Trump DOL Withdraws Biden-Era ESG Rule and Crypto Guidance for ERISA Plans

On May 28, 2025, the U.S. Department of Labor (“DOL”) began to articulate the Trump administration’s retirement policy priorities with its decisions to (i) end its defense of the Biden-era ESG rule in a long-running lawsuit brought by a coalition of state attorneys general and instead engage in new rulemaking and (ii) rescind 2022 guidance that had expressed significant concerns with adding cryptocurrency to a 401(k) plan investment menu (Compliance Assistance Release (“CAR”) No. 2025-01). It is unclear what the agency will repropose next year regarding ESG and investment duties for ERISA fiduciaries. CAR 2025-01 appears to reaffirm the agency’s historically neutral approach to investing, which neither endorses nor disapproves of specific investment categories. Moreover, promoting a more principles-based approach for evaluating and selecting plan investments that reflects a prudent process would be consistent with the DOL’s 2020 information letter (and 2021 supplement) that addresses incorporating private equity and other alternative assets in 401(k) plans—a topic that has generated substantial interest this year. It remains to be seen whether this approach will apply to investments involving ESG characteristics.

DOL Abandons Biden-Era ESG Rule

As many in the industry anticipated, the government filed papers in the Fifth Circuit on May 28, 2025 to end its defense of the ESG regulation that the Biden administration adopted in 2022, which had been the subject of a challenge by the attorneys general from 26 states filed shortly after the rule took effect. The attorneys general contended that the rule undermined key protections for retirement savings and that the agency overstepped its statutory authority under ERISA in promulgating it. Back in February, the regulation had been upheld for a second time by Judge Matthew J. Kacsmaryk of the Northern District of Texas, who ruled that when a fiduciary chooses between competing investment options that equally serve plan participants’ financial interests, the fiduciary is not acting for a purpose other than those financial benefits when the ultimate choice is based on a collateral factor such as ESG. This decision was subsequently appealed to the Fifth Circuit, where it had remained pending as the DOL was deciding whether it should rescind the rule.

The May 28, 2025 letter said that the DOL will engage in a new rulemaking, which will appear on the DOL’s Spring Regulatory Agenda. No other details were provided. It remains to be seen whether the DOL will revert back to some variation of the ESG-skeptical/pecuniary-factors analysis that the Trump administration adopted in 2020 (or perhaps something even more explicitly antagonistic toward ESG). Given the uncertain future of ESG and the role it can play (if any) in plan investment decision-making, it is critical that fiduciaries ensure that any decisions involving plan investments, managers or proxy voting should be based on sound economic rationales and are the result of prudent and reasonable processes. To the extent that retirement plans include ESG funds in their line-up and ESG factors remain a part of the investment calculus, it is incumbent upon fiduciaries to confirm that those factors’ financial risk and return characteristics should be what is determinative.

CAR 2025-01: 401(k) Plan Investments in Cryptocurrencies

The DOL’s newest guidance rescinds CAR 2022-01, in which the agency had cautioned plan fiduciaries to “exercise extreme care” before they consider adding a cryptocurrency option to a 401(k) plan lineup (See our prior alert here, which summarizes the guidance). In CAR 2022-01, the DOL questioned the appropriateness of exposing a 401(k) plan’s participants to direct investments in cryptocurrencies or other products whose value would be tied to cryptocurrencies as a result of the significant risks of fraud, theft and loss that had been associated with the asset class. The DOL also indicated that it would be conducting an investigative program aimed at plans that offer participant investments in cryptocurrencies and related products, which would examine how plan fiduciaries responsible for overseeing such investment options or allowing such investments through brokerage windows were satisfying their duties of prudence and loyalty under ERISA in light of the concerns mentioned in CAR 2022-01.

While we are not aware of any investigations the DOL has conducted pursuant to CAR 2022-01, plan investments in cryptocurrency assets have remained low. This fact helped bolster the DOL’s argument in a 2022 case brought by a 401(k) plan recordkeeper that marketed its plan services with cryptocurrency offerings, in which the recordkeeper sought to invalidate CAR 2022-01 (ForUsAll, Inc. v. U.S. Dep’t of Labor, 691 F. Supp. 3d 14 (D.D.C. Aug. 29, 2023)). In ForUsAll, the Court said, “it is hard to fathom how [a declaration that the Release was unlawful and an order vacating and setting it aside] would restore ForUsAll’s lost business opportunities because it is doubtful that plan fiduciaries would disregard these lingering risks and partner with ForUsAll if the Release itself were no longer effective.”

CAR 2022-01 signified an unusual step for the DOL to take in terms of its form and substance. As a novel kind of sub-regulatory guidance, the release did not carry legal consequences and did not tell regulated parties what they must do or may not do in order to avoid liability (as explained in ForUsAll, “it does not ‘command[],’ ‘require[],’ ‘order[],’ or ‘dictate[]’ that plan fiduciaries refrain from offering cryptocurrency investment options or take any other action.”). That said, it still had a chilling effect on fiduciaries who might have otherwise considered cryptocurrency as a potential plan investment. It also represented a major deviation from the DOL’s traditional approach of not being paternalistic with respect to selecting and reviewing investments—and instead, placing the focus on the process a fiduciary uses for making these decisions. For example, in a 2020 information letter (and 2021 supplement), the DOL stated that a plan fiduciary would not violate ERISA solely by reason of offering a professionally managed asset allocation fund (such as a target date fund) with an alternative investment component as a designated investment alternative so long as certain process-oriented safeguards were in place.

Now that this guidance has been rescinded, the DOL has made it clear that fiduciaries can determine whether cryptocurrency or any other asset is appropriate for their specific plan participants. In reaching these conclusions, fiduciaries will want to consult their investment advisors and very carefully evaluate and document all relevant facts and circumstances and make context-specific decisions—particularly, in light of the continuing stream of retirement plan litigation.

Beyond cryptocurrency, a return to a more neutral posture is a welcome development in light of the recent push for more alternative assets in 401(k) plans. While there are questions about how cryptocurrency investments can be structured for plans, including, whether plans should hold cryptocurrency directly (i.e., through the brokerage window) or indirectly through a more structured offering like a fund or a trust that is included on the investment menu, figuring out solutions for how to do this should be feasible now that fiduciaries will feel free to evaluate the asset class again.