Trump 2.0: Some Predictions

What Retirement Plan Sponsors Might Encounter Over The Next Four Years

As we enter 2025 there is much speculation about the policies the Trump administration (“Trump 2.0”) will pursue. This site focuses on retirement matters and, accordingly, this blog will discuss what might occur under the incoming administration with respect to retirement plans and how the incoming administration could reshape the retirement plan landscape.  These are not predictions that specific policies will be pursued, but are intended to alert the reader about policies that could be pursued and trends that may emerge.

ESG in the Crosshairs

During Trump 1.0 the administration issued regulations designed to discourage the use of ESG (environmental, social and governance) factors in selecting plan investments. See DOL Delivers Lump of Coal to ESG Funds and Outgoing Administration Offers a Few Parting Shots. Plan fiduciaries can expect Trump 2.0  to pick up where Trump 1.0 left off. 

This is likely to mean that fiduciaries will face greater hurdles and additional steps in demonstrating that use of ESG factors are not inconsistent with ERISA fiduciary responsibilities. It may also mean that it may be more difficult to use ESG-influenced funds as default investments (such as within a target date series). And, most worryingly, the new administration may weigh in on litigation challenging the use of ESG funds (such as Spence v. American Airlines, Inc.) and give plaintiffs additional arguments for use in litigation against plan fiduciaries that do utilize ESG factors in fund investment.

Look Out For Crypto

The crypto industry is on a roll. Prices are climbing and President-elect Trump has been enthusiastic in his support for crypto assets. See, for example, What Another Trump Administration Could Mean for Crypto. Perhaps equally important is the number of senators and representatives who have expressed a favorable opinion of crypto. See The Crypto Industry Spent Over $130 Million on the Election. It Paid Off.

And, at the same time, crypto is becoming more mainstream, through the use of products such as exchange-traded funds. This enthusiasm for crypto—and political support—could result in efforts to facilitate the use of crypto as retirement plan investments. .

Although crypto would likely be too risky for an investment fiduciary in a DC plan (who is always at risk for poor investment selections), crypto could seek entry in areas where fiduciaries have less exposure—such as IRAs and self-directed brokerage accounts. And, don’t be surprised if you see the DOL softening the position taken in Compliance Assistance Release No. 2022-01 (where the DOL expressed “serious concerns about the prudence of a fiduciary’s decision to expose a 401(k) plan’s participants to direct investments in cryptocurrencies, or other products whose value is tied to cryptocurrencies”).

The United States General Accounting Office report on the availability and use of crypto assets in 401(k) plans (Industry Data Show Low Participant Use of Crypto Assets Although DOL’s Data Limitations Persist) describes some of the barriers to the use of crypto as a retirement plan investment. We can anticipate the reduction of some of those barriers in the coming years.

Defanged Regulators (Part I)

Perhaps the most significant change in the benefits field in the coming years is the product of the first Trump term—the appointment of three justices to the U.S. Supreme Court. These three justices were the core of the court majority that decided Loper Bright Enterprises v. Raimundo in 2024. This case eliminated the doctrine that, in certain instances, courts should give deference to decisions of regulatory agencies. Instead, under Loper Bright, “Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority.”

This may seem esoteric to many—but the impact will be profound. Under Loper Bright courts will be freer to strike down regulatory guidance and, correspondingly, it will be more difficult for regulators to issue meaningful guidance. For example, the Department of Labor has already had a difficult time in recent years, with major regulatory initiatives being halted or struck down left and right. One can expect even more of this in the coming years. 

Additionally, when courts have differing interpretations of the law we end up with different sets of rules in different judicial districts. We have already seen this with ERISA fiduciary litigation. The impact of these differences will grow as, under Loper Bright, court decisions replace regulatory guidance.

Defanged Regulators (Part II)

President-elect Trump and those around him (such as the new Department of Government Efficiency), have expressed a desire to slash government spending and the associated bureaucracy. This could come in the form of direct cuts to staffing (through budget cots) or more indirect moves to prompt regulatory staff to leave government (such as by moving department offices out of Washington, D.C. to encourage “voluntary” terminations). See Here’s what happened the last time Trump moved federal jobs out of D.C. 

However, regardless of the methods used, one can anticipate fewer employees at regulatory agencies—with correspondingly fewer resources to issue new regulatory guidance.

Nature (and Lawyers) Abhor a Vacuum

Employers and service-providers who are looking forward to an era of defanged regulators should not break out the champagne yet. Over the past few years it seems that the scope of fiduciary lawsuits has expanded—from the “traditional” claims (fees too high; investment results too low) to a broader set of claims—such as challenging the use of plan forfeitures (See New Front on Fiduciary Litigation?) and the use of (low cost) indexed target date funds (See Trauenicht v. Genworth Financial, Inc.). Indeed, it seems that a growing portion of plan governing committee meetings is spent assessing new litigation.

This is not to say that reduced regulatory activity directly causes expansion of fiduciary litigation; the regulatory “ecosystem” is complex. However, between the courts empowered by the Loper Bright decision (discussed above) and the shrinking regulatory state, plaintiffs’ attorneys will have more opportunity to challenge fiduciary practices—and we can expect them to take advantage of this opportunity.

Revenue “Enhancements”

As noted, the incoming administration has vowed to reduce the federal budget deficit. However, these cuts may not be enough—or come soon enough—to finance some of President-elect Trump’s other plans (such as extending the 2017 tax cuts). This is where the incoming administration may seek some revenue “enhancements.” 

There has not been any discussion of these enhancements (yet) and this blog is not predicting that such enhancements are forthcoming. But—if the talk turns to revenue increases the benefits community should brace for the possibility that some of those increases will come from benefits. Specifically, benefits’ contribution to revenue enhancements could come in the form of expanding provisions of the Internal Revenue Code requiring that certain retirement plan contributions must be made on a Roth basis. After all, SECURE 2.0 has started us down this path by mandating that catch-up contributions for certain highly paid employees must be in the form of Roth contributions—and this modest change generated over $22 billion for the Federal government. Expansion of this approach would have the political benefit of being a “extension” of an existing provision—and not a new tax.  

For the five year period of 2022-2026 the tax-favored treatment for employer-provided defined contribution retirement plans was estimated to cost the federal government $1.3 trillion in lost tax revenue. Report on Tax Expenditures for Fiscal Years 2022-2026,  Staff of the Joint Committee on Taxation. If the incoming administration goes looking for revenue, these numbers are just too large to disregard.

Conclusion

Making predictions—especially political predictions—is risky, especially for an incoming administration with a long and varied agenda. So, let’s not call these items predictions. Rather, consider them potential trends to look out for. And, of course, if any of these trends do emerge, we’ll remind you that you saw it here.