There’s an old New Yorker cartoon that shows a grandfatherly man talking to a younger man in a library, and he says to him that “Those who don’t study history are doomed to repeat it [while] those who do study history are doomed to stand by helplessly while everyone else repeats it.” Am I the only one who remembers when “W” wanted to turn our future social security benefits into, essentially, personal defined contribution accounts for Wall Street to manage? Whether you remember it or not, the idea has come back again, like a vampire that hasn’t had the stake fully driven through its heart, only this time in the idea of giving private equity access to managing funds in 401(k) plans. Note that I said 401(k) plans, not pension plans – if pension plan sponsors want to turn their plan assets over to alternative asset managers to invest, knowing that they will have to make up the shortfall if the investment goes south or is so costly that it may as well have gone south, bully for them, as they are both calling the tune and paying the piper for the song.

But there is a whole host of reasons why that isn’t the same story with 401(k) plans, and I will just briefly catalogue them here, off the top of my head and superficially – with the hope that either others will discuss each one in more depth elsewhere or that I may later have the time to return to one or more for an in-depth discussion.

First, 401(k) accounts long ago stopped being some form of supplemental retirement savings account for employees, instead becoming the sole opportunity for retirement income for most (and at best a second rate replacement for pensions, from the point of view of most employees). It is a fiction to pretend that any but the smallest portion of those investors is sophisticated enough not to be an easy mark for speculative investments or even good investments that happen to either pose high risk or impose high fees. The proposal risks a continued downward slide for employee retirement income, from pensions to defined contribution plans to speculative and risky investing for retirement. That is not something that retirement security across the society, which is mediocre at best, needs.

Second, private equity isn’t exactly known for the transparency of its fees, costs and expenses. Recent studies suggest that, even with regard to mutual funds held in 401(k) plans and even after regulatory investment in targeting the problem, vast numbers of 401(k) participants do not know or understand the fees in their plans or the long term impact on their retirement readiness of those fees. This latest idea won’t exactly go far towards alleviating this problem.

And third, the plaintiffs’ bar just went to bed dreaming of holiday treats. They have had to move on from the relatively easy pickings of suing plan sponsors and fiduciaries for excessive fees in their plans to more difficult theories, like plan forfeitures and health plan costs, as fees on mutual fund based plans have come down (often in response to years of class action suits over them). Just wait till the fees and expenses of private equity investments start showing up in defined contribution accounts – plaintiffs’ class action lawyers must be licking their chops at this prospect.