Warren Renews Questions for Empower on 401(k) Private Equity Investments

Senator Elizabeth Warren, D-Massachusetts, has renewed her request for answers from Empower Retirement LLC about plans the company announced to offer private equity investments to participants in its 401(k) plans after insisting Empower’s recent response failed to address her original inquiry.

In her latest letter, dated July 11, Warren said Empower, in the company’s July 8 response to her initial letter, dated June 18, “failed to meaningfully explain how Empower’s efforts to invest retirement savings in private funds—which often yield returns on-par with the public market while charging exorbitant fees” will help individuals build lasting financial security.

The letter comes as President Donald Trump is expected to sign within the next week an executive order encouraging inclusion of private equity assets in 401(k) plan investments. Trump telegraphed his plans for the order in recent weeks, according to three people familiar with his intentions.

Those familiar with the president’s plan say that Trump is limited in what he can do via executive order, so the decree will most likely encourage regulatory agencies to take a “neutral” stance on the alternative investments in 401(k) plans, similar to recent DOL guidance on cryptocurrency investments in the defined contribution plans.

In her latest letter, Warren once again cited research indicating that private funds have weak transparency, fewer regulations than public market funds, and carry excessive fees despite yielding similar results to public markets.

“Private fund options for the sake of private fund options—if those funds do not meaningfully outperform public companies and charge exorbitant fees—is not a sufficient reason to discount the risk associated with investing in private firms, including private equity funds,” she stated in the letter. “Your response did not meaningfully address how you would shield plan participants, and our financial system, from the structural risks inherent in private markets. 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.”

Warren ended the letter by asking Empower to respond to a series of her questions by July 25. The questions included how the investments will benefit Empower’s clients, who has legal liability and the cost of fees.

An Empower spokesperson said the company is currently not commenting on the possibility of a response to Warren’s second letter. The spokesperson said the company is awaiting Trump’s executive order, which the company expects to be released shortly.

“Empower believes that fiduciaries should have the right to consider private investments,” the spokesperson said. “Empower is not suggesting that private investing is for everybody. But there are investors that could take advantage of these asset types, and we think that the fiduciary should have a right to consider them for their plans following a prudent process.”