DOL 401(k) Private Equity Rule: Why TSP Is Exempt By Law

Last Updated: May 3, 2026 Reading Time: 9 min

The Department of Labor proposed a rule on March 31, 2026 that would let plan fiduciaries put private equity, private credit, and crypto inside the default funds of private-sector 401(k) plans. Most coverage frames this as "401(k) gets a private-equity option." That framing misses the part that matters: the safe harbor explicitly covers QDIAs (default funds), and 84% of auto-enrolled workers are in QDIAs. Federal employees are protected because the TSP is a creature of statute, not ERISA. Comments close June 1, 2026.

Key Takeaways

• DOL FR Doc 2026-06178 (RIN 1210-AC38) creates a fiduciary safe harbor for including private equity, private credit, real estate, infrastructure, and crypto in 401(k) plans, including default funds (QDIAs).
• TSP is exempt because 5 U.S.C. § 8438 locks the TSP investment menu to the G/F/C/S/I funds plus the mutual fund window. Adding alternatives would require an act of Congress.
• Fee gap is roughly 40 to 55 times higher for private equity vs TSP (TSP 0.034%–0.051% vs PE 1.61%–2% plus 20% carried interest).
• Comments are due June 1, 2026 at regulations.gov, RIN 1210-AC38.

What the Rule Actually Does

DOL published its proposed rule "Fiduciary Duties in Selecting Designated Investment Alternatives" in the Federal Register on March 31, 2026 as document 2026-06178 with regulatory identifier RIN 1210-AC38. The rule creates a six-factor safe harbor that protects plan fiduciaries from ERISA liability when they include alternative assets in their plan menus. The six factors are performance, fees, liquidity, valuation, benchmarks, and complexity.

DOL's own impact estimate projects roughly $178 billion in annual flows into target-date funds containing alternatives if the rule is finalized, affecting about 4.5 million participants. Today, only 4% of defined-contribution plans offer alternative assets, and just 0.1% of DC plan assets are actually allocated to alternatives. The rule is designed to change that by removing the litigation overhang that has kept fiduciaries cautious.

The Kirkland & Ellis analysis of the proposed rule text confirms the load-bearing fact most coverage misses: the safe harbor covers "any investment alternative... including a qualified default investment alternative (QDIA)." That is the QDIA hook. About 84% of defined-contribution plan participants are in target-date funds, the most common QDIA. Auto-enrolled workers can land in a default fund without making any affirmative investment decision. Under the proposed rule, that default fund could embed private equity, private credit, or crypto.

The rule does not mandate alternatives. It creates a legal safe harbor for sponsors who choose to add them. Some will. Many will not. The regulatory deterrent against trying is now gone.

Why TSP Is Protected By Statute

The TSP is not an ERISA plan. It was created by the Federal Employees' Retirement System Act of 1986 and is governed by Title 5 of the U.S. Code. The investment universe is fixed by 5 U.S.C. § 8438:

• G Fund (Government Securities)
• F Fund (Fixed Income Index)
• C Fund (Common Stock Index)
• S Fund (Small Cap Stock Index)
• I Fund (International Stock Index)

Plus the mutual fund window, which itself was authorized by the Thrift Savings Plan Enhancement Act of 2009 (P.L. 111-31) and took 13 years to launch in 2022. The Federal Retirement Thrift Investment Board (FRTIB), which administers TSP, has no authority to add asset classes beyond what statute permits. That is the central difference from the 401(k) world. In a private-sector plan, the sponsor and fiduciary make investment-menu decisions within DOL's regulatory framework. In TSP, Congress makes those decisions.

The statutory fee discipline is just as binding. 5 U.S.C. § 8473(b)(1)(B) directs FRTIB to ensure "low administrative costs." That is why TSP expense ratios are what they are. Private-sector plan sponsors operate under a process-based fiduciary duty to ensure fees are "appropriate relative to returns," with no hard cap.

The Fee Comparison: 40 to 55 Times Higher

TSP vs. Private-Sector 401(k) (Post-Rule): What Federal Employees Actually Have

Dimension	TSP (Federal Employees)	Private-Sector 401(k) Post-Rule
Investment universe	5 statutory funds + mutual fund window (5 U.S.C. § 8438)	Any DIA including PE, private credit, crypto, real estate, infrastructure (subject to 6-factor safe harbor)
Default fund (QDIA) contents	L Lifecycle funds (combinations of G/F/C/S/I)	Could include target-date funds embedded with private equity or private credit
Annual fee range	0.034% to 0.051% (all core funds)	Up to 1.61%–2% management fee plus 20% carried interest on PE components
Fee gap	baseline	roughly 40 to 55 times higher than TSP
Fee protection mechanism	Statutory: "low administrative costs" mandate	Fiduciary process-based, no hard cap
Liquidity	Daily pricing, standard withdrawal timeframes	Alternatives may be illiquid; managers (Blue Owl, BlackRock, Apollo, Ares) have restricted redemptions
Valuation methodology	Daily net asset value	Non-registered alternatives valued quarterly at minimum, manager-provided estimates accepted
Redemption rights	Participant-directed, no lockups	Subject to lock-up provisions in PE and private credit structures
Changing investment options	Requires act of Congress (precedent: P.L. 111-31 took 13 years to implement)	Fiduciary discretion within safe harbor
Liability protection	FRTIB as trustee; participants cannot sue for fund selection	Fiduciaries get presumption of prudence within safe harbor; litigation still possible
Transparency	Daily performance data on tsp.gov	Private assets: no daily pricing, periodic estimates or internal models
Who picks what you are in	Congress (universe) + FRTIB (index selection)	Plan sponsor + fiduciary within DOL safe harbor

The fee differential is the number federal employees should send to their non-fed friends. On a $200,000 retirement balance over 20 years, the difference between 0.04% TSP fees and 1.7% PE fees compounds into roughly $80,000 to $100,000 of foregone wealth, before the 20% carried interest is even applied. Use the TSP Growth & Withdrawal Calculator to model your own balance against a 50x fee scenario.

Why Federal Employees Should Care, Even Though TSP Is Exempt

Three reasons:

1. Spouses with private-sector 401(k)s are directly affected. If your spouse is auto-enrolled in a private 401(k) and the plan sponsor adopts the safe harbor for a target-date fund containing private equity, your household retirement allocation just changed without anyone making an active decision. Your spouse should ask their HR department three questions today:

• Does our plan use a target-date fund as the default investment?
• Has our plan sponsor announced any plan to add alternative assets to the fund menu or target-date glide path?
• What are the current expense ratios, and what would they become with alternatives included?

2. Rolling TSP to an IRA at retirement loses the statutory protection. Many federal employees roll their TSP balance to an IRA after retirement, often pushed by financial advisors who promise more flexibility. IRAs are not covered by ERISA or this DOL rule. But the rule changes the regulatory environment around alternative investments, and advisors are now likely to market private equity, private credit, and crypto products more aggressively into IRA accounts because those products gain mainstream credibility from the safe harbor. The statutory protections that make TSP safe do not transfer.

If you are within five years of retirement, this is now a meaningful factor in the TSP-vs-IRA-rollover decision. Read State of Federal Retirement Readiness 2026 for context on retirement readiness, and the TSP Guide 2026 for the full TSP playbook.

3. Precedent pressure on the TSP statutory protection. The same private equity industry that lobbied for this DOL safe harbor will, if it succeeds, push for legislative changes to expand the TSP investment universe. The 2009 mutual fund window legislation that eventually became the 2022 MFW shows this is possible. Federal employees who care about TSP's low-fee design should be aware that today's 401(k) policy is tomorrow's TSP policy fight.

How to Submit a Comment Before June 1

Submitting a comment takes about 10 minutes.

1. Go to regulations.gov and search for RIN 1210-AC38 (or "Fiduciary Duties in Selecting Designated Investment Alternatives")
2. Click "Comment"
3. Identify yourself as a federal employee, FERS participant, or TSP holder. This adds credibility because federal employees have a unique perspective on what statutory fee protection looks like in practice.
4. Write 2 to 5 sentences. Personal-impact comments carry more weight than long policy essays.
5. Do not include Social Security numbers or other personal information. Comments are public record.
6. Submit before 11:59 PM Eastern, June 1, 2026.

A Federal-Employee Comment Template

"As a federal employee and TSP participant, I write to note that the proposed safe harbor for alternative assets in ERISA plans sets a precedent that, if successful, could generate legislative pressure to expand TSP's statutory investment universe. The TSP's congressional design, five index funds with sub-0.05% fees and full daily liquidity, represents a deliberate policy choice to protect civil servants from the conflicts of interest, illiquidity, and fee structures inherent in alternative investments. I urge the Department to require fee caps, mandatory liquidity stress testing, and independent (not manager-provided) valuation for any QDIA incorporating alternatives. Federal employees who roll TSP balances to IRAs at retirement deserve the same protections their active TSP provides."

Adapt the template to your situation. The specific concrete details (your years of service, your TSP fee experience, what you'd lose by rolling to an IRA) are what make a comment land.

Calculate Your TSP Fee Advantage

Use the free FedTools TSP Growth & Withdrawal Calculator to see what compound TSP fees do to your balance over a 30-year career. Then mentally substitute a 1.7% expense ratio (typical PE fee) and watch the difference. The fee gap is the single largest hidden value of staying in TSP, and it disappears the moment you roll to an IRA.

Run your TSP fee comparison →

For broader retirement-readiness context, see the State of Federal Retirement Readiness 2026 flagship report and the Best TSP Allocation 2026 playbook.

Frequently Asked Questions

Does the DOL proposed rule apply to the TSP?

No. TSP is governed by 5 U.S.C. § 8438, not ERISA. The DOL's proposed rule (RIN 1210-AC38) covers ERISA private-sector 401(k) plans only. TSP investment options are set by Congress and cannot be expanded to include private equity, private credit, or crypto without new legislation. Even adding the TSP mutual fund window in 2022 required a 2009 act of Congress (P.L. 111-31).

What is a QDIA, and why does it matter that this rule covers QDIAs?

A Qualified Default Investment Alternative (QDIA) is the fund an employee is automatically placed in when they enroll in a 401(k) but do not pick their own investments. About 84% of defined-contribution plan participants are in target-date funds, the most common QDIA. Kirkland & Ellis confirms the proposed safe harbor explicitly covers QDIAs, which means millions of auto-enrolled workers could land in default funds containing illiquid private equity or crypto without ever making an active investment choice.

What is the comment deadline and how do federal employees submit?

Comments are due by June 1, 2026. Submit at regulations.gov, search for RIN 1210-AC38. Federal employees can identify themselves as FERS participants and TSP holders to add credibility to the federal-employee perspective on the rule's precedent risks.

Why do TSP expense ratios matter in this context?

TSP expense ratios run 0.034% to 0.051% across the five core funds, some of the lowest in the country. Private equity funds typically charge 1.61% to 2% in annual management fees plus 20% of profits as carried interest. On a $200,000 balance over 20 years, that fee gap compounds into tens of thousands of dollars in lost returns. Congress, not a plan sponsor, sets the TSP fee discipline by statute.

If I roll my TSP to an IRA at retirement, am I affected by this rule?

Not directly. IRAs are not covered by ERISA or this DOL rule. But the rule changes the regulatory environment around alternative investments, which means financial advisors are likely to start marketing private equity, private credit, and crypto products into IRA accounts more aggressively. The statutory protections that make TSP safe (low-fee mandate, transparent index funds, daily liquidity, no lockups) do not transfer to an IRA.

What types of alternative assets could end up in 401(k) default funds?

The proposed rule covers private equity, private credit, real estate, infrastructure, commodities, digital assets including crypto, and lifetime income products. These can be embedded inside target-date funds or other designated investment alternatives, including QDIAs.

Could the TSP add private equity later?

Only if Congress passes a new statute. FRTIB, the TSP's governing board, has no authority to add asset classes beyond what 5 U.S.C. § 8438 allows. The 2022 mutual fund window precedent required the Thrift Savings Plan Enhancement Act of 2009 (P.L. 111-31) and took 13 years to launch. Any TSP move into alternatives would require similar legislative action.

My spouse has a private-sector 401(k). What should they ask their HR department?

Three questions: (1) Does our plan use a target-date fund as the default investment? (2) Has our plan sponsor announced any plans to add alternative assets to the fund menu or to the target-date fund glide path? (3) What are the current expense ratios on the funds I am invested in? If the plan adds alternatives, ask specifically about lock-up provisions, redemption restrictions, and total fees including carried interest before staying in a default fund.

Who supports and who opposes this rule?

Supporters include the private equity and private credit industry (positioned to access roughly $9.3 trillion in defined-contribution plan assets), the Trump administration (via Executive Order 14330), and the Investment Company Institute. Opponents include the Economic Policy Institute, the Private Equity Stakeholder Project, Sen. Elizabeth Warren, and AARP. AARP's surveys show public support drops sharply once respondents learn about illiquidity, fees, and limited transparency.

When could the rule take effect?

Comments close June 1, 2026. After OIRA review, a final rule could publish by late 2026 with effect for plan year 2027. The timeline is subject to litigation and political shifts.

Related Resources

• State of Federal Retirement Readiness 2026: The full picture on TSP balances, FERS adequacy, and retirement readiness benchmarks
• Best TSP Allocation 2026: The TSP fund allocation playbook by age and risk tolerance
• TSP Guide 2026: Pillar guide to the entire TSP system
• TSP Calculator: Project your balance and model different fee scenarios

Sources: Federal Register 2026-06178 (RIN 1210-AC38) · DOL EBSA Press Release · 5 U.S.C. § 8438 (Cornell LII) · Kirkland & Ellis Analysis · Latham & Watkins Analysis · Economic Policy Institute · Private Equity Stakeholder Project · TSP.gov Expenses · Federal Register: TSP Mutual Fund Window 2022 Final Rule