Washington has a bad habit of writing rules and walking away. Decades pass, the world changes, and the rules just sit there. I saw this firsthand at the Office of Management and Budget, where one of the most persistent challenges was not finding new things to regulate — it was getting agencies to honestly reckon with the rules already on the books.
The rules governing retirement investing are overdue for that reckoning. When the laws that decide how Americans save for retirement were written in the Carter administration and haven’t been updated since, that is not prudent caution; it is instead an example of institutional neglect that is in dire need of being addressed.
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President Donald Trump’s Executive Order 14330 recognized this, directing the Department of Labor to take a fresh look at how 401(k) plans access the broader investment universe. Pension funds and university endowments have used these strategies for years. There is no good reason a schoolteacher’s retirement account should be cut off from them simply because the rulebook predates the strategies themselves.
TWO BIRDS, ONE STONE: HOW TO MAKE COLLEGE AFFORDABLE AND TAKE CARE OF RETIREMENT
Access is the easy part. The harder part, and the more important part, is protection.
At OMB, I directed the entire executive branch to treat deregulation as its highest priority — but I was always careful to distinguish between rules that had outlived their purpose and protections that remained essential. That distinction matters enormously here. Acting Secretary Keith Sonderling has been candid that expanding access has to come paired with modernizing the framework around it. That is exactly right. Done backwards, you get the worst of both worlds: new investment options reaching savers before the rules catch up. Done in the right order, you get something better than the status quo, with the same protections savers have relied on for half a century.
For a 50-plus-year-old law, ERISA’s core ideas about loyalty, prudence, and protection from bad actors have aged remarkably well. Millions of Americans have retired with dignity in part because of the framework Congress built in the mid-to-late 1970s, and because the career staff at DOL has spent five decades enforcing it.
The problem is not the principles behind ERISA. The problem is that some of the specific implementing rules were built for a market that no longer exists.
Take Prohibited Transaction Exemption (PTE) 77-4. Adopted in the late 1970s, it gave investment managers a workable path to offer certain affiliated funds inside retirement plans without tripping ERISA’s prohibited transaction rules. It came with real guardrails, too. No double fees. Disclosures to plan fiduciaries. Independent oversight. For nearly 50 years, it has done its job, which in this town counts as a minor miracle.
But a great deal has changed since the Carter administration. New fund structures are now commonplace. Investment strategies have grown more sophisticated. The universe of well-regulated vehicles available to professional investors has expanded considerably.
PTE 77-4 has not kept pace. The exemption sorts investments by the legal box they happen to sit in, not by what they actually do. The practical result is that perfectly sound, professionally managed, well-supervised options can fall outside the exemption for reasons that have nothing to do with whether they would serve a retirement saver well.
The fix here is not complicated. Make PTE 77-4 investment-neutral. The exemption should apply the same way, no matter how a fund happens to be organized on paper, and every existing safeguard should stay exactly where it is.
That change would let a fiduciary do the job ERISA actually asks of them, which is to look at the investment itself: what it costs, how risky it is, who is running it, whether it belongs in the portfolio. Right now, the legal wrapper around the fund can shut down that analysis before it starts. That is backward.
RETIREMENT SECURITY IS IN OUR HANDS
And let me be clear on the protection side, because this is where the whole thing lives or dies. Fiduciary duty does not change. Double fees are still prohibited. Disclosures still go to plan fiduciaries. Independent oversight is still required. Updating the exemption does not mean watering it down, and any reform worth doing has to clear that bar.
The Department of Labor is already pointed in the right direction and has moved with real urgency since the Executive Order was signed. PTE 77-4 has earned the chance to be modernized rather than replaced. American workers deserve a retirement system that gives them real options and protects them at the same time. That is the job DOL has taken on, and it deserves the support to see it through.
Mick Mulvaney served as a U.S. representative from South Carolina (2011-17), director of the Office of Management and Budget (2017-20) and acting White House chief of staff (2018-20).
