The Trump administration has taken a significant step toward allowing American retirement savings to be invested in private equity, cryptocurrencies, and other alternative assets, reversing restrictions introduced under the Biden administration.
On Tuesday, the U.S. Department of Labor rescinded 2021 guidance that had discouraged 401(k) plan sponsors from investing in the leveraged buyout sector. The move is part of President Donald Trump’s broader push to give private investment firms access to the vast 401(k) market — a shift that could channel hundreds of billions of dollars into the private equity industry.
The 401(k) system, which governs employer-sponsored retirement plans, is regulated under a 1974 federal law. The 2021 Biden-era letter had created uncertainty among plan sponsors, raising concerns about increased scrutiny and potential litigation over such investments. This replaced earlier guidance issued in the final months of Trump’s first term, which had encouraged greater diversification into private markets.
“Instead of allowing Washington bureaucrats to call the shots, we believe plan fiduciaries should decide which retirement investment options are best for hardworking Americans,” said U.S. Labor Secretary Lori Chavez-DeRemer.
Supporters of the change argue it could enhance returns and strengthen retirement security. Swiss private capital firm Partners Group, a strong proponent of the policy shift, had previously urged the Labor Department to withdraw the Biden-era restrictions. In a letter sent in May, the firm argued that giving 401(k) holders access to private equity could “materially improve retirement security for millions of working families” and highlighted the growing role of private markets in the U.S. economy.
The decision is expected to draw both support and criticism, with proponents touting potential benefits from diversification, while opponents warn of the risks of exposing retirement savings to less liquid and more complex investments.
