Why DOL-EBSA Has No Investment Oversight Capacity, While SEC Has Hundreds of Investment Experts
More than half of all 401(k) assets—and virtually all 403(b) and governmental 457 assets—are held in products that are not SEC-regulated mutual funds. Tens of billions more sit in:
- Insurance company general-account annuities,
- Separate account annuities,
- State-regulated Collective Investment Trusts (CITs) that bury insurance contracts and spread-based arrangements in their portfolios,
- Pension Risk Transfer (PRT) annuities, which are essentially opaque, bank-like liabilities without bank-like oversight.
Yet the federal agency responsible for enforcing ERISA—the Department of Labor’s Employee Benefits Security Administration (EBSA)—has almost no staff with expertise in investments, securities analysis, annuities, credit, or risk modeling.
This is the regulatory hole that the insurance industry, and increasingly the private-equity-owned life insurance industry, has deliberately exploited for 40+ years.
1. Staffing Comparison: SEC vs. DOL–EBSA
A rough but conservative comparison shows the scale of the problem:
Securities and Exchange Commission (SEC)
- ~4,500 total staff, with
- 500–800 investment professionals across:
- Division of Investment Management
- Division of Trading & Markets
- Office of Compliance Inspections and Examinations
- Division of Economic and Risk Analysis
- Dozens of PhD economists, quantitative modelers, structured-product experts, securities lawyers, and examiners.
- Hundreds of staff devoted purely to mutual fund, ETF, investment adviser, and securities-market oversight.
Department of Labor – EBSA
- ~875 total staff nationwide
- Of these, only 15–20 have any involvement in investment-related matters—and not one is an actual investment professional in the sense the SEC uses that term.
- Almost all EBSA staff are:
- lawyers,
- field auditors focused on operational compliance (contributions, timeliness, eligibility),
- health-plan specialists,
- benefits advisors.
- EBSA does not employ securities analysts, portfolio managers, credit analysts, actuaries specializing in insurer risk, or quantitative risk modelers.
In other words:
The agency responsible for policing over $12 trillion in ERISA plan investments has fewer investment experts than a single medium-sized mutual fund complex.
2. EBSA Has Never Actively Supervised Pension Investments—Not Once in 35 Years
This matches the lived experience of many practitioners—including mine:
“In 35 years I have never seen DOL-EBSA work on a pension investment issue.”
The reason is institutional:
- EBSA is structurally designed to investigate plan operations, not investment products.
- EBSA field offices have zero analytic tools equivalent to what the SEC or even FINRA examiners use.
- EBSA has never built risk dashboards, market-surveillance tools, CDS-implied credit tools, or portfolio review capabilities.
- Staff are not permitted to opine on suitability, credit risk, liquidity risk, or spread-based conflicts.
- Instead, EBSA outsources investment expertise to:
- vendors,
- industry sources,
- or the very firms under investigation.
This is why EBSA repeatedly misses massive structural issues—including state-regulated CITs hiding annuity contracts, PRT annuities structured to evade securities regulation, and spread-based insurance products siphoning revenue from plan assets.
3. 50 State Insurance Regulators: Zero Investment Oversight for Pension Products
State insurance departments have even less capacity:
- They employ actuaries and solvency examiners—not investment professionals with ERISA expertise.
- Retirement products are 1–3% of their workload; health and property/casualty consume the rest.
- Most states have no staff who specialize in stable value, separate accounts, or complicated annuity structures used in DC plans.
- When a regulator “investigates,” they refresh the NAIC template—the NAIC being a trade group that exists to protect insurers.
In 35 years, I have personally seen:
No state insurance commissioner ever take action regarding pension investment insurance products—not one article, not one investigation, not one expert report.
This is why insurers prefer to sell state-regulated products into federally regulated ERISA plans—the definition of a jurisdictional loophole.
4. State-Regulated CITs: The Newest Regulatory Escape Hatch
As I’ve documented extensively (linking to pieces below):
- State-regulated CITs can embed annuity contracts, spread-based insurance instruments, and opaque fee-sharing arrangements without SEC registration.
- The DOL provides no oversight,
- State banking supervisors have no expertise,
- And the documents are drafted by bank-trust firms and insurance companies who know exactly what they are doing.
See my latest analyses:
- State-Regulated CITs as Vehicles for ERISA Prohibited Transactions
- Target Date QDIA CIT Testimony & Analysis
- DOL’s Flawed PRT Report
Collectively, they show that regulators don’t even know what is inside these vehicles, much less how to evaluate conflicts, spreads, liquidity guarantees, or insurer credit risk.
5. DOL Advisory Council Capture: The Lifetime Annuity Lobby Writes the Script
My testimony to the ERISA Advisory Council revealed:
- Several council members were actively promoting lifetime annuities as the QDIA solution,
- The hidden fee structures were not understood—or deliberately ignored,
- The Council had no expertise on insurer credit risk, synthetic vs. general-account stable value, or spread-based compensation,
- No one on the Council cited CDS spreads, rating downgrades, or insurer leverage risks.
My conclusion is the only reasonable one:
The Council is structurally captured by industry.
6. The Result: The Biggest Unregulated Sector in U.S. Finance
Because of this regulatory vacuum, we now have:
1. $1+ trillion in annuity products sold into ERISA plans with no securities oversight.
2. $1+ trillion in state-regulated CITs with no federal risk oversight.
3. $3+ trillion in PRT annuities with no federal credit-risk oversight.
4. Hidden spread-based compensation that no regulator evaluates.
Insurance companies know exactly what they’re doing:
- Avoid the SEC.
- Avoid EBSA.
- Avoid state regulators who don’t understand annuity investment risk.
- Avoid transparency.
- Push annuities through QDIA rules, automatic enrollment, CITs, and PRTs where oversight is weakest.
This is the essence of the “regulatory hole.”
The CommonSense 401k Project 