Senator Warren Wants Information About Empower’s Push Into Private Equity for 401(k) Plans

Senator Elizabeth Warren, D-Massachusetts, requested answers from Empower Retirement LLC about plans the company announced to offer private equity investments to participants in its 401(k) plans.

In a June 18 letter addressed to Empower’s CEO, Edmund Murphy III, Warren outlined significant concerns about risks and the lack of oversight of private investments and questioned if the move serves the best interests of retirement savers. The letter included 13 specific questions, to which Warren requested answers by July 7.

Empower, which manages retirement accounts for nearly 19 million Americans, announced in May that it would begin offering access to alternative investments—including private equity and private credit—through the retirement plans it recordkeeps. But Warren, the ranking Democrat on the Senate Committee on Banking, said the investments are too risky to add in 401(k) plans.

“While you claim that this move will ‘help clients build secure and prosperous futures,’ there are many reasons to believe that the 19 million workers whose retirement funds you safekeep will be more at risk as a result of this partnership,” Warren stated.

Empower spokesman Stephen Gawlik acknowledged that the company received Warren’s letter and that it will respond to her.

In addition, Gawlik said via email about the plan to provide access to private markets for defined contribution plan investors, “this initiative is designed to provide individuals with access to a broader range of investment options, enabling them to further diversify their investment portfolios. Investment decisions will be made by plan fiduciaries following a prudent process as outlined in the law (ERISA). Empower believes in the importance of advice and risk mitigation for every investor. These new opportunities are offered under an advice model for plan participants and deliver the guardrails necessary to help an entirely new investor class access private investing.”

Warren also raised concerns about the firms with which Empower is partnering, including Apollo Global Management, Franklin Templeton, Goldman Sachs and others—all of which have faced enforcement actions and fines from federal regulators over the years for investor protection violations, according to the letter.

She also pointed to a recent Moody’s report that questioned the integrity and transparency of private funds targeting individual investors and noted that even major institutional investors like Yale University have begun offloading private equity holdings amid disappointing returns and market uncertainty.

Yale’s reported $6 billion sale of a portion of its private equity portfolio on the secondary market came as Republicans are targeting private universities’ endowment funds and threatened federal grants funding, which experts said indicated affected institutions would seek to access liquidity in their portfolios.

In May, a Yale spokesperson told CIO, a sister publication of PLANSPONSOR, “We remain committed to private equity investments as a major part of our investment program and continue to make new commitments to funds raised by our current investment managers. In addition, we continue to actively seek new relationships with private equity firms in the endowment.”

Warren’s letter asked a series of 13 detailed questions, requesting that Empower disclose how it evaluated the risks and benefits of offering private equity, the extent of its legal liability, its partnerships with asset managers and how it will protect investors moving forward.

“During a crisis or even momentary panic in the broader markets, private credit is more likely to experience liquidity freezes, inability to perform price discovery on their underlying assets, and lines of credit being terminated as traditional banks flock to safety,” Warren stated.