401(k) Industry Pushes for DOL Rule Clarity on Collective Trusts

The Department of Labor’s lack of detail on collective investment trusts in its proposal to ease the inclusion of cryptocurrency, private equity, and other alternative assets in 401(k) plans has sparked pushback from attorneys and retirement industry groups.

Several letters submitted during the public comment period ending June 1 urged the DOL to include more details and examples about how CITs could be used, and to ensure the final rule is “vehicle-neutral” so plan sponsors and fiduciaries view the trusts on equal footing to mutual funds. Benefits attorneys said CITs shouldn’t be overlooked in the final rule given their growing popularity within retirement plans.

CITs are pooled investment vehicles that combine the assets of multiple investors and are cheaper than and regulated differently from mutual funds. They have become an increasingly common mode of investment for defined contribution plans, and benefits attorneys said they expect CITs to be a main vehicle to add private market exposure once the proposal is finalized, because of their widespread use within target-date funds and their different liquidity standards.

DOL’s proposal to create legal cover for fiduciaries who satisfy six factors when adding private assets to 401(k) plan menus featured several mentions of mutual funds in examples of how to qualify for the safe harbor, but only a passing reference to CITs. That lack of clarity sparked questions about how fiduciaries could use an increasingly prevalent investment vehicle when testing the new legal safe harbor.

Kevin Walsh, a principal at Groom Law Group, said it was likely an “inadvertent oversight,” but that public comment submissions “really identified that as a weakness.”

“If they’re going to be asset-class neutral, we would hope they’d also be asset-wrapper neutral, particularly where you’ve got a wrapper that’s basically only used by retirement investors,” Walsh said.

CITs have been an increasing presence in retirement plans. The collective trusts held 42% of defined contribution plan assets as of 2024, up from 23% in 2015, according to Morningstar’s 2026 retirement plan landscape report. The total assets in CITs through defined contribution plans increased in that period from $1 trillion to $3.8 trillion, according to Morningstar.

The pooled investment vehicles can offer a lower-cost alternative to mutual funds for retirement plan investments. While mutual funds are overseen by the Securities and Exchange Commission, collective investment trusts are regulated by federal or state banking agencies and the DOL.

The trustee overseeing a CIT is subject to fiduciary standards under the Employee Retirement Income Security Act, and the vehicles are typically sub-advised by a registered investment adviser.

‘Greater Clarity’

The DOL’s March 30 proposal references mutual funds more than a dozen times, including in examples that are meant to show fiduciaries cases that would or wouldn’t meet the requirements for evaluating liquidity and valuation to qualify for the safe harbor.

The proposal contains only one mention of collective investment trusts, which comes in the section on liquidity.

The Investment Company Institute, which represents the asset management industry, wrote in its comment letter that the DOL should “be careful not to unintentionally imply through its commentary and analysis in the examples that mutual funds are favored over other fund structures.”

Multiple retirement industry groups recommended the DOL in its final rule include specific examples showing that a fiduciary can satisfy the safe harbor requirements through a CIT investment structure.

Erin Cho, head of Mayer Brown’s ERISA fiduciary practice, said the proposal’s references to regulations that apply to registered funds likely reflected the influence of the SEC in the drafting process given the agency’s role in overseeing those funds.

“I do expect that in light of all of the comments that have been submitted, the Department of Labor will provide greater clarity and even greater support for collective investment trusts in the final rule,” Cho said.

Increased CIT Use

As the trusts have risen in popularity, the scrutiny around them has increased. Critics have argued CITs are opaque and have weaker disclosure and liquidity standards compared to mutual funds.

Timothy Hauser, a former longtime DOL official who was critical of the agency’s proposal, wrote in a public comment letter that the department was attempting to address myriad investment vehicles and assets in “a few one-size-fits-all-paragraphs.”

“However, it just isn’t possible to do justice to the statutory requirement of prudence in this manner,” Hauser wrote, noting the rule had to cover mutual funds, index funds, target date funds, collective investment trusts, commodities, and more.

Industry groups supportive of the proposal noted in their letters that the nuances of CITs make it so that some of the concepts outlined in examples don’t cleanly apply to collective trusts.

“We had advocated in our letter to have a vehicle-neutral, principle-based rule that really provides the flexibility for fiduciaries to do what the department in the preamble says they’re supposed to do, which is exercise their discretion and make the prudent judgments and be afforded deference for those decisions,” said David Cohen, associate general counsel at the Investment Company Institute.