US Department of Labor Announces Proposed Rulemaking on the Regulation of Longevity Risk-Sharing Pools

On March 30, 2026, the United States Department of Labor's Employee Benefits Security Administration announced the outcome of its review of the presidential executive order titled Democratizing Access to Alternative Assets for 401(k) Investors. While much of the order was indeed focused on alternative assets, the order also focused on longevity risk-sharing pools.

We have written previously that as we read of the law of the land, there appears to be little reason to think that longevity risk-sharing pools are per se illegal in the U.S. It is true that certain features of risk-sharing arrangements developed in the 19th century were banned in the US in 1906 after issuers of a product called "tontine insurance" were caught misappropriating assets and otherwise taking advantage of unsuspecting buyers through shady product features. Certainly, fraudulent practices should be illegal, and that was both the purpose and effect of the 1906 regulation. The banning of certain unfair practices, however, does not infer a ban on fair products that are offered and sold using fair practices.

That being said, a problem remained in that it was not entirely clear under the regulations whether or not risk-sharing pools were permissible within defined contribution plans. The rulemaking proposal attempts to make clear that they are – provided, of course, that plan fiduciaries follow a prudent process.

We applaud the DOL for clarifying the legal status of prudently designed longevity risk-sharing pools within defined contribution (DC) plans in the U.S. We also applaud the latitude given for allowing a wide variety of designs and means of implementation. For example, the proposed rule states:

"While, as explained above, the term “designated investment alternative” is defined broadly to include a qualified default investment alternative within the meaning of 29 CFR 2550.404c-5, the Department believes it is important to clarify that the definition does not stretch so broadly as to capture noninvestment features that may be chosen by plan settlors. This is particularly salient for longevity risk-sharing pools which are specifically discussed in EO 14330. While it is true that a longevity risk-sharing pool might be implemented or offered in a participant-directed individual account plan through a designated investment alternative, it is also true that a longevity risk-sharing pool might be implemented by a plan sponsor through structural changes to a plan design." (bolded emphasis ours)

In other words, a longevity risk-sharing pool could be designed as an investment option, but other methods of structuring risk-sharing pools may also be considered. To wit, refer to the DOL's footnote to the bolded sentence above, which cites our paper introducing a design that overlays the risk pooling structure onto participant accounts in a way that is highly transparent and ensures the actuarially fair treatment of all participants:

"... Individual Tontine Accounts, Richard K. Fullmer & Michael J. Sabin, JOURNAL OF ACCOUNTING AND FINANCE (Aug. 8, 2018) (describing how longevity risk pooling could be implemented, as a design matter, in an account-based solution, in a way that is wholly agnostic to the underlying investment or designated investment alternative)." (bolded emphasis and added hyperlink ours)

The overlay approach offers significant benefits, including the ability of the risk pool to span across multiple investment options rather than be constrained to a single option (leading to larger pools with superior longevity risk diversification) and the transparency associated with individual accounts in which all cash flow transactions (including longevity credits) are visibly accounted for down to the penny for each and every participant (as sponsors and participants are accustomed). Ultimately, it is up to plan fiduciaries to follow a prudent process in determining the design or designs that are best for their plans. As an expert in this area, we stand ready to help fiduciaries and others in this endeavor, no matter which design they may choose – packaged investment option, account overlay, or otherwise.

Nuovalo is a global leader in developing the science of fair longevity risk-sharing and helping retirement plans, financial services companies, and governments to design and deliver low-cost lifetime income to plan participants.

Nuovalo: We set the standard in both developing and applying the science of longevity risk-sharing pools