Washington DC – The stakes couldn’t be higher, as the Trump administration is expected to issue a new executive order that would require federal agencies to explore opening up 401(k) plans to risky private market investments. This is something the private equity industry has been lobbying aggressively for as a way to get a hold of new sources of revenue.
While financial insiders and asset managers would reap the rewards, millions of workers saving for retirement would be exposed to higher risks and steep fees in products that lack basic investor protections and transparency requirements. The private equity industry defends its debt-fueled leveraged buyout model as necessary to provide purportedly high yields, and it argues that expanding into other parts of the U.S. retirement system would offer advantages to more working people. But extensive data and analysis by the AFT and AFREF tell a different story. Private equity profitability has been in year-over-year decline for the past 20 years.
“Private equity has a track record all right: one of extracting huge fees from our members’ retirement savings and with zero transparency and disappointing returns,” said AFT President Randi Weingarten. “Rather than help workers, the Trump administration is planning to make matters worse by opening up individual retirement accounts to industry vultures. “The AFT fights every day to uphold workers’ retirement security. But this report reveals that private equity is simply not worth the risk, and that its growth will make it harder, not easier, for working people to retire with dignity and grace. It’s why we’re calling on pension funds and 401(k) plan administrators to demand information on fees, evaluate risk and deeply interrogate the industry’s glitzy, but wildly misleading, pitch.”
“Private equity executives have enriched themselves by the billions, taking high fees and other charges from working people’s hard-earned retirement savings in pension funds. Now they want fees from the trillions of dollars in individual retirement accounts, putting millions of more people at risk,” said Lisa Donner, co-executive director at Americans for Financial Reform Education Fund. “Meanwhile, private equity is harming workers and communities through abusive practices that too often drive businesses to bankruptcy, reduce quality of care while also increasing costs in healthcare, ratchet up the price of housing, and more. To stand up for working people and retirees, the administration, regulators and Congress need to rein in these abuses, not enable and incentivize their further growth.”
