Get answers to the top questions employers have about retirement legislation and policy under the second Trump administration.
From SECURE 2.0 provisions to Social Security and potential shifts in tax policy, the retirement landscape is evolving—fast. As a second Trump administration begins shaping its agenda, employers are watching closely to understand how upcoming legislation and regulatory changes could impact their sponsored retirement plans.
Here are answers to some top questions we’re getting from employers:
Beginning in 2026, a penalty-free (but not tax-free) withdrawal of up to $2,500 annually can be taken by a participant from a qualified retirement plan (401(k), 403(b), SIMPLE, IRA, SEP IRA) that chooses to adopt the feature to help pay for qualified long-term care insurance premiums.
Many are curious if the IRS will further delay the implementation of the provision that catch-up contributions for those with FICA compensation greater than $145K must be made as Roth contributions.
The requirement is slated to go into effect January 1, 2026, and plan sponsors should prepare to comply by that date. We do not anticipate further delays to the implementation date.
Doing away with taxes on Social Security benefits for retirees was one of President Trump’s campaign promises. The latest draft of the House budget reconciliation tax bill provides some relief for seniors, but not in the way most thought. Rather than eliminating taxes on Social Security benefits for retirees, retirees will instead see their standard deduction increased by $4,000. This provision in the current House bill would expire in 2029.
The Social Security Trust Fund is projected to be exhausted by 2034. These funds have been used in recent years to make up for the shortfall in payroll tax revenue because of the aging population and more retirees collecting Social Security benefits. If Congress doesn’t act by then, Social Security would still pay benefits—but likely at a reduced rate of approximately 20% to 25%.
Read more about this topic in Myths vs. Facts: The state of Social Security.
Retirement tax deferrals are an enticing target to offset tax cuts as they represent the third highest non-business expenditure.
The DOL’s third attempt to install broad fiduciary duties on most recommendations involving retirement plans and IRAs has been locked in a court battle. Implementation of the final rule was frozen by the courts until the case is ultimately decided – but the DOL appealed that decision last year. Now, with a new administration, the DOL has asked the courts to pause the appeals process until incoming new leadership can review the cases and determine a course forward. While the Labor Secretary has been confirmed, we are still awaiting the confirmation process for the nominee for head of the Employee Benefits Security Administration (EBSA), Daniel Aronowitz.
There has been a significant increase in fiduciary breach lawsuits in recent years, many of which are copycat in nature, repeating many of the same claims, apparently to survive early motions to dismiss. If they succeed, they often force large settlements, since fiduciaries typically want to avoid the high cost of litigation discovery.
The recent Supreme Court ruling in Cummingham V. Cornell University lowered the bar for these cases to proceed. The Court took a very literal reading of the law and held that plaintiffs only need to allege a prohibited transaction—such as hiring a third-party service provider—to move forward. They don’t need to prove that an exemption doesn’t apply at this early stage.
The decision is prompting serious interest in action. The industry and lawmakers are realizing that a legislative solution is needed that raises pleading standards while preserving protections for workers.
Additionally, the nominee to head the Dept of Labor’s EBSA, Daniel Aronowitz, has been a vocal critic of DOL’s history of siding with, and supporting, plaintiffs’ bar. If confirmed, he’s expected to advocate more strongly for employers and plan fiduciaries.
Staying engaged can help employers prepare while retirement policy continues to evolve in a second Trump administration. It’s important to work with trusted advisors and plan providers to help monitor regulatory developments as new guidance and reforms unfold in the months ahead.
Find more legislative updates and retirement trends from Principal® thought leaders.
