Regulatory and legislative hurdles, along with a slew of unanswered practical questions, will pose significant challenges as the Trump administration seeks to turn its newly announced 401(k) expansion plan into a reality.
President Donald Trump during his State of the Union address said he would act next year to offer Americans without employer-sponsored 401(k)s “access to the same type of retirement plan offered to every federal worker.” The government would match contributions up to $1,000 each year, he said.
The concept would be modeled after the Thrift Savings Plan (TSP), a low-fee federal worker retirement program, and build on the Saver’s Match program included in the SECURE 2.0 Act passed by Congress in 2022.
While the president offered scant details, retirement benefits advocates and attorneys said it was an ambitious proposal that could help address the roughly 56 million workers whose companies don’t offer a plan. To make it work, the administration must address key questions, some of which would require congressional action and development of regulations, they said.
“It just gets really complicated really quickly, and there’s always a risk of unintended consequences people are going to have work through,” said Michael Kreps, an attorney at Groom Law Group.
National Economic Council Director Kevin Hassett told reporters at the White House that the retirement accounts “can be stood up right away” and that the White House has been working with the Treasury Department to revamp the Saver’s Match program set to go into effect in 2027.
The administration expects to go back to Congress “to expand that program so it affects everybody the president talked about,” Hassett said. The Saver’s Match under SECURE 2.0 matches 50% of contributions with Treasury funds, up to $1,000. It only applies to individuals earning up to $35,500 and married couples earning up to $71,000.
Benefits attorneys said the administration could work within its existing authority to create the accounts—as the Obama administration did with the now defunct myRA program—then use the government match to incentivize participation.
Launching a federally-run 401(k) plan would require a major investment in technology and integration with payroll providers “that will take a long time to build,” Kreps said.
The administration would also have to issue “a number of regulations” to define how the accounts work, he said.
The Treasury Department would likely have to outline rules around worker and government contribution limits, withdrawal limits, and tax advantages and penalties.
But the administration may be able to create the new retirement accounts by drawing on the developing regulatory framework for Trump Accounts, the investment vehicles for newborns established in last year’s GOP tax and spending bill.
“The Trump Accounts had a similar administrative challenge broadly,” said William McBride, chief economist at The Tax Foundation. “Those accounts are a new idea in a lot of ways, but in one big way they are accounts that are automatically set up by the Treasury Department for the beneficiaries.”
Congressional Role
SECURE 2.0 mandated that most employers newly offering 401(k)s should automatically enroll employees at a minimum default contribution.
Trump could ask Congress to approve even broader auto enrollment. Studies have shown making the process automatic is critical to getting workers to participate in any 401(k) plan.
Otherwise, the administration would need to engage in a robust education and awareness campaign to get workers to enroll, benefits attorneys and advocacy groups said.
Congress would likely have to designate an agency or a governing board to oversee the accounts and manage investment options.
One route for Trump to set up at least part of his plan framework is the Retirement Savings for Americans Act (RSAA), a bill with bipartisan Congressional support. As written now, it would automatically enroll workers without access to an employer-sponsored retirement plan in a new retirement account. Low- and middle-income workers would be eligible for a match from the federal government.
The accounts would be portable and would offer relatively conservative investment options comparable to the TSP’s.
“The Retirement Savings for Americans Act is kind of a natural pathway that very closely mirrors what the president said he’s trying to accomplish with this plan,” said Catherine Lyons, senior director of policy and coalitions at the Economic Innovation Group.
Gaps Remain
Trump’s plan is still more broad strokes outline than detailed policy proposal.
It’s currently unclear whether the funding for the account matches would come through the federal budget. The administration has secured large philanthropic donations to seed Trump Accounts, which it could attempt here.
The White House hasn’t specified if the accounts’ tax treatment would be solely as traditional 401(k)s or as Roth 401(k)s. The TSP offers Roth-style accounts as an option.
If the new plans are administered by the federal government, the Employee Retirement Income Security Act would likely not apply, but it’s unclear precisely which federal benefits law framework would. The cited model for the new plans, the TSP, isn’t covered by ERISA but by the Federal Employees’ Retirement System Act of 1986.
The White House hasn’t specified who would manage the accounts under its proposal.
The TSP has a board confirmed by the Senate which sets standards and policies to manage funds and puts parameters on investments. TSP contracts with firms like Blackrock and State Street Global Advisors to manage plan assets, according to its website.
The RSAA calls for a similar set up to the TSP, with a board appointed by the president and confirmed by the Senate.
There is also the question of assigning fiduciary duty and legal liability in the likely absence of ERISA’s high statutory standards of care.
“The ability to sue this entity and how aggressively you can do that will depend on how Congress structures it,” said Eric Paley, leader of the employee benefits and executive compensation team at Nixon Peabody LLP.
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