What the Results of the 2024 Presidential Election Means for Your Retirement Plan
With the results of the 2024 presidential election now in, President-Elect Trump’s return to office has sparked significant discussion about potential changes for retirement plans, policies, and, of course, financial markets. For plan sponsors, business owners, and HR executives managing retirement plans, this means new questions about how the evolving political landscape might affect 401(k)s, 403(b)s, deferred compensation arrangements, and other retirement savings vehicles.
While we can’t predict the exact policies that will be introduced in Trump's second administration, understanding the general priorities of his past administration can help plan sponsors stay informed, adaptable, and proactive. This blog will focus on providing context and resources to help you prepare for possible changes without speculation or bias.
Key Areas to Watch for Retirement Plan Sponsors
Broadly:
Leadership of Government Committees
The shift in Senate control can significantly influence the composition and priorities of key committees that oversee retirement-related legislation, such as the Senate Finance Committee and the Health, Education, Labor, and Pensions (HELP) Committee. Changes in leadership or majority control may result in new legislative agendas, potentially impacting tax policy, retirement savings incentives, and regulatory oversight. For plan sponsors, it’s essential to monitor how these changes could shape future policies affecting retirement plans.
Tax Policy Changes and Contribution Limits
Retirement plans often see changes in contribution limits, tax incentives, and employer deduction rules during new administrations. Proposals or adjustments to the tax code could impact both qualified plans and non-qualified deferred compensation plans. As the Trump administration has historically focused on tax reform, there may be discussions about lowering corporate or personal tax rates, which could affect the appeal of deferring income into tax-advantaged retirement accounts.
Market Volatility and Retirement Investments
Election results often stir short-term market fluctuations, which can influence the investment performance of 401(k)s and 403(b)s. President-Elect Trump’s previous term saw both market rallies and corrections tied to trade policy changes, tax reforms, and geopolitical tensions. Sponsors may want to revisit their plan’s investment options, emphasizing diversification to help participants navigate potential market swings.
Social Security
While President-Elect Trump has promised to protect the benefit, and even went so far as to promise to work towards ending taxation on Social Security benefits, many potential members of his administration have targeted Social Security as an opportunity for reduced government spending. Removing taxation would also impact its potential insolvency, as taxation is earmarked for funding future benefits, currently forecasted for under ten years from now.
More specifically:
Regulatory and Fiduciary Responsibilities
A new Department of Labor (DOL) under a Trump administration may bring changes to fiduciary rule interpretations, cybersecurity requirements, and overall plan administration priorities and standards. Plan sponsors should keep a close eye on potential shifts in compliance obligations to ensure they remain aligned with updated regulations.
Secure Act 2.0 Implementation and Beyond
While Secure Act 2.0 has already set a strong foundation for retirement planning with provisions such as expanded auto-enrollment capabilities, allowing for emergency savings, student loan matching, and defining long-term part-time employees, a new administration might revisit or tweak its implementation. It’s also possible that President-Elect Trump’s administration will propose further legislative updates to encourage retirement savings. Let's not forget that the original SECURE ACT was passed during Trump's first term. SECURE 3.0 is already being discussed; what does the political change mean to its eventual implementation?
ESG (Environmental, Social, and Governance driven investing)
Federal initiatives to allow retirement plan fiduciaries to consider ESG investments into plans may continue to be clawed back or have a stricter rule implemented. For reference, in 2020, during the first Trump administration, the DOL finalized a rule limiting the consideration of ESG factors in retirement plan investments, emphasizing financial performance "pecuniary factors" over social goals. This rule was reversed under the Biden administration in late 2022, when the DOL finalized regulations that explicitly allowed plan fiduciaries to consider ESG factors if they are financially relevant. Since then, Republican-led states Governors have challenged the rules in the court system with litigation ongoing. The SEC under Chair Gary Gensler, whose term runs through 2026, has also disbanded its ESG taskforce, and reprioritized its focus from ESG over the last year, amid legal challenges to its ESG disclosure and climate rules. These shifting rules highlight the importance of staying informed about federal guidance, as the regulatory stance on ESG could evolve again under new leadership.
How Plan Sponsors Can Stay Proactive
In times of political transition, one thing remains constant: the need for careful, informed decision-making. As a plan sponsor, here are a few steps to help you prepare for any potential changes:
Partner with a Retirement Plan Advisor
A trusted advisor can help you navigate the uncertainty surrounding new policies and ensure your plan remains compliant, competitive, and well-structured. Advisors stay informed about regulatory and market changes, offering valuable insights tailored to your organization’s needs.
Reassess Your Plan’s Design
Consider whether your retirement plan is optimized for a changing economic and tax environment and attracting talent. This could mean revisiting plan features like automatic enrollment, investment menus, and employer match structures.
Communicate with Participants
Employees may feel anxious about how political changes could affect their retirement savings. Providing education and resources, especially around market volatility and the benefits of staying the course, can help alleviate concerns and keep employees engaged with their financial goals.
Staying Grounded in Uncertainty
While political shifts often bring questions and speculation, it’s important to focus on what you can control. The principles of long-term retirement planning—patience, consistency, and adaptability—remain the foundation for both participants and plan sponsors alike. Staying informed and partnering with experts will help you weather changes and position your retirement plan for success under any administration.
No matter what changes lie ahead, our mission is clear: to help you start and build retirement plans that sustain your business and your employees’ financial futures. Contact us today at Christina.Tunison@lpl.com to learn how we can support your plan during this new chapter.
This information is not intended as authoritative guidance or tax or legal advice. You should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.
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