Private Equity in Your 401(k): What Changed in 2026

On March 30, 2026, the Department of Labor proposed the rule that everyone had been waiting on since President Trump’s August 2025 executive order. If you’ve been wondering whether private equity is about to show up in your retirement plan, here is the direct answer: the rule does not require your plan to offer private equity, and it does not put it there automatically. What it does is give employers a defined process to follow if they choose to add it, along with legal protection for following that process.

That distinction matters, but it isn’t the whole story. The more realistic path into your account isn’t a new line item on your investment menu that you can look at and decline. It’s your target-date fund.

Key Takeaways

• The DOL’s proposed rule creates a process-based safe harbor, not a mandate. Employers remain free to say no, and most still are.
• The proposal is asset-neutral. It doesn’t endorse private equity; it describes how to evaluate any investment prudently.
• Target-date funds are the likely entry point. If private equity reaches your account, it will probably arrive by default rather than by your choice.
• The performance case has weakened considerably. Over the trailing 15 years, private equity’s measured edge over the S&P 500 has been close to zero once cash-flow timing is handled correctly.
• The rule is not final. Comments closed June 1, 2026, and a Supreme Court case that could reshape the whole question won’t be argued until the term beginning October 2026.

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What did the Department of Labor actually propose?

On March 30, 2026, the DOL proposed “Fiduciary Duties in Selecting Designated Investment Alternatives,” a rule establishing a process-based safe harbor for 401(k) plan fiduciaries. Fiduciaries who follow the process earn a presumption that they satisfied ERISA’s duty of prudence. The rule does not require, recommend, or favor private equity.

The proposal implements Executive Order 14330, Democratizing Access to Alternative Assets for 401(k) Investors. Its central move is procedural. Under the safe harbor, a plan fiduciary selecting an investment option must objectively and thoroughly consider six factors:

Factor	What the fiduciary must determine
Performance	Risk-adjusted expected returns, net of fees, serve the plan’s purpose
Fees	Fees are appropriate — though notably, not necessarily the lowest available
Liquidity	Sufficient liquidity at both the participant level and the plan level
Valuation	The provider can value holdings timely and accurately, via an independent process
Performance benchmarks	A “meaningful benchmark” exists with similar mandates, strategies, and risks
Complexity	The fiduciary has the skill to understand it, or engages someone who does

Two features deserve attention. First, the rule is asset-neutral: the DOL declined to write it as a private-equity rule, and it applies to the selection of any designated investment alternative. Second, the safe harbor covers selection, not ongoing monitoring — which is where most fiduciary liability actually arises.

The comment period closed June 1, 2026, drawing roughly 45,000 comments. The rule has entered the final rulemaking phase and could be finalized by the end of 2026.

Definition — Safe harbor: A set of steps that, if followed, gives you a legal presumption you met a standard. It shifts the burden in litigation. It does not guarantee you won’t be sued, and it does not mean the investment was a good one.

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Does this mean private equity is coming to my 401(k)?

Not necessarily, and not soon for most plans. Employers are not required to offer alternative investments, and many remain hesitant. Policy analysts at TD Cowen noted after the proposal that fiduciaries are unlikely to move until courts confirm the rule protects them — which could take years.

There’s a real gap between what a rule permits and what employers do. Plan sponsors have spent two decades getting sued over investment menus, and a proposed regulation doesn’t erase that memory. Aon’s global head of investments framed the open question well: the issue isn’t whether access expands, but whether access translates into adoption.

There’s also a pending case that could matter more than the rule itself.

What is Anderson v. Intel, and why does it matter?

In January 2026, the Supreme Court agreed to hear Anderson v. Intel Corp. Investment Policy Committee — the leading case on alternative assets in defined contribution plans. Intel participants alleged that plan fiduciaries breached their duty of prudence by allocating billions to custom target-date funds holding hedge funds and private equity. By 2014, the Intel 2030 fund reportedly held roughly 21% in hedge funds. The Ninth Circuit dismissed the claims, holding that plaintiffs must identify a “meaningful benchmark” to compare against.

The Court will decide whether that benchmark requirement is required at the pleading stage. Argument is set for the term beginning October 5, 2026, with a decision likely by mid-2027.

Notice the through-line. The DOL’s proposed rule requires fiduciaries to identify a meaningful benchmark. The Supreme Court is about to rule on what plaintiffs must show about benchmarks. If the Court makes those claims easier to bring, the safe harbor’s protective value shrinks considerably, and so does employer appetite.

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How would private equity actually get into my account?

Most likely through a target-date fund, not a standalone menu option. Target-date funds are the default investment in most 401(k) plans, which means allocation can happen without a participant making any active choice.

This is the part of the story that gets lost in the headlines about “access” and “democratization.” Very few plans are going to drop a private equity fund onto the menu next to the S&P 500 index fund and let people pick. The product development happening right now is aimed at collective investment trusts inside target-date structures — the all-in-one funds that hold roughly half of all 401(k) assets and serve as the qualified default investment alternative in most plans.

If you’re defaulted into a 2030 fund and that fund’s manager adds a private markets sleeve, your money moves with it.

Definition — QDIA (Qualified Default Investment Alternative): The investment your contributions go into if you never make a selection. In most plans, it’s a target-date fund. Roughly half of 401(k) participants are in one.

That’s the practical reason to read your plan communications rather than assuming this is somebody else’s problem.

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Do the returns justify it?

The evidence has weakened substantially. Analysis in a 2025 Harvard Business School working paper found that when private equity returns are compared to the S&P 500 using cash-flow-matched methodology, the trailing 15-year Direct Alpha was approximately negative 0.60%, and the trailing 20-year figure was roughly negative 0.04%. The outperformance that built the asset class’s reputation was concentrated in 2000–2015.

This deserves care, because the headline numbers you’ll see in marketing material are not wrong — they’re just measured in a way that flatters.

The measurement problem

Private equity reports internal rates of return (IRR). Public indexes report time-weighted returns (TWR). Comparing them directly is apples to oranges, because IRR is highly sensitive to the timing of cash flows.

Compare the two framings:

Framing A — the one used in marketing (aggregated horizon IRRs vs. S&P):

	5 YR	10 YR	15 YR	20 YR
PE	15.89%	15.14%	17.71%	13.56%
S&P	14.53%	13.10%	13.88%	10.35%
Apparent edge	+1.36%	+2.04%	+3.83%	+3.21%

Framing B — cash-flow-matched (Pitchbook Pooled IRR vs. S&P IRR equivalents, per the HBS analysis):

	5 YR	10 YR	15 YR	20 YR	2000–2015
PE Pooled IRR	15.38%	17.21%	17.21%	15.74%	15.67%
KS-PME Multiple	0.94x	1.03x	1.02x	1.04x	1.17x
Direct Alpha	-4.62%	-0.92%	-0.60%	-0.04%	+4.06%

Source: Lietz, HBS Working Paper 26-026, Figure 2, drawing on Pitchbook Global Benchmarks Q4 2024. Data as of December 31, 2024.

Same asset class. Same time periods. Different measurement. The 4%+ alpha that made private equity’s reputation is real — it’s just twenty years old.

Definition — Direct Alpha: A measure of how much a private fund outperformed (or trailed) a public index after accounting for exactly when money went in and came out. Positive means the fund beat the index; negative means the index would have done better with the same cash flows.

The “just pick a good manager” problem

The traditional answer to mediocre averages is manager selection: don’t buy the median, buy the top quartile. That advice rested on research showing that past performance predicted future performance — that skilled firms stayed skilled.

That relationship has broken down. Research by Harris, Jenkinson, Kaplan and Stucke found that for buyout funds raised after 2000, sorting managers into performance quartiles at the time of fundraising produced no significant difference in their final outcomes. Investors gain little from knowing how a manager’s current fund is doing when deciding whether to commit to the next one. Pitchbook’s own analysis reached a similar conclusion — with one uncomfortable exception. Persistence still exists at the bottom quartile.

Bad managers stay bad. Good managers regress. That’s an awkward foundation for a strategy built on picking winners.

The number that should matter most to you

Here’s what almost nobody quotes. Retail investors don’t buy individual funds directly. They buy through an allocator — a fund-of-funds manager, a target-date provider, a wealth platform. So the relevant benchmark isn’t PE fund performance. It’s fund-of-funds performance, which is the closest existing analogue to what a 401(k) structure would look like.

	5 YR	10 YR	15 YR	20 YR	2000–2015
PE Pooled Funds	15.38%	17.21%	17.21%	15.74%	15.67%
PE Fund of Funds	4.77%	9.87%	11.11%	10.31%	10.78%
KS-PME Multiple	0.85x	0.93x	0.95x	0.93x	0.98x
Direct Alpha	-4.74%	-2.41%	-1.74%	-2.01%	-0.86%

Source: Lietz, HBS Working Paper 26-026, Figure 5.

Every multiple is below 1.00. Every Direct Alpha is negative. Across every measured horizon, including the golden era. The structure closest to retail access has never beaten the S&P 500 in this dataset.

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Where do the fees actually go?

Retail private equity access typically involves an extra fee layer on top of the fund manager’s own management fee and carried interest. In one documented case, that additional distribution layer diluted the retail investor’s annual return by roughly 12% relative to what an institution pays for the same underlying strategy.

The performance figures above are already net of the fund manager’s management fee and carried interest. They don’t include what it costs to reach those funds as an individual.

Consider Blackstone’s BREIT, a retail-accessible real estate product with a $2,500 minimum. A retail investor pays the standard institutional stack — roughly 1.50% management fee, 15% carried interest over a preferred return — and then adds:

• 3.5% upfront brokerage fee. On a $2,500 investment, $2,412.50 gets invested.
• ~0.85% annual oversight fee paid to the distribution firm for as long as you hold it.

Assuming a 10% net return, the HBS analysis estimates that extra distribution layer dilutes the retail investor’s annual return by about 12% relative to an institution that doesn’t pay it. Fund-of-funds fees historically run 50–90 basis points plus potential carry. Index funds and ETFs in a typical 401(k) run 0.03%–0.20%.

The proposed DOL rule explicitly does not require fiduciaries to select the lowest-cost option. Fees must be “appropriate” relative to expected net returns — which is a defensible standard, and also a flexible one.

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What about the current state of the private equity market?

Several structural headwinds suggest near-term returns are unlikely to improve. Distributions to investors have fallen sharply, exits have slowed, holding periods are extending through continuation funds, and roughly $1.6 trillion in committed capital sits waiting to be invested at expensive entry prices.

Four things worth knowing about the industry’s current position:

1. Distributions have collapsed. DPI — the share of your money actually returned to you — has fallen steadily across recent vintages. Money is going in faster than it’s coming out.
2. Exits have slowed dramatically since 2020, at a time when public markets have been at record highs. Bain’s 2026 report put the backlog at roughly 32,000 unsold portfolio companies worth about $3.8 trillion.
3. Continuation funds are extending the clock. Rather than selling a company, managers increasingly roll it into a new fund they also manage. A ten-year horizon becomes fifteen or longer. Time works against an IRR.
4. Dry powder and entry prices. Roughly $1.59 trillion in committed-but-uninvested capital, a quarter of it outstanding for four years or more, under “use it or lose it” pressure — against US buyout entry multiples near 13x EBITDA. Expensive entry prices rarely precede strong returns.

Meanwhile, sophisticated institutions have been heading the other direction. Yale, CalPERS, New York City pension funds, and others have sold portions of their private equity portfolios on the secondary market — generally at discounts to reported NAV. One market observer’s assessment, quoted by Bloomberg: the push into retirement plans is supply-driven.

That’s worth sitting with. The capital being courted isn’t being courted because a great opportunity needs funding.

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Why does illiquidity matter more for retirees?

Institutions and individuals have fundamentally different liquidity profiles. A pension plan has thousands of participants across every age cohort and can forecast its cash needs decades out. You have one household, and your cash needs arrive without warning.

This is where the argument bites hardest for the readers I work with.

A defined benefit plan is diversified across people. When one retiree needs money, thousands of others don’t. Its liquidity needs are statistically predictable, which is precisely why a 20% allocation to illiquid assets is reasonable for an institution.

You are a portfolio of one. Jobs end. Diagnoses arrive. Marriages end. Roofs fail. Parents need care. If your account holds 20% in something you cannot sell, you are constrained exactly when constraint costs the most — and selling on the secondary market under pressure generally means accepting a discount to NAV.

Some retail “evergreen” products advertise redemption windows every 30 to 120 days. The honest caveat is that redemption windows work well in calm markets and tend to close in disrupted ones. Non-traded REITs suspended or gated redemptions during COVID. The liquidity is real most of the time, and absent precisely when you’d want it.

For a retiree drawing income, sequence-of-returns risk and liquidity are the same conversation.

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Does any of this apply to the TSP?

The Thrift Savings Plan is governed by the Federal Employees’ Retirement System Act and administered by the FRTIB, not by ERISA. The DOL’s proposed rule addresses ERISA fiduciary duties and does not directly govern the TSP.

If you’re a federal employee or a CSRS/FERS retiree, this is the question you actually came to ask, and it’s the one nobody’s answering.

The short version: the TSP sits under a different statute and a different fiduciary body. The DOL rule is written for ERISA plans. That is not the same as saying the TSP will never change — the FRTIB makes its own decisions, and policy pressure travels. But the proposed rule doesn’t reach into the TSP by its own terms.

Two things worth watching if you’re in this group:

• Any FRTIB statement on alternative assets, particularly regarding the L Funds, which function as the TSP’s target-date structure.
• What happens to money you’ve rolled out of the TSP into an IRA or a private-sector 401(k), where different rules apply.

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Is there another way to get private equity exposure?

The HBS paper proposes an alternative worth understanding: rather than investing in private equity funds, buy the publicly traded stock of the private equity firms themselves. This mirrors the “GP stakes” strategy institutions use, offers daily liquidity, and can be held at index-fund cost.

I’m including this because it’s the most interesting idea in the research, not because it’s a recommendation. It isn’t one, and it comes with real caveats.

The logic: the major private equity firms — Blackstone, KKR, Apollo, Ares, Carlyle — are publicly traded companies. Buying their stock gives you exposure to the economics of the private equity business (management fees, carried interest, growing AUM) rather than to any single fund.

The finding: across the firms studied, the public stock outperformed the firms’ own flagship private funds over both trailing 5- and 10-year periods ending December 2024. US firms’ stocks beat their own funds by an average of roughly 23% over five years and 16% over ten. Only EQT and Partners Group, traded on European exchanges, showed the reverse over five years.

The caveats matter as much as the finding:

• The author says so herself. The comparison puts stock returns against fund IRRs, an imperfect apples-to-oranges exercise. She calls the results “directionally correct,” not precise.
• Volatility cuts both ways. These are liquid, publicly traded, and they move. That’s the tradeoff for not being locked up.
• It isn’t a pure play. You’re buying an asset management business, whose value depends on fee growth and capital raising alongside fund performance.
• The sample is small. Only five US firms have ten-year public track records, and the period includes their conversion from limited partnerships to corporations, after which performance improved sharply.
• This is a working paper, not peer-reviewed research.

It’s a framework for thinking, not a trade to place.

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What should you do next?

Nothing here calls for urgent action. It calls for knowing what you own.

1. Find out what’s actually in your target-date fund. Pull the fact sheet for whatever fund your 401(k) defaults you into. Look at the holdings breakdown. If you can’t tell what’s in it from the fact sheet, that’s information too.

2. Read your plan’s annual notices instead of filing them. Changes to a plan’s default investment come with disclosure. It’s easy to miss and easy to find once you know to look.

3. Ask three questions before accepting any private markets option.

• What’s the total fee load, including anything paid to whoever is packaging or distributing it?
• What are the actual redemption terms, and what happens to them in a stressed market?
• What benchmark is this measured against, and who chose it?

4. Match liquidity to your actual timeline. If you’re within a decade of drawing income, your capacity to tolerate a lockup is lower than a spreadsheet suggests. Model the year you’d need the money most, not the average year.

5. Get a second read if it’s a material allocation. Fee-only fiduciary advisers have no economic interest in whether you buy this. That’s the point of the structure.

If you’re a federal employee, this is less urgent for TSP balances than for anything you’ve rolled out. Know which bucket you’re in.