The short answer: the Department of Labor has proposed a rule that would make it easier for employers to put annuities in a 401(k) default option or on the regular fund menu, but as of mid-September 2026 it is still a proposal, not a final rule. Nothing changes in your plan today. If a guaranteed income feature does show up in your account later, the questions worth asking are about fees, what happens if you leave your job, how strong the insurer is, and how easily you can get your money out.

What did the DOL propose about annuities in 401(k) default options?

On March 31, 2026, the Department of Labor published a proposed rule titled “Fiduciary Duties in Selecting Designated Investment Alternatives” in the Federal Register. It implements section 3(c) of Executive Order 14330, which was issued on August 7, 2025, and is titled “Democratizing Access to Alternative Assets for 401(k) Investors.”

The executive order’s list of alternative assets includes private equity, real estate, digital assets, commodities, infrastructure, and “lifetime income investment strategies including longevity risk-sharing pools.” That last item is why annuities are part of this conversation.

The proposal does not order any plan to add an annuity. It creates a safe harbor: if the people who pick a plan’s investments follow a careful process, their choice is presumed prudent and courts are expected to give it “significant deference,” as Mayer Brown’s April 2, 2026 summary puts it.

The six factors plan fiduciaries would weigh

Under the proposal, a plan fiduciary would have to objectively and thoroughly consider six factors for each investment option:

  • Performance: risk-adjusted returns, net of fees, compared with a reasonable number of similar options.
  • Fees: whether the cost is appropriate given the expected return and other benefits.
  • Liquidity: whether there is enough access to cash for the plan and for individual workers.
  • Valuation: whether the investment can be valued accurately and on time.
  • Performance benchmark: whether there is a meaningful comparison point.
  • Complexity: whether the fiduciary understands the product or has hired qualified help.

Does the proposal put annuities into the 401(k) default investment?

Not directly, and this is where a lot of headlines got ahead of the text. The rule’s definition of a “designated investment alternative” includes a plan’s qualified default investment alternative (QDIA), so the same six factor safe harbor would apply when an employer picks or changes its default fund.

The proposal also points to an advisory opinion the Department issued in 2025, in which the Department concluded that a program pairing investment management with guaranteed lifetime withdrawal benefits, offered through a variable annuity contract, met the requirements to be a QDIA. The Department added that whether choosing such a program is prudent for any particular plan depends on the facts.

What the proposal does not do is rewrite the QDIA regulation itself. Morgan Lewis noted in its April 6, 2026 analysis that QDIA questions were left for future guidance.

The two annuity examples in the rule

The proposal includes worked examples, and two involve annuities. In the fee example, a plan adds an asset allocation fund offered through a variable annuity contract that charges an extra fee for the lifetime income feature, and the fiduciary is treated as prudent after analyzing the annuity market, break-even ages, and that fee.

In the liquidity example, workers’ monthly contributions buy pieces of deferred income that start paying for life at age 65. Those contributions become fully committed after 90 days, and early withdrawals face a penalty and a market value adjustment, yet the fiduciary can still be prudent if it concludes the guaranteed payments justify those restrictions.

Why would this matter for workers approaching retirement?

Most 401(k) money sits in whatever the default is. The proposal itself notes that most plans with automatic enrollment use a target date fund as the default, and cites Vanguard data showing about 84 percent of participants used target date funds in 2024.

Meanwhile, guaranteed income inside plans is still rare. Bloomberg Law reported on March 26, 2026 that a 2023 LIMRA report found roughly 90 percent of defined contribution plans offer no in-plan option for lifetime guaranteed income. The same article noted that current default fund rules, which let workers move money out at least quarterly, have been a barrier for products that cannot be turned into cash quickly.

If employers use the safe harbor, a worker in their 50s could one day find part of their default fund quietly building a future income stream. That could be a real benefit for someone worried about outliving their savings, but it also means reading the fine print on something you never actively chose.

Where does the DOL rule stand as of September 2026?

The comment period closed on June 1, 2026. PLANADVISER reported on June 10, 2026 that the Department received nearly 45,000 comments, and that the head of the Employee Benefits Security Administration said the agency would review them swiftly before publishing a final rule.

As of September 18, 2026, I have not found a final rule published in the Federal Register. That means nothing from this proposal is in effect in any plan yet, and a final version could look different from what was proposed.

What are the tradeoffs of an annuity inside a 401(k)?

Fees. The rule’s own example assumes an extra charge for the lifetime income feature. The proposal asks fiduciaries whether a fee is appropriate given the expected return and other benefits, and the question for you is whether that charge buys enough guaranteed income to be worth it.

Portability. The SECURE Act of 2019 lets plans allow a direct transfer of a lifetime income investment to an IRA or another plan within 90 days before the product is dropped from the menu, according to Groom Law Group’s summary of the SECURE Act lifetime income provisions. How your specific product handles a job change or a new recordkeeper is something to confirm in writing.

Carrier risk. An annuity guarantee is only as strong as the insurance company behind it. State guaranty associations are a backstop, but NOLHGA explains that their protection generally applies to contracts or certificates issued to and owned by an individual, with limits that vary by state and different rules for unallocated plan contracts.

Liquidity. As the liquidity example shows, the proposal openly contemplates products where money is locked in and early withdrawals carry penalties. That tradeoff can make sense for income you plan to hold for life, but it is a poor fit for money you may need for an emergency.

How is an in-plan annuity different from buying one with a rollover?

With an in-plan annuity, your employer’s fiduciary picks the insurer and the product, and you get whatever terms the plan negotiated. The Department’s fee example assumes the extra charge “typically secures more favorable annuity conversion rates” than would be available outside the contract, which is one possible advantage of group pricing.

With a rollover at retirement, you move the money to an IRA and choose the annuity yourself, if you want one at all. You can compare carriers, contract types, and terms side by side, including simple fixed-rate options like the ones on My Annuity Store’s fixed annuity rate comparison, and you decide the timing.

The tradeoff is choice versus convenience. In-plan income can start building years earlier with no shopping required, while buying at retirement gives you more control but puts the homework on you.

What should you ask your plan?

I am the Founder of My Annuity Store, and I can’t give you individual advice about your own plan or money. What I can offer is the list of questions I would want answered before letting any guaranteed income feature sit in my account:

  1. Is any part of my default investment tied to an annuity or lifetime income feature, and what percentage?
  2. What is the total annual cost of the income feature, on top of the fund’s expense ratio?
  3. Which insurance company backs the guarantee, and what are its financial strength ratings?
  4. What happens to the guarantee if I leave my job, or if the plan drops this product?
  5. Can I withdraw or move this money before income starts, and what penalties or adjustments apply?
  6. When would income payments begin, and are they for my life only or for my spouse as well?

Until a final rule arrives, annuities in a 401(k) default option remain a proposal worth watching rather than something you need to act on today.

Frequently Asked Questions

Will my 401(k) default fund automatically include an annuity?

Not because of this proposal alone. It gives employers a legal safe harbor if they choose to add lifetime income, but it does not require any plan to do so, and it is not yet final.

Is the DOL 401(k) annuity rule final?

As of September 18, 2026, no final rule has been published that I could find. The comment period closed June 1, 2026, and the final version could change.

Can I take an in-plan annuity with me if I change jobs?

It depends on the product and your plan. The SECURE Act lets plans offer a direct transfer to an IRA or another plan when a lifetime income product is dropped from the menu, so ask your plan how a job change is handled.

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