The likelihood that the Trump administration will seek to open up 401(k) retirement savings plans to private markets through an executive order seems to be rising.

According to The Wall Street Journal, the order may instruct the labour department and the Securities and Exchange Commission to offer guidance on how to include private asset options in 401(k) plans, which comprised US$12.4 trillion in defined-contribution plans alone as of end-2024.

Such proposals have long been surrounded by doubts about their viability for retail investors and investor protection.

Senator Elizabeth Warren, ranking member of the Senate banking, housing and urban affairs committee, sent a letter last month to Edmund F. Murphy III, president of Empower Retirement, the second largest US retirement plan provider, asking how such proposals could be implemented, and whether they were even justified.

“Private equity funds are finding it increasingly difficult to sell their assets to payout investors or honour redemptions,” according to the letter. “Similar problems plague the private credit market.”

Murphy replied noting that the number of listed firms in the US has declined by nearly 50% since its peak in the 1990s, from about 8,000 in 1996 to fewer than 4,000 today, and that “as the public investment universe contracts, retirement savers are increasingly left behind”. He said there would be “guardrails” in place, with investment managers accountable to fiduciary standards and private assets only forming parts of larger portfolios.

This month, Warren responded to Murphy, asking for clarification on a number of details, including how much money Empower stood to make on partnerships with Goldman Sachs, Apollo Global Management and other prominent financial entities, and how the firm planned to market private markets products to investment plan sponsors.

“Ultimately, you did not explain why providing retirees with the option to invest their hard-earned life savings in risky, expensive private markets benefits anyone other than private funds,” she wrote.

At the time of writing, Empower has yet to reply to Warren’s follow-up letter.

The final form of any executive order about private markets remains unclear. It’s also not clear whether other jurisdictions worldwide would follow suit. The outcome of US developments might either give them a test bed for similar legislation or to decide against it.

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