are highest.

ERISA is unforgiving about ignorance. You don’t get a pass because you didn’t mention something. Providers rely on what they’re told. If the information is incomplete, the advice will be too.

Transparency with your plan provider isn’t about trust—it’s about self-preservation. The more they know, the better they can protect you. The less they know, the more exposed you are.

If you want fewer surprises from the IRS, the DOL, or a plaintiffs’ lawyer, stop treating information like a liability. In the long run, secrecy costs far more than honesty ever will.