Attorney General Nessel Joins Coalition Opposing Plan to Weaken Federal Protections for Retirement Investments

LANSING – Michigan Attorney General Dana Nessel joined 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. In their comment letter submitted to the U.S. Department of Labor (PDF), 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.

“This proposed rule is a veiled attempt to allow investment firms to gamble with workers’ retirement savings,” said Attorney General Nessel. “Instead of protecting the retirees they are supposed to serve, the Trump administration is trying to unlawfully insulate multi-trillion-dollar fiduciaries from accountability. These corporations must be held to the highest standard, and the federal government should prioritize the best interests of hard-working Americans who have spent decades building their life savings. Instead, this administration has consistently shown it prefers protecting wealthy donors over workers. My office remains committed to opposing this rule and fighting for the financial security of Michiganders.”

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.

Joining Attorney General Nessel in submitting the comment letter are the attorneys general of Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Hawai’i, Illinois, Maine, Maryland, Massachusetts, 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.

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