It feels like bipartisan legislative achievements are becoming a rarity in a deeply divided Washington D.C. However, there is one general policy area that has witnessed important bipartisan victories over the past decade and that area is retirement policy.
Dubbed as SECURE 1.0 and SECURE 2.0, two major legislative achievements within the span of four years, improved, among other things, small business access to retirement plans, increased retirement plan uptake via automatic enrollment and escalation, raised catch-up contribution limits for older workers, as well as increasing the required minimum distribution age. There were other provisions heralded by both experts and policymakers aimed at addressing financial security for future retirees and the emergency needs of current workers.
Today, bipartisan work on retirement policy is moving full speed ahead. The overarching goals of this work include introducing more flexibility, expanding access, and improving coverage of private retirement accounts, given the changing dynamics of the workforce.
One key area policymakers are focusing on is the changing capital markets landscape. Financial innovation brings new investment products to the markets; existing ones take on a different shape due to regulations and investor demands.
This changing landscape can have significant impacts through private retirement accounts. According to Investment Company Institute data, as of September 2025, total US retirement assets stood at $48.1 trillion. By comparison, total U.S. debt currently stands at $38.6 trillion.
Investment options for this size of assets can not only have significant impact on retirement security of the participants, but also on the overall U.S. economy. And of course, as this economic potential grows, so does the legislative and administrative attention paid to the composition of investments within private retirement accounts.
Investments in private retirement accounts represents the only interaction for many U.S. households with the public markets. In most cases, the focus of these accounts is publicly traded vehicles, avoiding alternative investments like private equity.
However, over the years the U.S. public markets have seen a stunted growth while private markets have been booming. Some attribute this lopsided change to heavy regulations around public companies in the US. And research has begun to focus on how an investment rebalancing in private retirement accounts to one that is more inclusive of private equity and new products like crypto can change the results for participants as well as the overall economy.
It is true that DC plans have access to the private equity through a few investment vehicles, such as collective investment trusts (CIT), that pool accounts by banks or trust companies and hold diverse portfolios including alternative investments. But heavy legal and litigation risks under ERISA’s fiduciary standards and SEC rules and regulations, among other issues, have kept the share of private equity in the plans low, somewhere around 0.1 percent of total DC investment assets, according to the Council of Economic Advisers (CEA).
And a landmark executive order last year entitled “Democratizing Access to Alternative Assets for 401(k) Investors” aims to change this by relieving “the regulatory burdens and litigation risk that impede American workers’ retirement accounts from achieving the competitive returns and asset diversification necessary to secure a dignified, comfortable retirement.”
Recent research conducted by the CEA, for example, shows just the potential impact of expanding investments of private equity in defined contribution (DC) plans by between 5% and 30%. Their numbers show that this diversification could result in a GDP benefit of up to $35 billion, with younger cohorts benefiting more (a 2.5% increase in annuitized lifetime income) due to improved returns over longer investment spans.
When analyzed closely, even within DC plans, there seems to be a patchwork of investment options: For example, while 401(k) plans can invest in CITs, 403(b) plans designed for employees in health care, education, and other tax-exempt organizations effectively cannot, due to securities laws, despite the fact that SECURE 2.0. amended the tax code allowing the investment.
Congress is working on rectifying this issue. The Incentivizing New Ventures and Economic Strength Through Capital Formation (INVEST) Act aims to bring the parity between 401k and 403(b) plans when it comes to CITs.
Like in every issue, there is some disagreement in terms of increasing the prevalence of alternative investments, like private equity, in the private retirement accounts. Naysayers point to bigger risks, potential liquidity problems and differences in fee structures. Supporters highlight the higher returns associated with increased risk.
This is where the professional management of these assets plays a key role by diversifying portfolios to create the right risk profile for individual investors. However, they also need guidance from legislators and regulators to make sure that their hands are not tied when optimizing portfolios for their clients within the retirement landscape.
Pinar Çebi Wilber is chief economist and executive vice president of the American Council for Capital Formation.
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