The DOL made a major step forward with the 404a-(5) fee disclosure in 2012. These provide solid transparency in 401k plans using SEC registered Mutual Funds. These disclosure has resulted in high-fee mutual funds being called out in legislation. Wall Street and the Insurance industry, to hide excessive fees and risks, have moved away from transparent SEC Mutual Fund structures into state-regulated insurance annuity structures and state-regulated CIT structures. These poorly regulated state structures can allow them to hide Crypto, Private Equity, Private Credit, and annuities. While prior DOLs have been passive on this issue, the Trump DOL is actively helping to block fee and risk transparency in statements with amicus briefs.
Below is my DOL Comment Letter from 2/25/26 Comment Tracking Number: mm2-zwz3-38pd
Submitted via Federal eRulemaking Portal https://www.federalregister.gov/documents/2026/02/25/2026-03723/requirement-to-provide-paper-statements-in-certain-cases-amendments-to-electronic-disclosure-safe
U.S. Department of Labor
Employee Benefits Security Administration
Re: Requirement to Provide Paper Statements in Certain Cases – Amendments to Electronic Disclosure Safe Harbor
RIN: 1210–ACXX
Federal Register Document No. 2026-03723
Comment Letter – Disclosure Gaps for Annuities and Collective Investment Trusts (CITs)
Dear Sir or Madam:
I appreciate the opportunity to comment on the Department’s proposed amendments to the electronic disclosure safe harbor. While the proposal addresses the format and delivery of disclosures, it does not address a more fundamental problem: the substantive inadequacy of disclosures for certain retirement plan investment vehicles—particularly annuities and collective investment trusts (CITs).
Electronic delivery standards cannot compensate for disclosures that omit material information. In several high-growth retirement products, participants are not receiving the core data necessary to understand risk, cost, regulatory oversight, and conflicts of interest.
I respectfully urge the Department to address the following disclosure deficiencies.
I. Annuities in ERISA Plans: Critical Omitted Disclosures
Annuities offered within defined contribution plans frequently lack basic disclosures that would be standard for mutual funds or registered investment products. Specifically:
A. No Mandatory Spread or Embedded Fee Disclosure
Many fixed and group annuity contracts do not disclose:
- The insurer’s earned spread (general account yield vs. credited rate)
- Asset management compensation embedded in the contract
- Affiliate transaction revenue
- Credit-risk charges or capital arbitrage economics
Participants are often shown only a “crediting rate,” without disclosure of:
- The underlying asset portfolio yield
- The insurer’s retained margin
- How crediting rates are determined
- Whether adjustments reflect asset performance or internal discretion
This absence of spread transparency makes meaningful fee comparison impossible and undermines ERISA’s fiduciary standards.
B. No Disclosure of State of Issuance or Regulatory Jurisdiction
Participants are not told:
- In which state the annuity contract is issued
- Which state insurance commissioner has primary oversight
- Whether the issuing entity is domiciled offshore (e.g., Bermuda reinsurance arrangements)
- What guaranty association protections apply
Given the decentralized and opaque nature of U.S. insurance regulation, disclosure of regulatory jurisdiction is material. Participants cannot assess insolvency risk without knowing which regulator governs the issuing insurer.
C. No Uniform Risk Benchmarking Standard
Unlike mutual funds, fixed annuities do not provide:
- Duration disclosure
- Credit quality breakdown
- Asset allocation
- Stress-test sensitivity
- Comparable benchmarks
Without these, participants cannot assess whether they are being compensated for credit risk or liquidity risk.
II. Collective Investment Trust (CIT) Target Date Funds: Structural Opacity
CIT-based target date funds represent a rapidly expanding portion of retirement plan assets. Yet disclosure standards are significantly weaker than for ’40 Act funds.
Participants are often not provided:
- Full look-through holdings
- Underlying asset manager identities
- Layered fee structures
- Affiliate transaction disclosures
- Credit exposures in insurance-wrapped sleeves
- Disclosure of whether embedded annuities exist
Many CITs operate under state banking supervision rather than SEC oversight. Participants are rarely informed:
- Whether the regulator is a state banking commissioner or the OCC
- What disclosure regime governs the product
- Whether federal securities antifraud standards apply
This regulatory ambiguity is material and should be disclosed prominently.
III. The Regulatory Identity Problem
The Department should require that all retirement plan investment disclosures clearly state:
- The primary regulator (SEC, OCC, state banking commissioner, or state insurance department).
- The legal form of the product (mutual fund, CIT, separate account, general account, group annuity contract, etc.).
- Whether the product is subject to federal securities laws.
- Whether the product’s assets are insulated from the sponsor’s balance sheet.
Participants cannot evaluate risk without knowing the legal structure and regulator.
IV. Electronic Delivery Without Substantive Transparency Is Insufficient
The proposed rule focuses on delivery mechanisms (paper vs. electronic). However:
- If the content lacks fee transparency, electronic delivery merely accelerates opacity.
- If underlying risks are not disclosed, format reforms are immaterial.
- If embedded compensation and spread economics remain hidden, ERISA’s fiduciary safeguards are weakened.
The Department should not modernize delivery standards while ignoring substantive disclosure gaps.
V. Recommended Amendments
I respectfully urge the Department to:
- Require disclosure of insurer spread and credited-rate determination methodology for all annuity products in ERISA plans.
- Require disclosure of state of issuance and primary regulator for annuity contracts.
- Mandate look-through disclosure of underlying holdings and fees for CIT-based target date funds.
- Require clear identification of the regulatory authority governing CITs.
- Require disclosure of affiliate relationships between recordkeepers, asset managers, insurers, and CIT sponsors.
- Establish a “meaningful benchmark” requirement for fixed annuities comparable to stable value or Treasury benchmarks.
- Clarify that lack of transparency in these areas may implicate prohibited transaction concerns under ERISA §406.
VI. Conclusion
Electronic disclosure reform is welcome. But disclosure reform without substantive transparency will not protect plan participants.
Annuities and CIT-based target date funds are among the fastest-growing retirement products. Their regulatory frameworks are fragmented. Their disclosures are often incomplete. Their embedded compensation structures are opaque.
If ERISA’s fiduciary protections are to remain meaningful, participants must be given clear, standardized, comparable, and regulator-specific disclosures.
I appreciate the Department’s consideration and would welcome further dialogue on these issues.
Respectfully submitted,
Christopher B. Tobe
Commonsense 401k Project
https://commonsense401kproject.com/2025/11/01/annuities-are-a-prohibited-transaction-dol-exemptions-do-not-work/ https://commonsense401kproject.com/2025/09/15/weak-standards-make-annuities-prohibited-transactions-in-erisa-plans/
The CommonSense 401k Project 