The most important critique yet of the Department of Labor’s proposed rule opening 401(k) plans to private equity and other alternative investments did not come from a plaintiff’s law firm, a union, or a consumer advocate. It came from Michael Goldhaber at the NYU Stern Center for Business and Human Rights. https://bhr.stern.nyu.edu/quick-take/part-1-the-labor-departments-proposed-401k-rule-protects-private-equity-not-retirees/
Their article, “The Labor Department’s Proposed 401(k) Rule Protects Private Equity, Not Retirees,” deserves to become required reading for every ERISA fiduciary, consultant, plaintiff attorney, trustee, and member of Congress evaluating the proposal.
For years, I have argued in CommonSense 401(k) Project that the movement to place private equity, private credit, insurance products, and other opaque investments into America’s retirement system has nothing to do with helping retirees, but to enrich Wall Street.
The NYU paper reaches many of the same concerns from an independent academic perspective.
They Ask the Right Question
The debate has often been framed incorrectly. Private-equity advocates ask:
“Should participants have access to private markets?” NYU instead asks:
“Who is this rule really protecting?” That distinction changes everything.
The Department of Labor describes the proposal as creating a neutral framework for fiduciaries evaluating alternative investments. Yet one of its central features is reducing litigation exposure for plan fiduciaries who follow prescribed procedures when selecting investments. Private Equity industry supporters argue this encourages innovation; consumer advocates contend it shifts legal protection toward fiduciaries and asset managers rather than participants by blocking transparency.
That concern has been at the center of nearly every article we have written on this issue.
Safe Harbors Are Not Investment Standards
One of the biggest problems with the proposed rule is philosophical.
ERISA was enacted to protect workers.
The proposed regulation instead spends enormous effort explaining how fiduciaries can protect themselves from litigation. It’s hidden objective seems to be hiding high fee high risk products to enrich Wall Street.
That is why we argued in ERISA Investment Standards Should Be Higher Than Mutual Fund Standards—Not Lower that ERISA plans should demand more transparency than SEC-regulated mutual funds—not less. https://commonsense401kproject.com/2026/07/27/erisa-investment-standards-should-be-higher-than-mutual-fund-standards-not-lower/
Instead, this DOL proposal appears willing to accept investments with:
- subjective valuations,
- limited liquidity,
- non-standard performance reporting,
- complex fee structures, and
- benchmark methodologies unavailable in public markets.
That represents a lowering—not a raising—of investment standards.
The Missing Piece: Performance Integrity
The NYU article focuses heavily on fiduciary protection.
But there is an even deeper issue.
Private equity is unlike virtually every traditional investment offered inside 401(k) plans because performance itself often depends upon manager-generated valuations rather than continuously observable market prices.
That was the central point of The Great Performance Fraud. https://commonsense401kproject.com/2026/07/26/the-great-performance-fraud/
If reported performance depends upon internal valuation assumptions, then every downstream fiduciary analysis becomes suspect:
- benchmark comparisons,
- diversification studies,
- Sharpe ratios,
- consultant reports,
- target-date fund allocations,
- manager rankings.
The entire analytical framework becomes dependent upon accounting assumptions, self-serving valuations rather than market prices.
ERISA should demand the strongest performance standards in American finance—not weaker ones.
The Fee Story Is Even Worse
Our article The Great Fee Recapture explained why Wall Street increasingly prefers state-regulated collective investment trusts (CITs) over SEC mutual funds. https://commonsense401kproject.com/2026/07/14/the-great-fee-recapture-why-wall-street-is-leaving-sec-mutual-funds-for-state-regulated-collective-trusts/
The answer is simple. Greater opacity creates greater opportunities to capture fees that would be difficult to sustain in highly transparent mutual funds.
Private equity adds another layer:
- management fees,
- carried interest,
- transaction fees,
- monitoring fees,
- portfolio-company expenses,
- financing costs,
- valuation discretion.
Participants frequently see only a fraction of the total economic cost.
The Department’s proposal asks fiduciaries to consider fees.
But unless those fees are fully observable, measuring them becomes extraordinarily difficult.
Transparency cannot be optional. Private Equity contracts will be buried in poor state regulated CIT’s, which will then be buried in another layer of poor state regulated CITs in a Target Date Fund.
PwC Accidentally Said the Quiet Part Out Loud
One of our earlier articles analyzed how even industry publications increasingly describe retirement plans as enormous new distribution channels for alternative investments. https://commonsense401kproject.com/2026/06/10/pwc-accidentally-says-the-quiet-part-out-loud-about-private-equity-in-401ks/
The conversation rarely begins with participant needs. Instead it begins with:
“How can private markets gain access to trillions in defined contribution assets?”
That inversion of priorities should concern every fiduciary.
Capital formation is not ERISA’s mission. Participant protection is.
Due Diligence Cannot Be a Checklist
Our Private Equity Due Diligence Checklist attempted to demonstrate how difficult true due diligence actually is. https://commonsense401kproject.com/2026/06/07/erisa-private-equity-fiduciary-due-diligence-checklist/
Questions include:
- How are valuations independently verified?
- What secondary-market discounts exist?
- How are benchmark indices constructed?
- How much leverage exists?
- What conflicts exist between affiliated entities?
- How are portfolio-company expenses allocated?
- How are liquidity risks managed?
- How are performance numbers audited?
Many of these questions remain difficult—even for sophisticated institutional investors.
Expecting ordinary 401(k) fiduciaries to answer them consistently is unrealistic. Current structures of non-transparent state CITs will make it impossible for fiduciaries to do this level of due diligence
The Business Model Depends Upon Information Gaps
One of our most controversial articles argued that much of private equity’s competitive advantage comes not from superior investment skill but from information asymmetry.
The combination includes:
- limited transparency,
- proprietary benchmarks,
- subjective pricing,
- confidential agreements,
- limited disclosure,
- complicated organizational structures.
Whether one agrees with that conclusion or not, it highlights why transparency matters.
Markets work best when participants can compare investments using common standards.
Private markets frequently rely on customized standards instead. https://commonsense401kproject.com/2026/06/07/the-private-equity-business-model-depends-on-secrecy-fake-benchmarks-and-fiduciary-illusions/
Why Public Pension Experience Matters
As a Trustee of a $20 billion plan I was not allowed to look at the Private Equity contracts. Staff knew if I did I would point out the hidden fees and clauses which violated state fiduciary laws.
Our work examining CalPERS, Ohio STRS, and other public pension systems has shown how private equity can corrupt every system it touches. https://commonsense401kproject.com/2026/05/22/calpers-sick-twisted-relationship-with-jeffrey-epstein-linked-apollo-private-equity/
Both CalPERS and Ohio STRS staff have been able to manipulate Private Equity returns to enhance their own bonuses in the $millions. https://commonsense401kproject.com/2026/07/13/new-academic-paper-ohio-strs-had-two-performance-numbers-and-used-the-better-one-to-pay-bonuses/
The Real Standard Should Be the SEC
Perhaps the simplest principle is also the strongest.
The SEC requires extraordinary transparency from mutual funds because millions of ordinary investors depend upon them.
ERISA participants deserve protections that are at least as strong.
Instead, many of the investments now being promoted for retirement plans exist outside that disclosure framework.
That should concern every fiduciary.
If an investment cannot satisfy the transparency expectations imposed on mainstream retail investment products, fiduciaries should carefully consider whether it belongs in the default retirement savings vehicle for millions of American workers. https://commonsense401kproject.com/2026/07/27/erisa-investment-standards-should-be-higher-than-mutual-fund-standards-not-lower/
NYU Has Advanced the Conversation
Michael Goldhaber at NYU Stern deserves credit for reframing the debate.
Rather than asking whether private equity can enter 401(k) plans, they ask whether the Department of Labor’s proposal adequately protects the people ERISA was enacted to serve.
That is exactly the right question.
Our answer remains that participant protection requires more than procedural safe harbors. It requires investment standards built on transparent valuation, comparable performance measurement, complete fee disclosure, independent benchmarking, meaningful liquidity, and enforceable fiduciary accountability.
Until those standards exist, opening America’s retirement system to increasingly opaque private-market products risks protecting the industry’s expansion more effectively than the retirement security of the workers whose savings finance it.
Appendix: Underlying Private Equity Contracts, Violate ERISA
The Department of Labor’s proposed rule assumes that fiduciaries can prudently evaluate private equity before placing it inside America’s retirement plans.
That assumption falls apart the moment one asks a simple question:
How many ERISA fiduciaries—or their attorneys—will actually be allowed to read the underlying private equity contracts?
As a Trustee of a $20billion Retirement fund, I was not allowed to see the underlying Private Equity Contracts.
In many modern target-date structures, the answer may effectively be none.
The private equity fund sits inside another investment vehicle.
That vehicle sits inside a state-regulated Collective Investment Trust (CIT).
That CIT is then buried inside another state-regulated target-date CIT.
The plan sponsor never contracts directly with Apollo, KKR, Carlyle, or Blackstone.
Instead, it owns units of a CIT that owns another CIT that owns a limited partnership.
By the time an ERISA fiduciary reaches the actual governing contract, the legal rights may already have disappeared.
The Missing Documents
The attached review of Apollo, Carlyle, and KKR partnership agreements demonstrates why these contracts matter.
They commonly give the General Partner:
- unilateral valuation authority,
- broad indemnification,
- confidentiality protections,
- authority to conduct parallel investment activities,
- extensive conflict protections,
- limited fiduciary liability.
The architecture is remarkably consistent.
Authority.
Valuation.
Indemnification.
Confidentiality.
Oversight comes later—if at all.
That alone should concern every ERISA attorney.
The 25 Percent Test
Many private equity funds contain provisions allowing substantial portions of the partnership to consist of non-ERISA investors.
Practitioners commonly refer to this as the “25 percent test” under the Department of Labor’s plan asset regulation, where benefit plan investor participation below certain thresholds can mean the underlying assets are not treated as ERISA plan assets.
If 80%, 90%, or 95% of investors are non-ERISA capital, the governing agreement may legitimately be written primarily for non-ERISA investors. Or to shield Private Equity from ERISA liability
The contract may permit provisions that would never appear inside an ERISA trust.
What Would a Good ERISA Lawyer Say?
Imagine handing an experienced ERISA attorney—not a securities lawyer—the actual limited partnership agreement.
The attorney reads provisions providing:
- manager-controlled valuations;
- broad exculpation clauses;
- confidentiality restrictions;
- affiliated transactions;
- parallel funds;
- limited fiduciary remedies.
Many attorneys would likely advise their client that these provisions deserve careful scrutiny under ERISA’s duties of prudence and loyalty before committing plan assets. Whether particular provisions violate ERISA would depend on the facts and legal analysis, but the contractual allocation of authority itself raises obvious fiduciary questions.
Unfortunately, most attorneys may never receive the documents.
The Intel Problem
That is why the Supreme Court’s decision in the Intel litigation matters so much.
As discussed in my earlier article,
The Supreme Court’s Intel Case Is About Secrecy, Fake Benchmarks, and Fiduciary Illusions https://commonsense401kproject.com/2026/01/17/the-supreme-courts-intel-case-is-about-secrecy-fake-benchmarks-and-fiduciary-illusions/
the central issue extends beyond pleading standards.
It is about whether plaintiff attorneys can obtain the information necessary to determine whether fiduciaries actually acted prudently.
Without discovery:
- the contracts remain hidden;
- the side letters remain hidden;
- the valuation procedures remain hidden;
- the conflicts remain hidden.
If the governing documents cannot be examined, meaningful fiduciary review becomes extraordinarily difficult.
The Perfect Shield
The Department of Labor proposes allowing private equity inside target-date funds.
State banking regulators oversee the CIT.
The private equity manager invokes contractual confidentiality.
The plan sponsor receives only summary information.
Participants receive even less.
The plaintiff’s attorney cannot obtain the governing documents until after years of litigation—if ever.
Every layer adds another barrier to transparency.
Every layer makes fiduciary review more difficult.
Every layer weakens ERISA’s promise of accountability.
ERISA Was Never Intended to Operate Blindfolded
ERISA is built on informed fiduciary judgment.
That judgment becomes impossible when the governing documents cannot be examined.
If fiduciaries cannot read the contracts…
If participants cannot read the contracts…
If regulators rarely review the contracts…
If plaintiff attorneys cannot obtain the contracts…
…then the Department of Labor is asking fiduciaries to certify prudence based largely on trust.
That is not the ERISA Congress enacted.
It is an invitation to substitute opacity for diligence.
Before private equity is allowed inside America’s retirement plans, the Department of Labor should answer one basic question:
Will every ERISA fiduciary, every participant, and every plaintiff’s attorney have meaningful access to the governing contracts before retirement assets are committed?
If the answer is no, then the rule risks protecting secrecy as much as it protects investment flexibility.
The CommonSense 401k Project 