Sen. Elizabeth Warren (D-Mass.) has raised concerns about a major retirement plan provider’s intent to offer private equity and credit investments within 401(k) accounts.
What Happened: In a letter obtained by Axios, Warren, the top Democrat on the Senate Banking Committee, addressed Empower's CEO, probing the company's rationale for introducing private equity into defined contribution plans.
She asked how the firm determined this move aligns with the best interests of its clients, requested details on investment allocations, and inquired about any legal advice the firm received.
Empower has not yet rolled out the program but has noted plans to include investor safeguards such as fee reductions and liquidity measures.
Why It Matters: Supporters of the shift argue it could offer everyday investors access to high-return opportunities traditionally reserved for wealthy individuals and institutions. The concept gained traction under the Trump administration as a way to democratize investment options.
However, critics like Warren argue it could jeopardize retirement savings due to private equity’s complex fee structures, limited transparency, and uneven performance record. She also highlighted emerging risks in the private credit market.
In March, reports emerged stating that President Donald Trump is considering a new executive order that would push U.S. agencies to let private equity firms tap into the country’s huge 401(k) savings pool, which is worth almost $9 trillion. Private equity firms have long pushed for regulatory changes that would enable this.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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