Business & Finance

Proposed Labor Department rule changes prompt scrutiny of 401(k) fees

The federal proposal aims to protect employers from lawsuits while encouraging alternative investments like cryptocurrency in retirement plans.

Updated Aug 27, 2026 · 09:23 UTC1 reports

The short version

The U.S. Department of Labor has proposed rules to shield employers from litigation if they follow specific procedures when selecting 401(k) investment options.
The rule changes are designed to encourage plans to incorporate alternative, higher-risk investments such as private equity, real estate, and cryptocurrency.
Financial experts warn that high fees significantly erode savings over time, noting that even an additional 1% in fees can shrink a retirement nest egg by 28%.

The Department of Labor's proposed rule would give companies greater protection from worker lawsuits over 401(k) management if they document their decision-making process using a set of six factors.[ProPublica]
The department stated that the proposal aims to reduce litigation risks for employers and expand access to alternative investments like private equity, real estate, and cryptocurrency within retirement plans.[ProPublica]
According to calculations by the Labor Department, an extra 1% in fees can reduce a retirement nest egg by 28% over time.[ProPublica]
A Government Accountability Office investigation found that nearly 40% of people do not fully understand the fees they pay on their retirement plans.[ProPublica]
Retirement experts consider index funds charging around 0.1% or less to be low-cost options, whereas expense ratios exceeding 1% serve as a warning sign of a high-cost plan.[ProPublica]

Critics like Monique Morrissey of the Economic Policy Institute argue the proposal will undermine saver protections, while some consultants suggest employers may not immediately rush to offer riskier investment options.[ProPublica]