Trump vs Biden compare on key retirement issues

Trump vs Biden: Background on retirement

President Trump hasn’t proposed any fundamental changes to how 401(k) plans should operate, but the U.S. Department of Labor (DOL) has revisited several fiduciary-related issues under the current administration. Alternatively, Vice President Biden has promised to address the tax advantages for 401(k) plan contributions, and he’d likely direct the DOL to be more stringent on fiduciary requirements and conflicts, as well.

President Trump

Vice President Biden

Investor guidance
The DOL recently proposed a set of rules that, if finalized, would change the requirements for advisors who recommend investments to plan participants. The rules would still require advisors to act in participants’ best interests when recommending investments, but it’s less restrictive regarding how they’re compensated than President Obama’s “fiduciary rule” that was struck down in 2018.

Limiting ESG funds
Because the DOL may require fiduciaries to always put economic interests ahead of non-pecuniary (non-monitary) goals, this would also limit the use of funds that consider environmental, social and governance (ESG) objectives as part of their investment strategy.

"Equalizing" 401(k) tax benefits
Vice President Biden’s tax plan would "equalize" the incentive system by replacing tax-deductible contributions with flat-tax credits valued up to 26%. This action is meant to equally incentivize savers regardless of what they earn.

Automatic enrollment
Vice President Biden has also suggested that almost all employees without a pension or 401(k)-type plan will have “automatic” access to a retirement plan. This could either involve a government-provided defined contribution plan option or a mandate to employers to provide plans, with subsidies given to smaller businesses.

Employer takeaways

Vice President Biden’s proposal for 401(k) plans could be a desirable change on equity grounds without affecting current contribution trends, although some employers rely on making large tax-excluded contributions to offset the administrative costs for plan sponsorship.
A Biden administration could seek to replace the DOL’s proposed rules, or a Democratic majority in Congress could overturn them within 60 legislative days of the election. As cross-selling and rollover practices continue to be scrutinized, it’s increasingly important that participants receive trusted and unbiased guidance when they’re making investment decisions.