CHICAGO – Attorney General Kwame Raoul today co-led a coalition of 24 states in opposing a proposal from the Trump administration that would put the retirement savings of millions of Americans at risk.
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In their comment letter submitted to the U.S. Department of Labor today, the coalition argues that the department’s proposed rule would harm workers and retirees by increasing their exposure to risky, volatile alternative assets, such as cryptocurrency and private credit, which are often less understood by investors and could result in catastrophic financial losses. The Department of Labor estimates that under the proposed rule, about 4.5 million workers and retirees and $178 billion would go into funds with riskier investments each year.
“Workers should be able to rely on the standard Congress put in place to protect their retirement plans,” Raoul said. “I’m proud to lead my colleagues in calling on the Trump administration to not threaten the financial stability of our nation’s retirees with this dangerous and unlawful proposal.”
Congress set a high standard of prudence for the managers, known as fiduciaries, of 401(k) plans governed by the Employee Retirement Income Security Act of 1974. The standard requires them to choose and monitor investment options with care to ensure the financial soundness of the plans workers rely on for a secure retirement. For decades, courts have confirmed that fiduciaries must be both careful and skillful when managing workers’ savings.
If fiduciaries do not meet the standard set by law, they could face government enforcement or lawsuits from the workers and retirees who lose money. Congress gave workers and retirees the power to bring those lawsuits to hold fiduciaries accountable and deter them from taking improper or needless risks when choosing investments. The department’s proposed rule would create a loophole that tries to stop courts from evaluating whether fiduciaries were careful and skillful when choosing investments for workers’ retirement savings. The department has acknowledged that the proposed rule change would likely cause fiduciaries to move many Americans’ retirement savings out of stocks and bonds and into riskier options like cryptocurrency.
The coalition argues that the proposed rule would shift financial risk to workers and away from fiduciaries, and, in doing so, would harm states and their residents. The letter notes that the loss of retirement income could force workers to continue employment beyond retirement age, potentially harming their health and safety. Seniors who lose portions of their retirement savings would also increasingly have to rely on federal and state public assistance programs.
Raoul co-led the coalition with the attorneys general of California, New York and Oregon, and the Pennsylvania Department of Labor and Industry. Joining them in submitting the comment letter are the attorneys general of Arizona, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, North Carolina, Rhode Island, Vermont, Virginia and Wisconsin.
