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President Donald Trump has expressed support for encouraging 401(k) retirement plans to invest more heavily in private equity, real estate, and cryptocurrency—investment types that can be complex and risky. To facilitate this shift, the U.S. Department of Labor has proposed regulatory changes that would make it more difficult for employees to hold companies liable for how they manage their retirement plans.
Under the proposed rules, companies that follow a prescribed decision-making process would receive the benefit of the doubt in court, potentially reducing litigation risks for employers acting in good faith. The department announced in March that these changes aim to “democratize access to alternative investments in 401(k) plans” and lower legal risks for prudent employers.
However, experts caution that even with documented reasoning, companies may still act imprudently when selecting investment options. Tim Hauser, former deputy assistant secretary at the Labor Department’s Employee Benefits Security Administration, noted that it may be difficult for the average 401(k) participant to effectively monitor their plan’s investment choices.
Fee levels are a particular concern. Christine Benz, director of personal finance and retirement planning at Morningstar, said that if most funds in a 401(k) have an expense ratio above 1%, it should be considered a “red flag” indicating a high-cost plan. Quinn Curtis, a University of Virginia law professor who studies 401(k) fee litigation, added that even expense ratios of 0.5% to 0.75% are “actually pretty high by 401(k) standards.”
ProPublica has invited the public to submit their annual 401(k) disclosures to better understand the range of fees and funds available. Over 200 people have responded, many with questions about their plans.
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