Employee Fiduciary Urges DOL to Add Participant Protections to Proposed Prudence Rule

MOBILE, Ala., May 6, 2026 /PRNewswire/ - Employee Fiduciary, LLC submitted a formal comment letter on April 30 to the U.S. Department of Labor on its proposed "Fiduciary Duties in Selecting Designated Investment Alternatives" rule (RIN 1210-AC38). The low-cost 401(k) provider, which serves more than 5,000 small businesses nationwide, urged the agency to close three participant-protection gaps before finalization.

The proposed rule — published March 30, 2026 — establishes a six-factor framework for 401(k) investment selection and a process-based safe harbor for plan fiduciaries who follow it. Employee Fiduciary supports both as meaningful improvements over the vague "prudent expert" standard that has long invited hindsight litigation. The firm's concern is what the rule leaves out.

"Private equity firms, real estate funds, and cryptocurrency platforms have been celebrating this rule since the day it dropped," said Eric C. Droblyen, CEO of Employee Fiduciary. "There has been considerably less commentary from participants and the small business owners who sponsor their retirement plans. We submitted this letter to put their interests on the record."

Three Gaps That Must Be Closed

• Fix CIT fee transparency. The rule's six-factor test explicitly covers collective investment trusts as designated investment alternatives — and given their rapidly growing use as wrappers for private market investments in 401(k) plans, that's significant. Unlike mutual funds, CITs are exempt from SEC registration under the Investment Company Act of 1940 and not subject to the same fee disclosure standards. Until the Department clarifies whether CITs must include carried interest, leverage costs, and acquired fund fees in the expense ratios shown to participants, plan sponsors comparing CIT vehicles to registered funds will be comparing apples to oranges without knowing it — and the safe harbor's fee factor cannot be meaningfully satisfied for private market CIT investments.
  
  
• Move beyond disclosure on crypto — participants need real protections. The rule's asset-neutral stance opens the door to cryptocurrency in 401(k) plans by reversing prior Department guidance specifically warning against it. Disclosure alone is not sufficient protection — a participant who receives a crypto disclosure they don't fully understand has not been protected, and sophisticated financial industry participants are well-practiced at satisfying disclosure requirements on paper while continuing business as usual. Employee Fiduciary asked for four substantive safeguards: a participant opt-in requirement so no one is passively exposed to digital assets; a suitability standard modeled on blue sky law qualifications, recognizing retirement savings are many participants' primary or sole source of financial security; enhanced independent valuation requirements; and a clarification that a benchmark constructed by an adviser with a financial relationship to the digital asset manager does not satisfy the rule's benchmarking standard. None of these prohibit crypto — they simply ensure participants cannot be exposed to it without informed consent and a meaningful suitability determination.
  
  
• Give participants transparency rights that match the new protections for fiduciaries. The letter identifies this as the rule's most fundamental structural flaw: robust new legal protections for fiduciaries, nothing new for participants. Under the rule as proposed, a participant has no way to know whether the six-factor test was applied rigorously or reduced to a compliance checklist, whether benchmarks were meaningful or constructed to favor a preferred investment, or whether fee comparisons reflected the true all-in cost of CIT vehicles. Employee Fiduciary asked the Department to require an annual plain-language summary for each participant covering every investment option, the benchmark used, net-of-fees performance relative to that benchmark, and total fees in dollar terms — plus access to six-factor documentation upon request, including a plain-language summary so the right of access translates into genuine understanding rather than impenetrable technical disclosure.

A Warning Against Checkbox Compliance

The letter also flags an implementation risk: without explicit Department guidance, the safe harbor could spawn a market for canned compliance checklists — boilerplate templates satisfying the letter of each factor without genuine fiduciary analysis. Employee Fiduciary urged the Department to make clear in the final rule that the quality and specificity of documentation, not merely its existence, determines whether safe harbor protection attaches.

"This rule has the bones of something genuinely good for participants," Droblyen said. "But a process-based safe harbor is only as strong as the process it protects. Right now, the rule creates more certainty for plan sponsors than it does transparency for the people whose retirement security actually depends on getting this right."

The full comment letter is available here. Employee Fiduciary's companion analysis is published at employeefiduciary.com/blog/dol-six-factor-prudence-rule-comment-letter. The firm's earlier analysis of the proposed rule is available at employeefiduciary.com/blog/dol-prudence-rule-good-bad-ugly.

The DOL comment period remains open. Employee Fiduciary encourages other plan providers, advisers, and participant advocates to submit their own views at regulations.gov.

About Employee Fiduciary

Founded in 2004 and headquartered in Mobile, Alabama, Employee Fiduciary provides low-cost 401(k) plans to small and medium-sized businesses. The firm was founded on three principles: transparent fees, personal service, and expert plan design. Today it serves more than 5,000 small businesses and approximately 150,000 participants nationwide. Follow Employee Fiduciary on Facebook, Instagram, X, and LinkedIn.

For Additional Information
Victoria Power
Employee Fiduciary
[email protected]
(251) 254-9634

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SOURCE Employee Fiduciary