Labor Department Proposes 401(k) Safe Harbor as 1% Higher Fees Can Cut Savings 28%
Updated
Updated · AOL · Aug 11
Labor Department Proposes 401(k) Safe Harbor as 1% Higher Fees Can Cut Savings 28%
3 articles · Updated · AOL · Aug 11
Summary
An August Labor Department proposal would give 401(k) fiduciaries significant deference if they document a prudent investment-selection process, potentially making it harder for workers to challenge costly or risky plan options.
The rule emphasizes process over outcomes, listing factors such as fees, performance, liquidity, valuation, benchmarks and complexity; critics say that could turn ERISA oversight into a check-the-box defense for bad results.
Trump's August 2025 order pushing wider access to private equity, private credit, real estate, crypto and commodities has sharpened concern because those assets can carry higher fees, weaker liquidity and opaque valuations inside retirement plans.
Fee differences alone can compound sharply: the Labor Department estimates paying 1 percentage point more annually could leave a worker with about 28% less after 35 years.
The proposal is not final and is expected to face legal challenges, while some employers may still hesitate to add complex products to plans that many Americans already view favorably.