Empower Introduces Private Investments in 401(k)s: What This Means for Plan Sponsors

The retirement industry is entering a new era. In 2025, Empower announced that it would begin offering private investments inside 401(k) plans through Collective Investment Trusts (CITs). This bold move could reshape how retirement savers build wealth for the future, while also presenting both opportunities and challenges for plan sponsors.

At AS Wealth Management Planning, we believe this shift requires careful analysis. While alternative assets like private equity, private credit, and real estate may provide new avenues for diversification and return potential, plan sponsors must weigh the fiduciary responsibilities, participant education needs, and long-term implications of adopting such options.

What Exactly Is Changing?

Traditionally, 401(k) plans have been limited to publicly traded investments such as stocks, bonds, and mutual funds. Empower’s decision to incorporate private equity, private credit, and real estate into retirement accounts represents a significant departure from that model.

These options will be available through CITs, which are pooled investment vehicles similar to mutual funds but often more cost-efficient for institutional investors. By offering private investments in this structure, Empower aims to bring institutional-style diversification to everyday retirement savers.

Why This Matters for Plan Sponsors

For plan sponsors, the introduction of private investments in 401(k)s is not just a technical update—it’s a strategic decision point. Here are the key considerations:

1. Diversification Opportunities

Private equity and private credit often move differently than traditional public markets. Adding them into a 401(k) could potentially reduce portfolio volatility and increase long-term returns. For sponsors looking to enhance their plan’s competitiveness, this could be a valuable offering.

2. Fiduciary Responsibility

With innovation comes responsibility. The Department of Labor (DOL) has provided limited guidance on alternatives in retirement plans, but fiduciary duty remains clear: sponsors must act in the best interest of participants. This means:

• Conducting thorough due diligence.

• Evaluating fees relative to benefits.

• Ensuring products are appropriate for a broad participant base.

3. Participant Education Needs

Most employees are familiar with mutual funds or target-date funds, but private investments can feel complex and intimidating. Plan sponsors must ensure that any addition of alternatives is paired with robust education and transparent communication.

4. Plan Differentiation

Offering private investments could make a plan more attractive to both current employees and potential recruits. In competitive industries, this innovation could serve as a differentiator in benefits packages.

Potential Benefits for Participants

While skepticism remains among many retirement savers, there are potential advantages:

• Higher Return Potential: Historically, private equity has outperformed public markets over long time horizons.

• Access to Institutional Investments: Employees gain access to asset classes traditionally reserved for wealthy or institutional investors.

• Inflation Hedge: Real estate and private credit can provide protection against rising costs, helping preserve purchasing power in retirement.

However, these benefits are not guaranteed, and sponsors must balance them with the inherent risks.

Challenges and Risks

Introducing private investments into retirement plans also raises challenges:

1. Fees and Costs

   • Private equity and credit funds often come with significantly higher fees compared to index funds. These fees can erode long-term savings if not carefully managed.

2. Liquidity Issues

   • Unlike mutual funds, private assets are generally illiquid. This means funds may be tied up for years, limiting flexibility.

3. Transparency Concerns

   • Private investments may not offer the same level of transparency as public markets, making it harder for participants to evaluate performance.

4. Participant Mistrust

   • Surveys show that nearly half of U.S. retirement savers are hesitant about alternative assets in 401(k) plans. Without proper education, mistrust could limit adoption.

How Plan Sponsors Can Prepare

At AS Wealth Management Planning, we recommend that sponsors take a strategic, step-by-step approach:

1. Evaluate Alignment with Plan Objectives

   • Consider whether private investments align with your workforce demographics, risk tolerance, and retirement readiness goals.

2. Work with Independent Advisors

   • Partner with firms like AS Wealth Management Planning to perform independent due diligence on products, managers, and fee structures.

3. Prioritize Participant Education

   • Provide easy-to-understand materials, webinars, and FAQs to help employees grasp the risks and benefits of private investments.

4. Start Small

   • Alternatives don’t need to dominate the investment lineup. Consider making them available through target-date funds or as optional supplements, allowing gradual exposure.

5. Monitor Regulatory Guidance

   • Keep up with DOL updates and evolving best practices to ensure compliance and reduce fiduciary risk.

The Role of AS Wealth Management Planning

Our mission at AS Wealth Management Planning is to help employers design and manage retirement plans that deliver long-term value while maintaining compliance and participant trust.

With the rise of private investments in 401(k)s, we provide:

• Fiduciary support to ensure prudent selection and monitoring of new investment options.

• Participant engagement programs to bridge the knowledge gap around alternative assets.

• Ongoing plan review to assess whether new offerings are meeting objectives and improving outcomes.

By partnering with us, plan sponsors can explore innovative strategies without losing sight of their fiduciary duty or employee needs.

Final Thoughts

The introduction of private investments in 401(k) plans marks a pivotal moment for retirement planning. While the promise of diversification and enhanced returns is attractive, the risks—fees, complexity, and participant mistrust—cannot be ignored.

For plan sponsors, the key lies in balancing innovation with responsibility. Thoughtful implementation, clear communication, and ongoing oversight are essential to making these investments a true asset for participants.

At AS Wealth Management Planning, we’re committed to guiding sponsors through this transition. Whether you choose to embrace private investments or maintain a traditional investment lineup, our team ensures your plan is positioned to serve the best interests of your employees—today and in the future.