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Should we allow employees to invest their retirement assets in our fund?

03 25 2021

For Asset Management firms, RIAs, and alternative investment funds, allowing their employees to invest in their private equity investments for retirement savings may be desirable. Even though the U.S. Labor Department has loosened the rules pertaining to 401(k) retirement savings plans allowing the inclusion a private equity component, firms should consider how they position their own funds in their retirement plan.

Business owners with 401(k) plans can now more safely offer certain funds with a private equity component to their employees. Before 2020, 401(k) plans generally used mutual funds, bank collective investment trusts, and insurance company pooled accounts with portfolios focused on publicly traded stocks and bonds. Private equity investments have long been part of the investment portfolios used by defined benefit plans to fund many Americans’ retirement benefits. Still, they generally have not been incorporated into investment funds used by defined contribution plans, such as 401(k) plans.

Adding private equity investments increases the opportunities available to 401(k) plan participants. However, private equity investments available as a direct investment for retirement purposes inside a 401(k) as the only option is still not allowable under ERISA.

So, how would firms include their own fund in their company’s retirement savings plan? There are a few considerations to explore:

  1. Consult a PEO like AspenHR for industry-specific guidance on how Asset Management firms, RIAs, and alternative investment funds can include their own fund in their retirement savings plan. Working with a PEO that works with similar companies like yours helps ensure you are compliant in offering your own fund to employees as a retirement savings option.
  2. Work with your retirement plan administrator to see if including your fund is an option. Since they must enforce ERISA regulations, are monitored, and have reporting requirements, they are your best source of information.
  3. Consider offering your fund as a pension plan in addition to your 401(k) plan. Consult us at AspenPEO or reach out directly to the U.S. Department of Labor’s Employee Benefits Security Administration for guidance.

At AspenHR, we provide HR Managed Services via our PEO and ASO solutions to Asset Management firms, RIAs, and alternative investment funds. Our white-glove service model enables our clients to truly focus on their core business while becoming best-in-class employers. Our specific services include HR compliance and consulting, employee benefits (medical dental, vision, life, disability, 401(k), and payroll administration.