Among the reasons to challenge that claim, according to their letter, are the absence of standardized performance calculations for private equity funds, their lack of transparency and illiquidity, which could be especially problematic for plan participants who change change jobs and cannot or may not choose to  keep their retirement savings in a former employer's retirement plan.

Moreover, the letter notes, private equity investments are complex and difficult for plan participants, and even many plan sponsors, to understand. 

Weeks after the DOL issued its private letter, SEC staff in the agency's Office of Compliance Inspections and Examination issued a Risk Alert about compliance issues involving RIAs that manage private equity funds, known as private fund advisors.

The examiners found multiple conflicts of interest, misallocation of fees and expenses and failure to establish and enforce policies and procedures on the handling of material nonpublic information and funds' own fund's code of ethics, according to the alert, issued on June 23.

The DOL private letter on private equity options in 401(k) plans also stands in sharp contrast to a proposed rule the department issued on June 23 that would limit the ability of 401(k) plans and other pension plans operating under ERISA to invest in ESG-focused funds.

"The DOL is perfectly comfortable with retirement savers exposed to private equity, which is opaque and risky and where performance is highly questionable … but wants to create new hurdles in way of ESG investments," said Barbara Roper, director of investor protection at the Consumer Federation of America, one of the 19 organizations that sent the letter on private equity to the DOL. Other signatories include the AFL-CIO, American Federation of State, County and Municipal Employees (AFSCME) and National Employment Law Project.