WASHINGTON, D.C. — The Trump administration is proposing a rule change to the regulations governing 401(k) plans. The initiative follows an executive order issued by President Donald Trump last year calling for new rules regarding 401(k) plans.

The proposed rule outlines a set of factors for employers to consider before approving investments in 401(k) plans. It states that following this outlined process would entitle employers' decisions to deference from the courts.

Daniel Aronowitz, who heads the Employee Benefits Security Administration at the Department of Labor, previously operated a firm that assisted large companies in protecting themselves against worker lawsuits. The Employee Benefits Security Administration is the Department of Labor office responsible for enforcing the Employee Retirement Income Security Act of 1974.

Aronowitz characterized increased litigation over 401(k) plans as a "con game" and labeled the enterprise of 401(k) lawsuits a "scam." Responding to criticism at an industry event in April, Aronowitz said, "Absolutely not." He further stated, "Read the proposed rule. We require a rigorous, objective, thorough and analytical fiduciary process that must be documented."

Ali Khawar, a former senior official at the Department of Labor, holds a different view. Khawar, who served as the second-in-command of the Employee Benefits Security Administration under President Joe Biden, said about the proposed changes, "What they have done is lower the standard for everything."

In 2025, over 90 class-action lawsuits were filed against large employers concerning 401(k) plans. Companies including UnitedHealth, Boeing, Verizon, and General Electric have settled 401(k) lawsuits without admitting wrongdoing for tens of millions of dollars. The Department of Labor states that an increase of 1% in additional fees can reduce a retirement nest egg by 28%. The Employee Retirement Income Security Act of 1974, which governs 401(k) plans nationwide, sets a standard of care for employers but does not list approved investment options. There are more than 700,000 401(k) plans across the nation.

Why It Matters

This proposed rule change would apply to over 700,000 401(k) plans nationwide and aims to standardize the fiduciary process employers must follow for investment approvals. The stated goal is to reduce litigation risk for employers, a context set by over 90 class-action lawsuits filed against large employers in 2025 concerning 401(k) plans, with several major companies settling such suits for large sums. The change could establish a new precedent for how courts evaluate employer decisions regarding 401(k) investments.