The private credit market is upside down. So why does the government think it’s a good time to invest your 401(K) funds there now?

On March 30, 2026, the Department of Labor advanced a rule guiding how private employers could expand their 401(k) and related retirement plans to allow employees to invest in private credit markets and other alternative assets. At the same time, the rule explains how the defined contribution plan fiduciaries would be shielded from Employee Retirement Income Security Act (ERISA)-protections. The move comes following an August 2025 Executive Order by President Trump that the addition of alternative investment options would benefit employees, given the opportunity for higher returns than traditional investments like the stock market. As this thinking goes, no longer should such investment vehicles, such as private equity, be limited to those knowingly engaging in risky investment options for the chance to reap higher returns.  

On the surface, it seems logical. Why should only those in the know be able to make high stakes investments? Well, for starters, the private credit market has been turned upside down in recent months, in part, spooked by the concern that software companies – once considered a safe bet – could become obsolete in the new era of AI. Wealthy investors are pulling billions out of even well-known funds fearing deep losses. Secondly, the fees charged to oversee alternative investments, often managed by hedge funds, can be oppressively high – and are not necessarily tied to high returns. In other words, high fees for low or no returns. Is that what private employees are missing out on? One need only look at public pension funds to see workers crying foul over risky, alternative investments as they see their account values decline or stay flat – while the fees of asset managers grow.

It’s important to note here that public pension funds are not subject to ERISA rules – only private pension plans are. Hence, the need for the Department of Labor’s rule that private employers need not worry about ERISA backlash with these new investment options. Yet, employees do need to worry – because eroding ERISA protections mean the potential for eroding of account balances with no legal recourse against plan administrators. Should the DOL rule be implemented – and it likely will – employees will need to be extremely cautious in their investment decisions. Set it and forget it was always a bad 401(k) strategy, but under this new rule, a safe retirement might just slip away.