What Is a Regulatory Flexibility Analysis for a DOL 401(k) Rule?

The Regulatory Flexibility Act asks DOL to show what a rule does to small entities. It does not turn that analysis into the rule.

That difference matters whenever an EBSA proposal contains hundreds of pages of:

• plan counts
• revenue estimates
• compliance costs
• service-provider assumptions
• small-business alternatives.

A reader can mistake that material for:

what ERISA requires.

It is not.

The operative rule states the legal command.

The small-entity analysis answers a separate question:

How will that command affect smaller regulated entities, and could DOL accomplish the statutory objective with less burden?

DOL Has Two Basic Paths

At proposal stage, DOL first asks whether the rule is likely to have a:

significant economic impact on a substantial number of small entities.^[4][7]

If the answer is no, the agency can use the certification route under:

5 U.S.C. 605(b).^[4]

If DOL cannot make that certification, it prepares an:

initial regulatory flexibility analysis.^[2]

That is the proposal-stage flexibility analysis.

This is not a choice between:

analysis

and:

no analysis.

The certification path still requires facts.

What Does a Certification Require?

Section 605(b) allows the agency head to certify that a proposed or final rule will not have a significant economic impact on a substantial number of small entities.^[4]

But the statute requires the agency to publish:

• the certification
• a statement providing its factual basis.^[4]

DOL's own procedures emphasize the same point.^[7]

A certification is therefore not supposed to be:

"Impact is small. Trust us."

The agency has to explain why.

That factual basis can itself become important in later review.

Why Is the Factual Basis So Important?

Because a certification avoids the more detailed IRFA or FRFA.

If the threshold decision is wrong, the agency may have skipped analysis Congress required.

DOL's procedures warn that certification is subject to judicial review and should clearly explain the agency's reasoning.^[7]

SBA Advocacy makes the same point:

a factual basis should address both:

• how many small entities are affected
• what impact the rule has on them.^[9]

Certification is a supported conclusion.

Not a procedural loophole.

What Does the Proposal-Stage Analysis Cover?

Section 603 requires an initial analysis when an agency must publish an NPRM and cannot use the Section 605 certification.^[2]

The proposal-stage review has to address:

• why the agency is considering action
• the rule's objectives and legal basis
• the number of small entities affected, where feasible
• reporting, recordkeeping and other compliance requirements
• professional skills needed for compliance
• overlapping, duplicative or conflicting federal rules
• significant alternatives that reduce small-entity impact.^[2]

That last category is where the statute becomes especially practical.

What Alternatives Does Congress Expect DOL to Consider?

Section 603(c) gives examples.^[2]

DOL should consider whether statutory objectives can be met through:

• different compliance requirements
• different timetables
• simplified reporting
• consolidated requirements
• performance standards instead of design standards
• full or partial small-entity exemptions.^[2]

Those are examples, not a mandatory menu.

The agency does not have to adopt every alternative.

It does have to take the small-entity problem seriously.

"Small Entity" Is Broader Than "Small Business"

The RFA defines:

small entity

to include:

• small business
• small organization
• small governmental jurisdiction.^[1]

That matters in retirement regulation because the economic actor can be:

• employer
• financial firm
• nonprofit
• plan
• service provider.

The legal category depends on the rule.

A 401(k) plan with 60 participants and a business with 60 employees may often be related.

They are not automatically the same analytical unit.

A Small Plan Is Not a Universal RFA Definition

EBSA sometimes uses plan size as a practical proxy.

The 2026 paper-statement proposal is a direct example.^[13]

For that IRFA, DOL treats an employee benefit plan with:

fewer than 100 participants

as a small entity.^[13]

DOL ties that approach to ERISA's simplified reporting authority for smaller plans.^[13]

It then expressly notes that this definition differs from SBA's small-business size standards and asks for comment on the appropriateness of the choice.^[13]

That qualification should travel with the number.

Why the 100-Participant Threshold Should Not Be Copied Everywhere

Because the threshold belongs to that analytical context.

Another EBSA rule can regulate:

• advisers
• broker-dealers
• insurers
• recordkeepers

rather than plans themselves.

Those firms may be classified using:

• SBA size standards
• revenues
• employee counts
• industry codes.

The RFA does not say:

all retirement rules use 100 participants.

A researcher should identify:

what entity DOL is measuring.

Then identify:

what size standard applies.

"Significant" and "Substantial" Are Not Fixed Statutory Numbers

The statute uses:

significant economic impact

and:

substantial number of small entities.^[4]

It does not define one universal:

• dollar threshold
• percentage of revenue
• percentage of firms.

SBA Advocacy notes that agencies exercise judgment in setting those thresholds and that agency practice can vary by rule.^[9]

DOL's internal guidance discusses rules of thumb some agencies have used, such as cost relative to:

• revenue
• profit.^[7]

Those are screening approaches.

They are not statutory definitions that can be applied mechanically to every EBSA rule.

The 2026 Paper-Statement IRFA Shows the Scale

DOL's February 25, 2026 proposal implements SECURE 2.0 paper-statement requirements and related changes to electronic-disclosure safe harbors.^[13]

Its small-entity analysis estimates:

• 663,107 small defined contribution plans
• 40,117 small defined benefit plans
• 703,224 affected small plans
• 9,581,855 affected participants and beneficiaries in small plans.^[13]

That is not a side issue.

The proposal affects essentially the entire small-plan universe covered by the analysis.

Why Does the Paper Rule Affect So Many Small Plans?

The proposal changes disclosure mechanics.

Small plans using the 2002 electronic safe harbor may need a new initial paper notice for specified newly eligible individuals.^[13]

Plans using the 2020 safe harbor face changes involving:

• paper benefit statements
• electronic-request explanations
• limits on paper-copy fees.^[13]

These are broad administration rules.

Small-plan impact therefore comes from:

scale multiplied by recurring disclosure activity.

A modest per-plan cost can still produce a large aggregate burden.

Could DOL Simply Exempt Small Plans?

The paper-statement IRFA says no, not while fully implementing the statute.^[13]

DOL explains that SECURE 2.0 did not provide a small-plan exemption from the relevant requirements.

Section 603 asks agencies to consider small-entity alternatives.

It does not authorize an agency to contradict Congress.

That is an important limit:

flexibility has to remain consistent with the governing statute.

A less burdensome alternative that violates the statute is not a valid alternative.

AC38 Uses a Different Small-Entity Structure

The March 31, 2026 designated-investment-alternatives proposal does not analyze only plan size.^[10]

It considers:

• small participant-directed defined contribution plans
• small service providers
• target-date-fund providers
• insurers
• other affected financial firms.^[10]

DOL says most small participant-directed plans would be affected because the proposal addresses investment-selection process and safe-harbor use.^[10]

The small-entity analysis therefore follows the economic chain around the plan.

Not just the plan itself.

Why Does AC38 Assume So Many Financial Firms Are Small?

DOL cites Census Statistics of U.S. Businesses data for Finance and Insurance.^[10]

It states that:

97.6 percent

of firms in that industry are small under the relevant analytical assumptions.^[10]

DOL therefore assumes the same percentage of service providers are small firms.

That assumption matters because many small plans rely heavily on outside providers for:

• administration
• investment-menu design
• fiduciary support.^[10]

A rule can affect a small plan indirectly through the firms serving it.

AC38 Also Shows Why "Impact" Is Not Always a Mandated Cost

The proposal's largest modeled small-entity cost is:

rule review.^[10]

But DOL says rule review is not a direct requirement imposed by the proposal.

It is an expected business response.

The proposal also anticipates some plans voluntarily obtaining written representations to use the proposed safe harbor.^[10]

That creates an unusual RFA problem.

DOL is analyzing real economic effects even when the regulation does not directly command the exact activity producing the modeled cost.

Why Didn't DOL Create a Small-Plan Delay for AC38?

DOL says the principal modeled costs are not direct mandatory requirements that can simply be switched off for small entities.^[10]

It also reasons that excluding or delaying small plans would prevent them from using the proposed safe harbor and receiving the associated modeled benefits.^[10]

That is a real trade-off.

A small-entity exemption can reduce burden.

It can also remove access to:

• relief
• flexibility
• safe harbor.

"Exemption" is not automatically the small-business-friendly answer.

What Happens After the IRFA?

Public comment tests the proposal-stage analysis.

Commenters can challenge:

• entity counts
• size standards
• compliance costs
• wage assumptions
• alternatives
• indirect impacts.

SBA Advocacy can submit comments representing small-entity concerns.

DOL must consider those comments in the final rulemaking process.^[3][7]

If the final rule still crosses the statutory threshold, DOL prepares a final small-entity analysis under Section 604.

What Must the Final Small-Entity Analysis Do?

Section 604 requires more than updating a spreadsheet.^[3]

The Section 604 analysis must address:

• need and objectives
• significant issues raised in public comments
• DOL's assessment of those issues
• changes made because of comments
• SBA Advocacy comments
• final affected-small-entity estimates
• final compliance requirements
• steps taken to minimize impact
• reasons alternatives were accepted or rejected.^[3]

This makes the FRFA a useful source for one particular question:

What did DOL change after hearing the small-entity criticism?

The 2024 Retirement Security Final Analysis Gives a Concrete Answer

The 2024 Retirement Security final rule contained a substantial Section 604 analysis.^[14]

SBA Advocacy had challenged several proposal-stage assumptions.^[15]

One of the most striking involved:

Independent Producers.

The proposal had estimated:

4,000

affected producers.^[14][15]

After comments and further analysis, DOL revised that figure to:

86,410.^[14]

That is not a rounding adjustment.

It shows why proposal-stage small-entity estimates should not be frozen into later articles.

Why Did the Independent-Producer Estimate Change So Much?

SBA Advocacy argued that DOL had underestimated affected small entities.^[14][15]

DOL revisited:

• entity categories
• data
• methodology.^[14]

The final small-entity analysis also revised other estimates.

That is the RFA process doing actual work:

comment → reconsideration → changed estimate.

The lesson is not that SBA's number automatically wins.

The lesson is that a supported challenge can force the agency to defend or revise its assumptions.

Advocacy Is Influential, Not the Rulemaking Agency

The Office of Advocacy represents small-entity interests in federal rulemaking.^[8]

It can:

• comment
• provide data
• challenge analysis
• recommend alternatives
• train agencies on RFA compliance.

But EBSA remains the agency making ERISA policy.

A memo should say:

"the SBA office argued..."

not:

"DOL concluded..."

unless the final DOL document adopts the point.

INV-198's authorship rule applies here too.

DOL Had to Address Small-Business Alternatives in the 2024 Final Rule

the small-business advocate urged DOL to consider alternatives including relief for small businesses.^[14][15]

The final FRFA examined a combined alternative involving:

• not amending PTE 2020-02
• exempting small businesses from the expanded fiduciary definition.^[14]

DOL estimated that such an approach could avoid substantial compliance costs.

It rejected the alternative because DOL believed it would also leave a large share of the advice market without the protections the rule was designed to provide.^[14]

Whether one agrees with that policy judgment is separate.

The final analysis shows the reasoning.

Does an IRFA Require a Small Business Advocacy Review Panel?

Not for EBSA.

This is a common overgeneralization.

Section 609(b) imposes the mandatory pre-proposal panel process only on specified:

covered agencies.^[5]

The statute lists:

• EPA
• CFPB
• OSHA.^[5]

DOL's own procedures state plainly:

OSHA is the only DOL agency that must convene such panels.^[7]

EBSA can have a significant small-entity rule and prepare an proposal-stage analysis without running the OSHA-style mandatory panel.

Why the Panel Distinction Matters

A researcher may see:

statutory small-entity impact threshold

and assume:

mandatory SBAR panel.

For EBSA, that is wrong.

The agency still has duties involving:

• analysis
• Advocacy
• public participation
• alternatives.^[2][5][7]

But the special Section 609(b) panel machinery is tied to the covered-agency definition.

Agency identity matters.

Small Entities Still Must Have a Chance to Participate

Section 609(a) requires agencies to assure reasonable opportunities for small entities to participate when a rule has the threshold significant impact.^[5]

Techniques can include:

• direct notice
• targeted publications
• conferences
• hearings
• electronic comments
• simplified participation procedures.^[5]

DOL's guidance encourages early interaction with smaller regulated parties.^[7]

That is broader than the formal panel requirement.

No mandatory EBSA panel does not mean:

no small-business participation duty.

Can RFA Compliance Be Challenged in Court?

Yes, after final agency action under the statutory framework.

Section 611 gives adversely affected or aggrieved smaller organizations a route to judicial review of specified RFA compliance.^[6]

A court can order corrective action.

The statute expressly contemplates remedies including:

• remand
• in appropriate circumstances, deferred enforcement against affected smaller firms.^[6]

The regulatory flexibility analysis also becomes part of the agency record for review.^[6]

That gives the RFA more force than a purely aspirational policy memo.

Does Judicial Review Mean Every Bad Estimate Invalidates a Rule?

No.

The statutory review provisions do not turn every disagreement over:

• respondent count
• wage rate
• firm classification

into automatic vacatur.

The legal issue is agency compliance with the RFA requirements under the applicable standard of review.

A weak assumption can still matter if it undermines:

• certification
• affected-entity analysis
• alternatives analysis.

But factual disputes have to be analyzed in context.

The RFA is enforceable.

It is not a mathematical strict-liability statute.

Small-Entity Analysis vs Regulatory Impact Analysis

INV-199 covers the broader economic analysis.

The simplest distinction:

RIA: economy-wide and policy-wide consequences.

RFA analysis: effects on covered small organizations and alternatives for reducing their burden.

One Federal Register document can contain both.

The same cost estimate can appear in both.

That does not make the analyses identical.

The small-entity statute has its own questions.

Small-Entity Analysis vs Paperwork Reduction Act

INV-200 covers information collections.

The paperwork analysis asks:

• what reporting
• recordkeeping
• disclosure burden

the federal requirement creates.

The flexibility analysis can use those burden figures when asking:

How do those requirements affect smaller regulated parties?

So:

PRA number → input

can become:

RFA small-entity effect.

The statutes remain separate.

Worked Example: Proposal Analysis Is Treated as the Rule

Vendor says:

"DOL requires all small plans to hire an investment adviser because the initial analysis assumes small plans use service providers."

Wrong.

The analysis describes market behavior used to estimate impact.

The proposed regulatory text determines whether hiring a professional is:

• mandatory
• optional
• part of a safe harbor.

Economic assumptions are not legal commands.

Worked Example: 100 Participants Becomes a Universal Definition

Compliance system adds:

"RFA small business = plan under 100 participants."

That is too broad.

The 2026 paper-statement proposal uses the under-100 threshold as its small-plan definition for that analysis.^[13]

AC38 separately analyzes financial firms using industry size data.^[10]

The right data field is:

small-entity definition used in this rule.

Not:

universal RFA definition.

Worked Example: SBA Comment Becomes DOL Guidance

Trade association quotes the January 2024 Advocacy comment criticizing the Retirement Security proposal.

Article says:

"DOL determined its estimate was too low."

At the comment stage, that was SBA's position.^[15]

DOL later revised the estimate in the final FRFA.^[14]

Those two sources should be cited in sequence.

That preserves:

• disagreement
• agency response
• final analysis.

Worked Example: EBSA Analysis Triggers an OSHA Panel

Research memo says:

"Because AC38 contains a proposal-stage small-entity analysis, EBSA had to convene a Small Business Advocacy Review panel."

No.

Section 609 defines the agencies subject to that mandatory process.^[5]

EBSA is not one of them.

DOL's own procedure confirms only OSHA within the Department is subject to that panel requirement.^[7]

The flexibility-analysis requirement and the panel requirement should not be merged.

Worked Example: Certification Is Rejected Because There Is No small-entity analysis

Final rule contains:

• Section 605(b) certification
• factual basis
• no FRFA.

Commentator says:

"The rule is defective because every final rule needs a final analysis."

Not correct.

The RFA expressly allows the certification path where the statutory threshold is not met.^[4]

The real question is:

Is the certification adequately supported?

That is where the analysis belongs.

How Should a Committee Use the Proposal Analysis?

Use it for:

• implementation planning
• vendor discussions
• cost forecasting
• identifying likely small-plan pain points
• spotting alternatives DOL is considering.

Do not use it to:

• claim a proposed obligation is already effective
• assume final text will be unchanged
• assume every small-plan estimate applies to your plan
• ignore current CFR requirements.

The proposal-stage analysis is forward-looking evidence.

Not current-law authority.

Small-Entity Analysis Checklist

Before citing an RFA section, verify:

Stage

Is it:

• proposal Section 603 analysis
• final Section 604 analysis
• Section 605 certification?

Covered entity

Is DOL measuring:

• plan
• employer
• financial firm
• nonprofit
• government entity?

Size definition

What makes the entity small?

Threshold

Did DOL certify or conclude the rule crosses the significant/substantial threshold?

Population

How many smaller organizations are affected?

Requirements

Which costs are:

• mandatory
• expected business response
• optional safe-harbor behavior?

Alternatives

What less burdensome options did DOL consider?

SBA comments

What did Advocacy actually argue?

Final response

Did DOL change:

• estimates
• text
• assumptions
• alternatives?

Current law

What does the operative regulation say now?

Those questions keep a small-business analysis in its proper role.

A Practical Source Matrix

The small-entity section is one layer of the rulemaking record.

It is not the entire record.

Fast Answers

What is the Regulatory Flexibility Act?

A federal statute requiring agencies to consider the effects of covered rulemaking on affected smaller firms.

What is the proposal-stage flexibility analysis?

The proposal-stage initial regulatory flexibility analysis required when the agency cannot certify that the rule lacks statutory small-entity impact threshold.^[2][4]

What is the final-stage flexibility analysis?

The final-stage analysis addressing small-entity effects, significant comments and burden-minimizing alternatives.^[3]

Can DOL skip the full proposal-stage analysis?

Yes, if the agency head makes the Section 605(b) certification and provides a factual basis.^[4]

Does the RFA define one fixed dollar threshold for "significant"?

No.

Does it define one fixed percentage for "substantial number"?

No.

Is every plan under 100 participants automatically a small business?

No.

Why does DOL use fewer than 100 participants in the 2026 paper-statements proposal?

It uses that threshold as a small-plan definition tied to ERISA reporting provisions for that analysis and acknowledges it differs from SBA small-business standards.^[13]

How many small plans does that proposal estimate are affected?

703,224.^[13]

What does AC38 assume about financial service providers?

DOL assumes 97.6 percent of Finance and Insurance firms are small under its data and methodology.^[10]

Did the small-business advocate affect the 2024 Retirement Security final analysis?

Yes. DOL revised multiple estimates after comments, including increasing the independent-producer estimate from 4,000 to 86,410.^[14][15]

Does every EBSA flexibility analysis require a Small Business Advocacy Review panel?

No. The mandatory Section 609(b) panel process applies to specified covered agencies; within DOL, that is OSHA, not EBSA.^[5][7]

Can RFA compliance be judicially reviewed?

Yes, after final agency action under 5 U.S.C. 611.^[6]

Is the small-entity analysis current 401(k) law?

No.

What is the safest one-sentence rule?

Use the small-entity record to understand who bears the rule's small-entity impact; use the operative legal text to determine what a 401(k) plan must do.

Sources & References

1. Legal Information Institute / U.S. Code: 5 U.S.C. §601 — Definitions — https://www.law.cornell.edu/uscode/text/5/601
2. Legal Information Institute / U.S. Code: 5 U.S.C. §603 — Initial Regulatory Flexibility Analysis — https://www.law.cornell.edu/uscode/text/5/603
3. Legal Information Institute / U.S. Code: 5 U.S.C. §604 — Final Regulatory Flexibility Analysis — https://www.law.cornell.edu/uscode/text/5/604
4. Legal Information Institute / U.S. Code: 5 U.S.C. §605 — Avoidance of Duplicative or Unnecessary Analyses — https://www.law.cornell.edu/uscode/text/5/605
5. Legal Information Institute / U.S. Code: 5 U.S.C. §609 — Procedures for Gathering Comments — https://www.law.cornell.edu/uscode/text/5/609
6. Legal Information Institute / U.S. Code: 5 U.S.C. §611 — Judicial Review — https://www.law.cornell.edu/uscode/text/5/611
7. U.S. Department of Labor: Department of Labor Procedures for Compliance With the Regulatory Flexibility Act and Executive Order 13272 — https://www.dol.gov/general/regs/guidelines
8. U.S. Small Business Administration — Office of Advocacy: How to Comply With the Regulatory Flexibility Act — https://advocacy.sba.gov/resources/regulatory-flexibility-act/rfa-basics/how-to-comply-with-the-regulatory-flexibility-act/
9. U.S. Small Business Administration — Office of Advocacy: Data Resources for Federal Agencies — https://advocacy.sba.gov/?p=14578
10. U.S. Department of Labor — Employee Benefits Security Administration / GovInfo: Fiduciary Duties in Selecting Designated Investment Alternatives — Proposed Rule, 91 FR 16088, March 31, 2026 — https://www.govinfo.gov/content/pkg/FR-2026-03-31/pdf/2026-06178.pdf
11. U.S. Small Business Administration — Office of Advocacy: EBSA Proposed Rule on Fiduciary Duties in Selecting Designated Investment Alternatives — https://advocacy.sba.gov/2026/04/01/ebsa-proposed-rule-on-fiduciary-duties-in-selecting-designated-investment-alternatives/
12. U.S. Small Business Administration — Office of Advocacy: Advocacy Supports EBSA Rule Clarifying Fiduciary Duties — https://advocacy.sba.gov/2026/06/09/advocacy-supports-ebsa-rule-clarifying-fiduciary-duties/
13. U.S. Department of Labor — Employee Benefits Security Administration / GovInfo: Requirement To Provide Paper Statements in Certain Cases — Proposed Rule, 91 FR 9213, February 25, 2026 — https://www.govinfo.gov/content/pkg/FR-2026-02-25/pdf/2026-03723.pdf
14. U.S. Department of Labor — Employee Benefits Security Administration / GovInfo: Retirement Security Rule — Final Rule, 89 FR 32122, April 25, 2024 — https://www.govinfo.gov/content/pkg/FR-2024-04-25/pdf/2024-08065.pdf
15. U.S. Small Business Administration — Office of Advocacy / DOL Public Comments: Comment on Retirement Security Rule, January 2024 — https://www.dol.gov/sites/dolgov/files/ebsa/laws-and-regulations/rules-and-regulations/public-comments/1210-AC02/00150.pdf

Educational Disclaimer

ROIStreet publishes educational content about 401(k) plans, ERISA, Department of Labor rulemaking, the Regulatory Flexibility Act, SBA Advocacy and federal small-entity analysis. This article is not legal, fiduciary, tax, investment, regulatory, economic or plan-administration advice. IRFAs, FRFAs and Section 605 certifications analyze small-entity effects and agency reasoning; they do not themselves create the underlying ERISA obligation. Definitions, affected-entity estimates, assumptions and alternatives can change between proposal and final action. Current compliance should be verified against operative statutes, published Federal Register actions, current CFR text, valid exemptions, current agency guidance and judicial decisions.

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