Published: May 2021

Protect retirement savers from risky private equity investments

Consumer Action joined allies in a letter to the Department of Labor asking the department to ensure that “defined contribution plan fiduciaries”—those responsible for ensuring that employer-based retirement plans feature safe and appropriate investments—undertake balanced consideration of the benefits and risks before they allow private equity funds to be offered to retirees.

The Department of Labor (DoL) issued an information letter in June 2020 setting forth key factors that retirement plans must consider if they recommend mutual funds with a private equity component to retirement savers. (Private equity refers to investments in companies that are not publicly traded.) On May 27, 2021, Consumer Action joined its allies in a letter to the labor department’s Employee Benefits Security Administration highlighting several deficiencies in the DoL letter’s guidance and asking that the letter be withdrawn until the agency conducts further study into how private equity could expose retirees’ portfolios to losses. In order to improve the information letter, the groups suggested that the agency closely examine the potential risks and rewards of private equity investments; warn plan sponsor fiduciaries that, where they lack the financial knowledge to assess the appropriateness of the investments, they must obtain disinterested advice from a fiduciary with the requisite expertise, or refrain from offering the investments; and study the extent to which funds with private equity exposure have been added to retirement plan offerings. The groups state that these steps are necessary to help ensure that the benefits and risks of private equity investments are clear to investors in employer-based retirement plans.

Lead Organization

Consumer Federation of America

Other Organizations

AFL-CIO | Alliance for Retired Americans | American Federation of State, County and Municipal Employees (AFSCME) | Americans for Financial Reform Education Fund | Better Markets | Center for Economic and Policy Research | Center for Popular Democracy | Chicago Consumer Coalition | Columbia Consumer Education Council | The Committee for the Fiduciary Standard | Communication Workers of America | The Consumer Assistance Council, Inc. | Economic Policy Institute | Eric F. Gerding,* Professor of Law and Wolf-Nichol Fellow, University of Colorado Law School* | Institute for Agriculture and Trade Policy | Institute for Policy Studies, Global Economy Project | National Education Association (NEA) | Laura Katz Olson, Distinguished Professor, Lehigh University* | Private Equity Stakeholder Project | Public Citizen | Strong Economy for All | Coalition in New York United for Respect | United Steelworkers | Virginia Citizens Consumer Council *Affiliation provided for identification purposes only

More Information

Click here to read the letter in full.

For more information, please visit the U.S. Department of Labor Issues Information Letter on Private Equity Investments, Jan. 20, 2021.

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