Introduction

In September 2025, the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) issued Advisory Opinion 2025-04A While framed as clarifying fiduciary duties under ERISA’s Qualified Default Investment Alternative (QDIA) regulation, the opinion appears instead to function as a multi-billion-dollar subsidy to insurance companies and private equity managers.¹

By providing supposed  legal cover for the inclusion of annuities and alternative assets inside target date funds (TDFs)—the default option for most 401(k) participants—the DOL attempts to shield fiduciaries from liability, lowers transparency standards, and undermines ERISA’s long-standing prudence and loyalty requirements.  It facilitates this by secretly allowing regulatory arbitrage from SEC oversight to weak captive state banking regulators and state insurance commissioners.

The DOL Advisory Opinion 2025-04A

The Advisory opinion was framed as guidance on AllianceBernstein’s (“AB”) Lifetime Income Strategy (LIS) program. The program allows AB to select and rotate insurance companies offering guaranteed annuities within its managed target date funds.²

The DOL summarized AB’s process as follows:

“AB selects insurers for participation in the LIS program by first sending a request for proposals seeking information about the insurers’ business (e.g., their lines of business and financials), their ability to offer guarantees, and the cost of such guarantees. AB selects the insurers to include in the LIS program based on the insurers’ claims paying ability and ability to provide quarterly guaranteed rates based on a fixed insurance fee. On a quarterly basis, AB reviews each insurer’s credit ratings and the guaranteed rates currently provided. AB also consults with an independent insurance research expert to assess the reasonableness of the guarantees being provided given the fixed insurance fee and confirm each insurer’s ability to continue to meet their obligations.”²

Conveniently AB is not encouraged to negotiate the best rates or risk liquidity protections like downgrade provisions.   In my experience most so called “independent insurance research expert” are very pro insurance and do limited negotiation.    Also allows a reliance on credit ratings with examples like AIG has shown to be imprudent.

 The DOL further emphasized:

“When a plan complies with the QDIA regulation, plan fiduciaries remain responsible for the prudent selection and monitoring of the QDIA, but they are not liable for any loss or by reason of any breach that occurs as a result of an investment in the QDIA.”²

This seems to be a big gift the of fiduciary liability industry, which happens to be where the recently confirmed DOL EBSA secretary held a major interest.

Cover for Corrupt Target Date Funds

The timing and tone of this Advisory fit seamlessly into a broader industry push to corrupt target date funds by embedding high-fee, low-transparency products. Insurers such as TIAA already hide spread-based annuity fees of 120–150 basis points inside state-regulated contracts tucked into TDFs.³

Similarly, private equity managers view TDFs as the ultimate distribution channel for illiquid, high-fee investments.⁴

Lifetime Income as a Trojan Horse

The DOL cloaks its endorsement of annuity-laden TDFs under the guise of “lifetime income.” This concept has been politically popular since the SECURE Act of 2019, which encouraged the inclusion of annuities in defined contribution plans. But lifetime income products create liquidity traps and single-entity credit risk.⁵

More troublingly, insurers routinely fail to disclose spread profits. These spreads—often exceeding 100 basis points—are invisible to participants and shielded from fiduciary scrutiny under weak state insurance regulation.⁶

Encouragement of Weak Regulatory Structures

The Advisory explicitly broadens QDIA eligibility to include products housed in variable annuities, collective investment trusts (CITs), and pooled investment vehicles:  

“To clarify its position, the Department added a new paragraph (e)(4)(vi) of the QDIA regulation in the final rule, providing that [a]n investment fund product or model portfolio that otherwise meets the requirements of [the regulation will] not fail to constitute a product or portfolio…solely because the product or portfolio is offered through variable annuity or similar contracts or through common or collective trust funds or pooled investment funds and without regard to whether such contracts or funds provide annuity purchase rights, investment guarantees, death benefit guarantees or other features ancillary to the investment fund product or model portfolio.”²

This is a bait and switch it appears to be Federally regulated OCC collective investment trusts (CITs), when in reality most will be weak state regulated CITs.   Instead of SEC regulated Variable Annuities, they will be using “similar” poorly state regulated annuities.

This allows managers to select from the weakest of 50 state regulators for both CITs and annuities.

Conclusion: A Retreat from ERISA

ERISA was designed to impose the highest duties of loyalty and prudence on plan fiduciaries. Advisory Opinion 2025-04A is a dramatic departure from that framework. It permits fiduciaries to outsource judgment to asset managers like AB. It blesses opaque annuities and alternative investments inside QDIAs. It provides liability shields (“no breach” safe harbor) that reduce accountability. It weakens disclosure by encouraging state-regulated annuities and CITs. The result is a multi-billion-dollar windfall for insurers and private equity firms—at the direct expense of American workers’ retirement security.

Footnotes

¹ U.S. Department of Labor, EBSA Advisory Opinion 2025-04A, https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/advisory-opinions/2025-04a

² Ibid.

³ Commonsense 401k Project, “TIAA Leads the Way to 401k Target Date Corruption,” Sept. 22, 2025, https://commonsense401kproject.com/2025/09/22/tiaa-leads-the-way-to-401k-target-date-corruption/

⁴ Commonsense 401k Project, “Keep Private Equity Out of 401k Target Date Funds,” Sept. 4, 2025, https://commonsense401kproject.com/2025/09/04/keep-private-equity-out-of-401k-target-date-funds/

⁵ Commonsense 401k Project, “401k Lifetime Income: A Fiduciary Minefield,” Feb. 10, 2022, https://commonsense401kproject.com/2022/02/10/401k-lifetime-income-a-fiduciary-minefield/

⁶ Commonsense 401k Project, “TIAA Exposed for Excessive Hidden Annuity Spread Fees—Again,” Sept. 21, 2025, https://commonsense401kproject.com/2025/09/21/tiaa-exposed-for-excessive-hidden-annuity-spread-fees-again/