From Taxes to Crypto: Key Federal Developments Impacting Employers

August is traditionally the quietest month in the nation's capital. Congress is in recess for the month, regulatory agencies typically take a breather from their busy agendas and federal workers book vacations in advance of things ramping up again after Labor Day.

August 2025, however, was an exception to the rule. The month saw several major developments that have repercussions both in Washington and in the markets. August began with President Donald Trump firing the head of the Bureau of Labor Statistics after a poor jobs report and ended with an unprecedented attempt to fire a sitting member of the Federal Reserve's Board of Governors. In between, a second Fed governor resigned, the government took a stake in tech giant Intel Corp., and the National Guard began patrolling the Washington streets. Now Congress has returned to Washington to face a looming government shutdown and more.

The fall should continue to be busy. As September begins, here's a look at key recent developments and what plan sponsors and the retirement industry broadly should keep an eye on in the weeks ahead.

Welcome clarity for the tax landscape

The president signed the "One Big Beautiful Bill" into law on July 4, providing some certainty on the direction of taxes for the foreseeable future. The new law makes permanent all of the 2017 tax cuts that were set to expire at the end of 2025, most notably the lower individual income tax rates. The higher standard deduction and a higher child tax credit are also now permanent. From a financial and estate planning standpoint, perhaps the most important change is that the amount of assets that can be inherited without triggering the estate tax will be $15 million per person ($30 million for couples) beginning in 2026 and will be indexed to inflation in subsequent years. No major retirement savings tax incentives were changed in the new law.

The new law also includes several of the president's 2024 campaign proposals, including no tax on tip income, no tax on overtime hours, and making the interest on auto loans tax-deductible. Those provisions will be effective from 2025 through 2028, and each has income caps and other restrictions that apply. A fourth campaign promise, to end the taxation of Social Security benefits, was not permitted under the parliamentary rules by which the legislation was considered. Instead, Congress approved a $6,000 tax deduction for seniors 65 and over (subject to income limitations) for 2025 through 2028. While those provisions are set to expire in a few years, there is a good chance that they will prove popular with voters—and thus difficult for Congress to let expire in a presidential election year.

Cryptocurrency on the front burner in Washington—and in retirement plans

July saw Congress pass its first-ever crypto legislation—the GENIUS Act. The new law sets up a regulatory structure for stablecoins, a type of cryptocurrency pegged to the dollar. Among other things, it would require issuers to hold one-for-one reserves in either dollars or other highly liquid assets. It's a big win for the crypto industry, which believes that clear rules of the road will allow for expanded issuance and mainstream usage of stablecoins. Notably, the bill passed the House with a strong bipartisan total of 308 votes, including 102 Democrats.

The House of Representatives also passed a second bill, the CLARITY Act, which creates a broader regulatory framework for cryptocurrencies beyond stablecoins. It clarifies that most cryptocurrencies will be treated as commodities and subject to regulation by the Commodity Futures Trading Commission (CFTC), with the SEC in a secondary role. It also includes disclosure and registration requirements, as well as consumer protections. It was also approved by a strong bipartisan margin—a vote that could boost support for the legislation in the Senate. Senate Banking Committee Chairman Tim Scott (R-SC) released a draft of his version of the bill in early September, and the committee has tentatively targeted September 30 for consideration of the proposal.

Of course, the pro-cryptocurrency atmosphere in Washington extends to the retirement industry as well. On August 7, President Trump signed an executive order making it easier to allow alternative asset investments such as cryptocurrency, private equity and real estate in 401(k) and other defined contribution plans. The order directs the Department of Labor (DOL) to re-examine past and present guidance on a fiduciary's responsibilities when it comes to offering alternative asset investment options in a plan, clarify its position on the issues, and potentially propose rules, notably including "appropriately calibrated safe harbors," to provide legal clarity for fiduciaries.

The Labor Department has already withdrawn its 2021 statement on alternative assets in 401(k) plans and 2022 guidance on cryptocurrency, adopting a "neutral" attitude on the inclusion of alternative assets and cryptocurrency in plans. But the onus remains on the plan sponsor to select prudent investment options for the plan and there remain a number of questions about whether alternative asset options meet that standard. Widespread adoption among plan sponsors seems unlikely unless and until the DOL provides further guidance. Many in the industry would like to see a regulatory safe harbor that insulates plan sponsors from litigation risk claiming imprudence. The executive order directs the DOL to act within 180 days, which means it may be early 2026 before the agency provides additional clarity.

Federal Reserve in the spotlight

At the end of July, the Fed held its baseline interest rate steady for the fifth consecutive meeting. But speculation is growing that a rate cut may be coming in September, particularly after a weak August jobs report. The Fed, of course, has been in the headlines for different reasons having to do more with personnel than policy.

On August 25, President Trump took the unprecedented step of firing Lisa Cook as one of the Fed's seven governors. Cook sued the president on August 28, arguing that he does not have the authority to fire her. The Federal Reserve Act, which dates back to 1913, states that a member of the Board of Governors can only be removed "for cause." The president pointed to allegations that Cook may have committed mortgage fraud prior to joining the Fed as his reasoning for terminating her, though Cook has not been charged with a crime. The courts will now determine whether the allegations are sufficient cause to remove Cook from her position.

Earlier this year, in a case about whether the president could fire heads of other independent agencies, the Supreme Court noted that "the Federal Reserve is a uniquely structured, quasi-private entity," a phrase that may indicate the Court sees the Fed as a special situation. Previous Court decisions have also signaled that the Fed's independence is paramount. The current case, which is widely expected to ultimately be determined by the nation's highest court, will provide an answer to that question.

The reaction from both the equity and fixed-income markets to the unprecedented challenge on the Fed's independence has been relatively sanguine, as investors seem willing to wait out the legal process. It's not clear how long that process will take, but courts are likely to be pressed for an initial decision on Cook's status prior to the next meeting of the Federal Open Markets Committee (FOMC) on September 16-17.

Meanwhile, the president already had an unexpected vacancy at the Fed to fill. Fed Governor Adriana Kugler resigned from the board on August 8, months before her term was scheduled to end in early 2026. The president has nominated Stephen Miran to complete the remainder of Kugler's term. Miran, who is currently the chairman of the White House Council of Economic Advisors, is on track for confirmation by mid-September. Interestingly, the president has indicated that Miran will serve only through the end of his term on January 31, 2026, and that he would nominate someone else for the full 14-year term that starts in February. The president also needs to nominate a successor to Powell, whose term as chair ends in May 2026.

Congress faces government shutdown deadline

The annual government funding process has bogged down once again. Congress is supposed to pass the 12 appropriations bills that fund every government agency and program by the time the new fiscal year begins on October 1. Congress hasn't made that deadline in nearly 30 years, and 2025 is no exception. The hyper-partisan atmosphere on Capitol Hill makes a compromise between the two parties on FY 2026 spending unlikely. As the deadline nears, lawmakers will be forced to pass a "continuing resolution," a temporary extension of current funding levels, or risk a shutdown. A shutdown this fall is a real possibility. But markets historically have not reacted much to shutdowns. In fact, the S&P 500 has gone up in the last five shutdowns, including the record 35-day partial shutdown early in Trump's first presidency.

DOL fiduciary rule: A resolution in sight?

Finally, the fiduciary rule debate at the Department of Labor remains in limbo. The so-called "Retirement Security Rule" that was approved in 2024 during the previous administration was paused nationwide by two federal courts last year. Those cases remain ongoing, but it is widely expected that the rule will ultimately be vacated by the courts. In late August, the court granted a 60-day period for settlement discussions between the DOL and the plaintiffs, indicating that a resolution may be near. Once that happens, the Labor Department will have to decide whether to write a new rule in the long effort to define who is a fiduciary in the retirement savings context.