Trump Administration Pushes Private Equity Into 401(k)s As PE-Backed Firms Appear in 54% of 2025's Biggest Bankruptcies

The Setup

President Trump signed Executive Order 14330 in 2025, directing regulators to widen the menu of assets allowed inside 401(k) plans. The order specifically opened the door to crypto, commodities, and what it called "private market investments, including direct and indirect interests in equity, debt, or other financial instruments that are not traded on public exchanges."

The Department of Labor followed with a proposed rule in March clarifying how plan fiduciaries can legally evaluate alternative investments, according to InvestmentNews. Labor Secretary Lori Chavez-DeRemer said the goal is to give "more than 90 million Americans" access to opportunities historically reserved for pensions, endowments, and the ultra-wealthy, arguing the change "will drive innovation and result in a major win for American workers, retirees, and their families."

The industry's actual balance sheet tells a rougher story.

The Numbers Nobody's Arguing About

PitchBook data shows private equity firms are currently sitting on 13,500 unsold portfolio companies, thousands of which the Wall Street Journal estimates have been stuck for six to nine years, according to reporting distributed by Moneywise and Yahoo Finance. That's a traffic jam of aging, debt-loaded businesses that firms can't offload at the prices they want.

The Private Equity Stakeholder Project's Bankruptcy Tracker found that of the biggest U.S. corporate bankruptcies in 2025, those with at least $1 billion in liabilities, 54% were private-equity-backed companies. Widen the lens to bankruptcies with over $500 million in liabilities and PE firms were involved in 51%. Overall, PE-backed companies accounted for 10% of all 2025 corporate bankruptcies despite private equity making up roughly 7% of the U.S. economy.

Matt Parr, communications director at PESP, told Moneywise that "large private equity-driven debt loads can leave companies more vulnerable to financial distress, closures, and layoffs." Saks and Eddie Bauer filed for bankruptcy. Kmart and JoAnn Fabrics are gone. Steward Health Care's collapse cost thousands of jobs and left communities without a local hospital, according to the Guardian.

The Guardian also notes the scale of what's at stake: private equity firms and their portfolio companies employ more than 13 million people in the U.S., from Dave's Hot Chicken and School of Rock (both owned by Roark Capital) to PetSmart (BC Partners) and Birkenstock (L Catterton).

Is There a Legitimate Case for This?

The strongest argument for letting 401(k) investors into private equity isn't unfounded. Institutional investors, pensions, and university endowments have used private markets for decades and often cite better long-term returns than public markets provide. Schroders' 2025 U.S. Retirement Survey found 45% of workplace-plan investors say they'd invest in private equity and private debt if given the option, up from 36% in 2024, based on 1,500 investors polled. There's real demand, and a case can be made that ordinary savers shouldn't be locked out of an asset class the wealthy have used to build fortunes.

Jim Baker, executive director of PESP, framed the industry's core vulnerability differently: firms are sitting on a "record number of unsold companies, many of which they've been unable to sell, or at least unable to sell at the prices that they're looking for." Audrey Stienon of the Open Markets Institute warned that "eventually, the companies that have accumulated this much debt are going to collapse," and when PE buys up "really, really important businesses" providing local jobs or services, a collapse means either a bailout, a rescue buyer, or fewer options for consumers.

The Industry Isn't Waiting

Asset managers aren't sitting on the sidelines for a final rule. Constitution Capital Partners launched its Horizon collective investment trust this week, pulling in over $50 million from 18 retirement plans with near-term commitments pushing total assets past $1 billion, according to InvestmentNews. SEI Trust Co. serves as trustee, and the product runs on Principal Financial Group's 401(k) recordkeeping platform.

Principal separately expanded its Featured Partner program to include AllianceBernstein, Apollo, Ares, Blackstone, Blue Owl, Carlyle, Franklin Templeton, Goldman Sachs, KKR, Morgan Stanley Investment Management, Neuberger, Partners Group, and PGIM. Every major name in private markets wants a piece of the 401(k) system.

Vestwell CEO Aaron Schumm told InvestmentNews the opportunity is real but products still need reworking for retirement-plan economics: "The products themselves have to be constructed in a way that's more palatable for a defined contribution long-term" investor. Fees remain the sticking point. Private equity funds traditionally charge a lot more than the index funds that dominate current 401(k) menus, and unlike public stocks, PE stakes can't be sold on demand if a saver needs cash.

What's Actually Unresolved

The DOL's rule is still a proposal, not final law. Whether fiduciaries will actually add private equity to target-date funds and 401(k) menus depends on how that rule lands and how much legal liability plan sponsors are willing to absorb. Meanwhile, the 13,500-company backlog PitchBook identified isn't shrinking on its own. Whether new retirement-account money becomes the liquidity event that finally clears some of that inventory, or just adds ordinary workers to the list of people holding the bag if more Steward Health Cares happen, remains to be seen.