The U.S. Department of Labor (“DOL”) recently issued an information letter (“DOL Letter”) that could provide sponsors of private equity and other private investment funds a new source of investor capital – some of the estimated $8 trillion-plus in assets held by defined contribution retirement plans (i.e., 401(k), profit sharing, 403(b), and 457 plans). These plans typically permit participants to direct the investment of their individual accounts, but the plan fiduciaries’ selection of those investment choices must comply with the Employee Retirement Income Security Act (“ERISA”). The DOL Letter confirms that including a private equity component as part of a multi-asset class vehicle would not, per se, violate ERISA fiduciary duties and sets forth the specific factors for plan fiduciaries to address when selecting and offering their plan participants such an investment vehicle.

Originally published in Employee Benefit Plan Revue - July/August 2020.