Private Markets In 401(k)s: A New Era In Retirement Investing
New regulatory compliance challenges emerge
On Thursday, August 7, an executive order was signed permitting alternative assets such as private equity, cryptocurrencies, and real estate to be included in workplace retirement plans. This policy change significantly broadens the scope of permissible investments, but it also raises important questions for those responsible for ensuring regulatory compliance. The inclusion of these complex and less transparent asset classes in retirement portfolios will require careful oversight, robust risk management practices, and close attention to evolving legal and fiduciary obligations.
The following blog puts this development in perspective and offers insight on a practical path forward to help plan sponsors and compliance teams stay compliant.
A major shift is underway in the U.S. retirement landscape. For decades, 401(k) plans have been largely confined to public market investments like stocks and bonds. But that is changing. Asset managers and policymakers are now opening the door to private market exposure, including private equity, private credit, and real estate, within retirement accounts.
This trend could provide new opportunities for diversification and growth, but it also brings a wave of complexity and risk that both plan sponsors and compliance professionals must be ready to address.
Blue Owl and Voya Lead the Way
According to a recent article in The Wall Street Journal, one of the most notable developments is the partnership between Blue Owl and Voya, aimed at launching private-market offerings within target-date funds by late 2025. These funds, a default option in many employer-sponsored retirement plans, could soon include allocations to private credit and real estate investments. The $12.4 trillion 401(k) market is an attractive entry point, but the expansion raises concerns about fees, liquidity, and valuation transparency.
Policy Tailwinds from Washington
This momentum is also building at the federal level. Reports suggest that a new executive order from the Trump Administration is in development, instructing the Department of Labor and the SEC to create guidelines that facilitate private investment options in 401(k) plans. If enacted, this directive could unlock access to trillions more in retirement assets. However, it also introduces heightened compliance demands. Fiduciary duties under the 1974 Employee Retirement Income Security Act (ERISA), suitability assessments, valuation standards, and legal liability all become more complex when private investments enter the picture.
What is ERISA?
A federal law that sets minimum standards for most private-sector retirement and health benefit plans. ERISA helps ensure that employees receive the benefits they have been promised, and that these benefits are managed responsibly, with clear disclosures and strong protections in place.
Compliance Risks on the Rise
While private markets offer long-term growth potential, they come with risks that do not typically exist with traditional 401(k) investments. Here are the key challenges compliance teams must prepare for:
- Valuation Transparency – Private equity and credit are not priced daily, making it harder to track value and ensure fair participant allocations.
- Liquidity Issues – Private assets are harder to sell, which can conflict with participants needing access to their money, especially near retirement.
- Fiduciary Risk – Plan sponsors must show that investments are prudent, fees are fair, and there are no conflicts of interest, as required by ERISA.
- Limited Surveillance – Private securities often trade outside traditional systems, making it tough to spot hidden transfers or insider-related activity.
- Complex Recordkeeping – Tracking and reporting private assets requires different processes and timelines, increasing the need for strong audit-ready records.
How StarCompliance Can Help
As private market investments become a more common feature in 401(k) plans, ensuring they stay within regulatory guardrails is critical. Star’s Private Investments Compliance Solutions give firms the tools to manage this growing complexity with confidence. Employees can easily declare their private investments, helping firms maintain transparency and oversight from day one.
Investment requests and ongoing updates are handled efficiently to ensure continued compliance and alignment with fiduciary responsibilities:
- Streamlined workflows: enable rapid processing of pre-clearance requests
- Supervision: Configure review workflows route requests through designated approval channels
- Books and records: Employees can easily update investment details when changes occur, maintaining ongoing transparency and oversight
The Bottom Line
Private-market exposure in 401(k) plans is no longer a theoretical idea. It is actively being implemented, with support from both asset managers and federal policymakers. For firms managing or advising retirement plans, this evolution introduces a new layer of responsibility.
With Star, you can stay ahead of the curve. As retirement investing expands into new territory, Star helps you navigate it with clarity and confidence.
To learn more about Star’s future-ready Private Investments Compliance Solutions, schedule your personalized demo here.
