#United States #Mobile #401(k) Plans #Employee Fiduciary #DOL Rule

Employee Fiduciary Advocates for Stronger Participant Protections in Proposed DOL Prudence Rule

In a significant move, Employee Fiduciary, LLC has expressed concerns regarding the U.S. Department of Labor's (DOL) recently unveiled proposed rule titled "Fiduciary Duties in Selecting Designated Investment Alternatives". On April 30, 2026, the company submitted a formal comment to highlight essential gaps in participant protections before the rule is finalized.

The proposed regulation, which was made public on March 30, 2026, introduces a six-factor framework for selecting 401(k) investments along with a process-based safe harbor for plan fiduciaries adhering to these guidelines. While Employee Fiduciary appreciates these revisions as progress from the previously ambiguous "prudent expert" standard, the firm believes that crucial elements are being overlooked. CEO Eric C. Droblyen stated, "Private equity firms, real estate funds, and cryptocurrency platforms have welcomed this rule since its inception. However, participant voices and the interests of small business owners sponsoring retirement plans have been largely absent. Our comment letter aims to elevate these concerns."

Identifying Critical Gaps

Employee Fiduciary outlined three major gaps that need addressing in their submission:

1. Fee Transparency for Collective Investment Trusts (CITs): The proposed regulation includes collective investment trusts as valid options, which is vital due to their increasing adoption for private market investments. Unlike mutual funds, CITs do not have the same fee disclosure requirements, leading to potential confusion for plan sponsors when comparing them to registered funds. Employee Fiduciary urges the DOL to clarify that CITs must disclose additional costs, including carried interest and leverage fees, to provide participants with a true understanding of their investment expenses.

2. Real Protections Regarding Cryptocurrency: The rule’s neutral stance on asset types permits the inclusion of cryptocurrency in 401(k) plans, which raises concerns about participant security. Merely providing disclosures about cryptocurrency investments does not ensure participant understanding. Thus, Employee Fiduciary has proposed several safeguards, including a requirement for participants to opt in to crypto investments, a suitability standard consistent with existing laws, enhanced independent valuation processes, and stringent benchmark conditions. These measures seek to protect participants from unnecessary exposure to risk without informed consent.

3. Matching Rights for Participant Transparency: The most significant flaw noted in the proposed rule is the disparity in legal protections offered to fiduciaries versus participants. Droblyen pointed out that while fiduciaries receive enhanced protections, participants remain uninformed about the thoroughness of the six-factor test applications or the integrity of the benchmarks used to assess investments. Employee Fiduciary has recommended a requirement for an annual plain-language summary for each participant, detailing investment options, benchmarks, net performance, and total fees.

Warning Against Checkbox Compliance

Employee Fiduciary also raised concerns about a potential risk in implementation. Without clear DOL guidance, the established safe harbor could lead to a culture of checkbox compliance, where fiduciaries merely fulfill basic documentation requirements without engaging in genuine fiduciary analysis. Droblyen voiced that the efficacy of the rule hinges not only on documentation existence but also on its quality and specificity.

"This proposal carries the potential for meaningful enhancements for participants," said Droblyen. "Yet, a process-based safe harbor's strength is dictated by the rigor of its implementation. Currently, the rule provides greater assurance to plan sponsors than transparency for participants whose retirement security hinges on its integrity."

The comment letter from Employee Fiduciary is available for public access, along with a complementary analysis on their website. As the comment period remains open, Employee Fiduciary encourages other stakeholders in the retirement planning community to make their voices heard.

About Employee Fiduciary

Founded in 2004 and operating from Mobile, Alabama, Employee Fiduciary specializes in providing affordable 401(k) plans tailored for small to mid-sized enterprises. The company champions three core principles: transparency in fees, dedicated service, and expert plan design, currently serving over 5,000 businesses and approximately 150,000 participants across the nation.

For more information, reach out to Victoria Power at Employee Fiduciary via email at [email protected] or by phone at (251) 254-9634.