A manufactured comment file is the rule's real exposure

Nearly 12,000 of the comments supporting the Labor Department's plan to widen alternative investments in 401(k) plans show clear signs of being manufactured, many attached to the names of dead people, according to Bloomberg News. That figure is now the proposal's sharpest exposure, and the three lawmakers who want it investigated are aiming directly at it.

On Sept. 17, Representative Bobby Scott (D-VA), ranking member of the House Committee on Education and Workforce, Representative Jamie Raskin (D-MD), and Senator Bernie Sanders (I-VT), ranking member of the Senate Health, Education, Labor and Pensions Committee, asked Attorney General Todd Blanche and FBI Director Kash Patel to determine whether federal law was violated in assembling the record. "It is imperative to find out whether federal law was violated in this case and, if it was, ensure that those who broke the law are held accountable," the letter says, according to 401(k) Specialist, which credits Bloomberg with the original reporting on the submissions. Scott and Sanders also wrote to the department's inspector general demanding an audit, and a third letter went to acting Labor secretary Keith Sonderling calling for further investigation.

If finalized, the proposal those comments support, Fiduciary Duties in Selecting Designated Investment Alternatives, would significantly reshape the fiduciary framework for selecting the designated investment alternatives offered in participant-directed retirement plans, a category that includes investments holding alternative assets. Its mandate is Executive Order 14330, which called for expanded access to private-market investments and other alternatives in retirement plans and tasked the department with reexamining its guidance and clarifying its position on the fiduciary process.

This publication argued on Sept. 21 that the safe harbor's weak flank is its comment file, and that the test worth running was whether the record supporting the private-markets rule contains thousands of comments nobody filed. The letters now put that test in front of the FBI and the department's inspector general, moving the argument out of a policy dispute about diversification and into an evidentiary one about who actually asked for the rule.

Manufactured comment campaigns are not new, Bloomberg notes; they have grown more common as agencies face increasingly politicized efforts to shape public commentary, and governments have found them hard to detect and enforce, from small-town city councils to major federal agencies. The volume, which the report calls unusually large for a single rule, and the target distinguish this one: a proposal that would move participant-directed plans toward private-market assets on the strength of a record that has to be authenticated first.

A comment file is where an agency collects what the public sends it about a proposed rule, and Bloomberg's reporting describes one in which almost 12,000 of the supportive submissions may never have been filed by the people whose names they carry—the portion of the record that will read as evidence of demand if the proposal is finalized.

The procedural attack is the one that should worry the department, because it costs less to bring than a fiduciary-duty fight over whether private-market assets belong on a designated investment alternative menu and does not require a court to disagree about diversification, liquidity, or participant outcomes. What it requires is a record with holes in it, and the department can have a defensible substantive case and still lose on an exposed administrative record.

The likeliest repair is procedural rather than substantive: supplement the record, reopen the comment period, or both, so the final rule can address the disputed submissions on their content instead of how they arrived—a detour measured in months that lands on a proposal whose benchmark work remains stalled. Until the department gets a benchmark it can defend, a self-directed private allocation is not a menu option sponsors will treat as real, and no amount of comment cleanup produces one.

The audit may not settle much, because reporting on the practice describes detection and enforcement as difficult, and counting submissions is a lower bar than proving who filed them and whether a statute was broken.

Sponsors will buy private assets inside the target-date sleeve, not on the self-directed menu, while that benchmark gap persists. A contested comment file delays finalization, leaving more of the demand in the sleeve, where collective investment trusts now hold 55 percent of a $5.3 trillion target-date market and recordkeepers, not plan sponsors, decide which glidepath wins.

Watch two things as the rule moves: whether the comment period reopens before finalization, and how many of the near-12,000 submissions the department has to answer in the response-to-comments section of the final rule. That section will be the most-read part of the document.