Federal Policy Shifts in 2026: What Changing Policy Means for Employers and Plan Oversight

The beginning of 2026 has been filled with policy and political developments that have directly impacted the markets, from the U.S. military operation in Venezuela to threats and negotiations over Greenland to threats to the Supreme Court decision to strike down the bulk of President Trump's tariffs. With 2026 being a midterm election year, it's likely the frantic pace in Washington will continue for much of the year. Plan sponsors and participants have a lot to keep track of.

One notable development at the end of 2025 was the House passage in December of the INVEST Act, which packaged together 22 financial services bills. The legislation includes the long-awaited e-delivery bill, which would allow firms to send regulatory documents to investors electronically by default. Investors could opt in at any time to continue receiving paper documents. Other notable provisions in the bill include allowing 403(b) plans to invest in collective investment trusts (CITs), as 401(k) plans can do today; expanding the ways in which an individual can qualify as an accredited investor; and launching an SEC task force on older investors. The bill now awaits action in the Senate.

Looking ahead to key issues in 2026

We see five areas where policy and political developments have the potential to impact the markets and investor portfolios. Plan sponsors and plan participants should keep an eye on these key areas:

1. Federal Reserve—The Fed's monetary policy decision making will always be critically important to the markets, but in early 2026 monetary policy seems almost secondary to the barrage of other headlines surrounding the Fed. The central bank's independence, a cornerstone of the global financial system for decades, has become a critical issue as the president has sought to fire a sitting Fed governor and his administration has launched a criminal investigation of Chair Jerome Powell. The president has nominated former Fed Governor Kevin Warsh, who served on the central bank board from 2006 to 2011, as the next Fed Chair, succeeding Powell when his term as chair ends in May. Confirmation hearings in the Senate Banking Committee are expected in the early Spring. Fed independence is likely to be a prominent issue.
    
2. Courts—On February 20, a divided Supreme Court ruled 6-3 that the president improperly used an emergency authority to impose "reciprocal" tariffs on about 100 countries, as well as some of the tariffs on imports from Canada, China, and Mexico. The case has significant ramifications for the markets, companies, global trade, and the economy that are not likely to be clear for months. The president does have other mechanisms available to him to impose tariffs and immediately used one to impose a global 15% tariff for 150 days. The Court offered no clarity on when (or if) refunds are due companies that have paid an estimated $175 billion in tariffs to date. Lower courts will sort out the mechanics of refunds, leaving companies in limbo for now. 
   
   Meanwhile, the Court heard arguments on January 21 in the case of whether the president can fire Fed Governor Lisa Cook. Justices seemed skeptical that Cook had been afforded a proper process when President Trump attempted to fire her last August. (Lower courts have allowed her to remain in her role at the Fed while the case plays out.) It's unclear whether the court will rule narrowly on the process or, as some justices raised during arguments, more broadly on the question of Fed independence. A decision is expected later this year.
    
3. Congress—Midterm election years tend to be lighter on legislative developments as members of Congress increasingly focus on their re-election campaigns and bipartisanship—already in short supply—dwindles further. But we are keeping our eyes on whether Congress will support any of several "affordability" proposals put forth by the White House. The president has floated ideas like a 10% cap on credit card interest rates, allowing individuals to withdraw funds from their 401(k) plan for a down payment on a home, and banning institutional investors from buying up single-family homes—all of which would need Congressional action but thus far don't seem to be gathering much momentum on Capitol Hill.
    
4. Regulators—Regulatory activity tends to pick up in the second year of a presidential administration, and we expect that to be the case in 2026. Topping the list of key issues for plan sponsors, the Department of Labor is expected to issue a rule proposal in March to allow 401(k) plans to invest in private markets. The key will be in the details, with plan sponsors eagerly awaiting information on the scope of permissible investments, the timing for when any changes might go into effect and, crucially, what kind of safe harbor will be available to employers looking to broaden the range of investment options in a plan without compromising their fiduciary responsibilities or exposing themselves to unreasonable litigation risk. 
   
   In another issue of note for employers, Treasury and the IRS are in the process of launching "Trump Accounts," which were created by 2025's "One Big Beautiful Bill Act" and will provide $1,000 in a starter investment account for children born from 2025 through 2028. Scores of companies have announced that they will match the government contribution for children of employees, and philanthropists like Michael Dell have pledged billions of dollars in support of the program. Parents, grandparents, guardians, and others can contribute up to $5,000 annually until the child turns 18, at which time the account essentially becomes an IRA. Buoyed by a Super Bowl ad promoting the accounts, Treasury announced that more than 2 million families had filed forms to open a Trump Account by the end of February. Treasury hopes to have the accounts running by mid-year, though there are numerous questions about which firm or firms will manage the accounts, how funds will be invested, what the tax implications of contributions and early withdrawals will be, and more. Further details from the administration are expected in the coming months, with Treasury aiming to fund the accounts for newborns by July 4. 
   
   Finally, during his State of the Union address on February 24, President Trump announced that the government would provide an annual match of up to $1,000 for employees who do not have access to an employer-sponsored retirement account beginning in 2027. Details were scant, but the administration seems to be considering an expansion of the Saver's Match, which Congress passed as part of 2022's SECURE Act 2.0 and is already set to launch next year—but currently only workers making less than $25,000 per year are eligible. The White House says the accounts would be similar to the Thrift Savings Plan for federal employees, featuring low fees and a limited number of index fund investment options. The White House said more information on the proposal would be coming soon.
    
5. Midterm elections—Washington is already fully in election mode. With eight months to go until November, a lot can and will change. But Democrats are favored to recapture the majority in the House of Representatives, as midterms have historically been a negative for the president's party and Democrats need to flip only a handful of seats to win. Republicans are a slight favorite to retain their majority in the Senate.

The big takeaway is that there is a lot going on this year in the policy and political landscape that could impact the markets, participants, and employers. And, given the nature of this president and this administration, there are likely to be plenty of developments that can't be anticipated. The current environment is an emotional one for investors, many of whom worry that the flat performance of the market over the first two months of the year is a signal of trouble ahead. Benefits administrators are undoubtedly seeing some of those emotions come out in conversations with employees. The key, as always, is helping investors navigate those emotions and, as much as possible, keep those emotions out of their investing decisions. The Schwab team in Washington will continue to provide our latest perspective on policy and political developments this year to help support those conversations.