Why Excluding 401(k) Assets From ‘Accredited Investor’ Rule Would Be Unjust
The latest SEC review of the accredited investor definition questions whether qualified retirement assets—including IRAs and 401(k)s—should be excluded from net worth when determining accredited investor status.
Short answer? No. That’s according to new research from PGIM’s David Blanchett and iCapital’s Drew Carrington, recently released by the Defined Contribution Institutional Investment Association (DCIIA) in a “Research Minute” blog post.
Blanchett and Carrington found that accredited households with significant qualified retirement savings—like so-called “401(k) millionaires”—have higher levels of financial literacy, on average, than those who would otherwise meet the accredited investor definition with other types of assets.
“Therefore, failing to consider qualified retirement assets in net worth under the definition of accredited investor would result in the exclusion of more financially sophisticated investors, not less, which is likely counter to the intent of any kind of potential change to the definition,” Blanchett and Carrington wrote in the full August 2025 paper, “Why Qualified Retirement Assets Should be Included in the ‘Accredited Investor’ Definition.”
In a recent LinkedIn post on the topic, Blanchett wrote that those questioning whether qualified retirement assets should be excluded say individuals including 401(k) millionaires “may have little, if any, prior investing experience and may not seek the assistance of professional advisors.”
Given the increasing prevalence of auto features such as auto enrollment, auto escalation and default investments in 401(k) plans, Blanchett said the people questioning the exclusion assume that wealth in qualified retirement plans was accrued without engagement or knowledge, which is why they should be excluded from these calculations.
Not so fast, say the researchers. Leveraging data from the Federal Reserve’s 2022 Survey of Consumer Finances to explore how financial literacy varies among different types of investors, Blanchett and Carrington found that accredited households with significant qualified retirement savings actually do have higher levels of financial literacy, on average, than those who would otherwise meet the accredited investor definition with other types of assets.
One potential explanation, the paper says, is that it takes decades of good decision making to accumulate a sufficient level of savings to be a “401(k) millionaire,” even for the relatively unengaged.
“Therefore, suggestions that excluding qualified assets from net worth under the accredited investor definition seem counter to the actual financial sophistication levels of those investors who manage to accumulate significant levels of qualified savings,” concludes the latest “Research Minute” post from DCIIA’s Retirement Research Center.
To qualify as accredited investors, the SEC currently requires individuals meet any of a range of wealth, income, or financial sophistication criteria. Among them? Net worth over $1 million, excluding primary residence (individually or with spouse or partner) or income over $200,000 (individually) or $300,000 (with spouse or partner) in each of the prior two years, with reasonable expectations of the same for the current year.
Bills seek to expand accredited investor definition
In related news, a pair of bills introduced in May seeking to expand the definition of an accredited investor have passed the House and now await action in the Senate.
U.S. Reps. Mike Lawler (R-NY) and Mike Flood (R-NE) in May introduced “The Equal Opportunity for All Investors Act,” legislation directing the SEC to create a test (administered by FINRA) that retail investors could take to qualify as accredited investors.
“The Equal Opportunity for All Investors Act is about opening up high-growth investment opportunities to more Americans,” Lawler said in a May 14 press release. “By expanding the definition of ‘accredited investor’ to include those who pass an SEC and FINRA certification, we’re modernizing outdated rules and ensuring that qualified individuals, not just the wealthiest, can participate in these valuable markets.”
The bill passed the House on July 21, 2025, and is now with the Senate. While it was also introduced during the last session of Congress (where it passed the House but died in the Senate), it may stand a better chance this year given the Trump administration’s recent efforts to make it easier for retail investors to access alternative investments and the SEC’s stated intent to expand private markets access for retail investors.
That also appears to bode well for the “Fair Investment Opportunities for Professional Experts Act,” a bipartisan bill introduced May 15 by House Committee on Financial Services Chairman French Hill (R-AR) and Rep. Juan Vargas (D-CA).
This bill seeks to expand the definition of an accredited investor, allowing Americans who demonstrate education, professional experience, or other similar credentials the opportunity to invest in private offerings.
“Wealth alone should not dictate who can and cannot invest in private offerings. Countless individuals—through work, education, or other experiences—have developed the knowledge to make informed investment decisions yet are excluded simply because of their income level,” said Chairman Hill. “Our bill addresses this imbalance by expanding investment opportunities for capable investors while helping small businesses access the capital they need to grow.”
SEE ALSO:
• SEC Embracing Wider Investor Access to Private Markets
• Trump: Regulatory Overreach, Opportunistic Lawsuits Have Stifled Investment Innovation
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
