Attorney General Bonta Opposes Plan to Weaken Federal Protections for Retirement Investments

OAKLAND — California Attorney General Rob Bonta today joined a coalition of 23 attorneys general and the Pennsylvania Department of Labor and Industry in opposing a Trump Administration proposal that would put the retirement savings of millions of Americans at risk. In a comment letter submitted to the U.S. Department of Labor (Department), 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  estimates that, under the proposed rule, $178 billion from 4.5 million workers and retirees would go into funds with riskier investments each year.

“Hardworking Americans deserve to retire with dignity and — especially amid a crisis of affordability — deserve to retire with enough money in their pocket to make ends meet. But now, a new proposed rule by the Trump Administration would expose American workers and retirees to risky investments that could leave them penniless at precisely the moment when they deserve to enjoy a peaceful retirement,” said Attorney General Bonta. “Today, alongside a coalition of states across the country, I am opposing this proposal, which would put the retirement savings of millions of Americans at risk and open the door to risky 401(k) investments, including cryptocurrency. I urge the Trump Administration to withdraw this proposed rule and to keep common sense standards in place that protect American workers and retirees.” 

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 fiduciaries to choose and monitor investment options with care to ensure the financial soundness of the plans that 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 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 unnecessary risks when choosing investments. The Department’s proposed rule would create a loophole intended to prevent 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.

In the letter today, 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 be increasingly forced to rely on federal and state public assistance programs. 

Joining Attorney General Bonta in submitting the comment letter are the attorneys general of Arizona, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, Virginia, and Wisconsin, along with the Pennsylvania Department of Labor and Industry.