Rod Whittemore is a former Maine state senator representing Somerset County. During his tenure in the Senate, he chaired the Insurance and Financial Services Committee.

Due to inflation and the subsequent rise in the cost of living, more Maine residents are struggling to save for their retirement. As a small business owner and the former chair of the Legislature’s committee with oversight of the financial service industry, this is very concerning to me.

Working Mainers need more options when it comes to saving for retirement. Luckily there is a proposed solution to help employees achieve higher returns in their 401(k) plans through private market investments, such as private equity, real estate and infrastructure. 

These investments have long been available to public sector employees, who have historically benefited from dedicating a portion of their retirement plans to private market investments. A recent report by Morningstar revealed that allocating just 10% of a retirement plan to private equity produced, on average, $1,137.22 more in sustainable annual retirement income. That may not sound like a lot at first, but over 30 years, that number would translate to an extra $34,000 in a retirement fund.

Maine’s own public employee retirement system recognizes the benefits of private markets. In May 2024, the Maine Public Employees Retirement System (PERS) board approved two commitments to private equity and private credit, totaling $150 million to be added to Maine’s public pension funds. Earlier this year, Maine PERS continued to boost its investments in private markets by allocating four alternative investment commitments of up to $535 million. Public sector workers are benefiting from Maine PERS’ diversified investments. Private sector employees should have the same opportunities.  

Historically, private sector employers have not been prohibited from offering private market investments in 401(k)s. However, the threat of frivolous litigation has deterred many companies from diversifying their retirement plan offerings.

Meritless lawsuits, including fiduciary litigation, cost $2,341 per household in Maine — a significant number for families trying to save. Not only are opportunistic trial attorneys preventing private sector employees in Maine from accessing new investment opportunities, but they are also costing Maine households precious cash that could be used for groceries, utilities or rent.

To modernize Mainers’ retirement plans, the U.S. Department of Labor plans to issue a proposed rule establishing investment instructions for private sector employers. The rule will outline the steps and disclosures required to conduct appropriate due diligence when adding private market investments to 401(k) plans. This framework will give employers the regulatory clarity they need to expand investment choices for workers and reduce baseless litigation. At the same time, plan fiduciaries will still be required to adhere to the strict standards enumerated within the Employee Retirement Income Security Act (ERISA).

Once a formal rule is implemented, employers may offer employees the option of new private market investments in 401(k) plans. A small portion of the plan could be allocated to private equity, and as an employee approaches their retirement age, the portion of that investment will likely decline based on an employee’s stage of life. This change can add diversification, higher returns and predictable growth to an employee’s retirement plan.

For Mainers trying to save for retirement, new guidelines to offer alternative assets in 401(k) retirement plans would make a monumental difference. Employees across various industries should have access to the same types of retirement plans, regardless of their job role. Now is a prime opportunity for the Department of Labor to act and ensure equal investment access for all citizens.