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Understanding the Trump impact: 5 areas to watch in wake of the 2024 U.S. election results

By Beth Ashmore , Jonathan Pliner, CFA , Courtney Stubblefield , Emory Todd and Lori Wisper | January 28, 2025

Analyzing the potential implications of the new Trump administration on total rewards, employee benefits, investments and retirement planning.
Health and Benefits|Investments|Retirement|Ukupne nagrade
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The 2024 election saw Republicans take full control of both chambers of Congress and the White House. Though single-party control typically offers some level of certainty, the corporate landscape in the U.S. will change. HR executives should remain aware of changes that affect investment, employee benefits, retirement and compensation.

Late last year, we hosted a webcast to discuss how the 2024 election results might impact capital markets, retirement, health insurance and compensation plans. We’ve summarized five areas to watch to help you navigate these potential changes with confidence and agility.

  1. 01

    Trump’s policy agenda fuels market optimism despite inflation and interest rate concerns

    The 2024 U.S. election results sparked a positive reaction from capital and equity markets, signaling investor confidence in the new policy agenda. Despite strong year-to-date equity returns on the S&P 500, November stood out with the largest increase in this benchmark over the past 11 months. Yet the index gave up some of those gains, falling 2.5% in December.

    As the new administration’s policies unfold, some economic policies may increase inflation and the deficit. Signs of this include a steepening yield curve and rising interest rates. Until the Trump administration’s policies are clear, interest rate volatility may continue, affecting both tax and deregulation perspectives for growth assets like public equities and alternative credit.

    Meanwhile, less regulatory oversight could help boost corporate profitability. In private markets and private equity, the decline in distributions in recent years could reverse. Likewise, we might see an increase in mergers and acquisitions (M&A), which could further improve this asset class.

    Potential actions

    • Maintain an investment strategy to meet high hurdle rates
    • Consider a mix of assets and diversification within portfolios to keep up with liability growth
  2. 02

    Political and economic uncertainty requires enhanced retirement-plan vigilance

    For companies with retirement plans, economic shifts have significant implications. If inflation continues under the new administration, then it’s time for defined contribution (DC) plans to revisit fund options to ensure participants achieve returns that exceed inflation over the long term. This is crucial for retirees to maintain their retirement savings’ purchasing power.

    On the defined benefit (DB) side, higher interest rates mean discount rates will remain elevated, sustaining increased funding levels seen in recent years. However, higher hurdle rates are necessary to keep pace with growing liability costs due to aging. Now is an opportune time for organizations with well-funded plans to adjust their investment strategies to manage higher liability growth over the medium term.

    In today’s high-interest-rate environment, well-funded pension plans offer sponsors many derisking options. Risk transfer becomes particularly attractive, providing more flexibility despite higher hurdle rates. Also, evaluating investment strategies will be crucial. Consider the impact of capital markets on retirement benefit financing, including both DB and DC plans and retiree healthcare.

    Key provisions of the 2017 tax changes are expiring soon and may require action from plan sponsors. We’re still waiting for guidance from the IRS on how plan sponsors can effectively repurpose surplus assets in Voluntary Employees' Beneficiary Association (VEBAs) for active medical purposes. Some plan sponsors have moved forward to repurpose these assets with guidance from counsel and using tax insurance products.

    Lastly, there are discussions about further reducing the corporate tax rate. When tax rates dropped in 2017, many companies accelerated funding to DB and retiree medical programs to take advantage of higher tax deductions and reduce Pension Benefit Guaranty Corp. (PBGC) premiums for underfunded plans. With PBGC premium rates even higher today, this strategy might be more appealing again. It may offer significant tax deductions through accelerated funding.

    Potential actions

    • Ensure DC participants achieve real returns
    • Maintain an investment strategy to meet high hurdle rates
    • Consider a mix of assets and diversification within portfolios to keep up with liability growth
    • Align retirement benefit financing with investment strategy; optimize surplus use in pensions and VEBAs
  3. 03

    Secure 2.0 and tax policy shifts may affect retirement plan taxes and Affordable Care Act (ACA) subsidies for pre-65 retirees

    Despite high levels of uncertainty around regulatory and legislative changes, one thing that remains clear is the implementation of Secure 2.0 Act provisions. Plan sponsors are addressing these changes as regulatory guidance is released. A notable upcoming requirement is the Roth catch-up contribution for high earners that’s set to take effect in 2025.

    The new administration may introduce more plan-sponsor-friendly implementation guidance. For example, regulations for lump-sum windows under Secure 2.0 might not be enforced or could be more lenient. Also, new fiduciary and ESG rules are unlikely to be implemented. Plan sponsors are particularly interested in the new administration addressing pivotal response treatment (PRT) litigation.

    Many of the provisions in Secure 2.0 were intended to offer employees flexibility in meeting both short-term financial needs and planning for retirement — with emergency savings, hardship withdrawals and additional catch-up contributions. The new administration may look to increase the use of Roth contributions and changes in contribution limits. Also, we may see further push to allow even greater flexibility and choice across employee benefits. There may be efforts to expand on the private letter ruling (PLR) that was granted this summer (noting that the employer-reimbursement of student loans would need to be renewed as it expires in 2025).

    Our advice for plan sponsors is to closely monitor tax discussions, as retirement plan tax treatment often comes under scrutiny during tax-policy debates. This could affect DC plan savers. Additionally, the expiration of ACA marketplace subsidies, which many pre-65 retiree medical participants rely on, may require attention.

    Potential actions

    • Consider accelerating DB and retiree medical plan funding to leverage potential corporate tax reductions
    • Monitor tax discussions for the potential effects on savers, plan design and engagement
    • Explore opportunities to integrate financial resilience with Secure 2.0 options to further integrate financial resilience with retirement plans — flexibility and choice
    • Implement Secure 2.0 changes and stay updated on fiduciary and ESG rules for DC plans
  4. 04

    Trump’s health agency nominations signal major shifts for ACA, reproductive health, drug pricing and Health Savings Accounts (HSAs)

    We’re confident that president elect Trump’s health agency nominations are poised to bring significant changes in healthcare policy. With the nominations of Robert F. Kennedy Jr. as Secretary of Health and Human Services, Dr. Mehmet Oz as the head of the Centers for Medicare and Medicaid Services (CMS), Dr. Marty Makary as the Food and Drug Administration (FDA) Commissioner and Dr. Janette Nesheiwat as Surgeon General, Trump is fulfilling his campaign promises to introduce change agents aimed at overhauling various aspects of public health in the U.S.

    Whether the Senate confirms these nominees is still uncertain. Nonetheless, these nominations signal a shift toward a new agenda. The administration aims to promote open scientific debate and increased transparency, especially regarding vaccines, medications and medical supplies.

    While we are uncertain of the exact outcomes, these shifts could reshape the national health narrative. If successful, the administration’s policies may enhance individual rights, reduce mandates and increase flexibility in healthcare coverage. There’s also speculation about a shift from focusing on infectious diseases to chronic diseases, with a focus on prevention and holistic medicine. This approach could lead to monumental changes in healthcare delivery and policy.

    Regarding health insurance, questions arise about the administration’s stance on the ACA. Rather than repealing and replacing the ACA, the focus appears to be on amending it. This could involve changes in how insurers rate policies, potentially lowering costs for younger individuals while raising them for older ones. Short-term medical plans also may receive more support, and there could be further privatization of Medicare. These changes in public programs under the CMS could affect commercial and employer-sponsored plans.

    President Trump has also expressed support for in vitro fertilization (IVF), even suggesting mandatory insurance coverage for IVF treatments.

    Prescription drug pricing and the regulation of Pharmacy Benefit Managers (PBMs) have been persistent issues in the news over the past two years. Despite significant lobbying, these issues enjoy broad bipartisan support. Future bills and regulatory actions may focus on refining rebate definitions and addressing spread pricing with more precise measures. Also, there’s talk about extending the 2017 tax cuts and reforms, potentially increasing flexibility in HSAs and separating them from high-deductible health plans. While much is speculative at this stage, changes in these areas seem likely.

    Potential actions:

    • Monitor regulatory changes as the administration takes office, including impacts on insurers and employer plans (e.g., preventive care, prior authorization, provider deference).
    • Watch PBM/drug pricing developments
    • Assess financial implications of Medicare privatization and its impact on commercial plans
  5. 05

    Compensation and labor updates highlight potential changes to the Fair Labor Standards Act (FLSA), ongoing minimum wage discussions and the need to reassess compensation and rewards strategies

    As we look at compensation, labor and the workforce, it’s clear that a new administration will bring inevitable disruptions, particularly in executive pay programs. Goals embedded in long-term and short-term incentive plans, often referred to as “in-flight plans”, may be influenced by changes in tax policies, tariffs and ESG metrics. Speculation suggests that ESG metrics might be sidelined due to shareholder pressures, particularly around diversity, equity and inclusion (DEI). This shift could impact how these plans pay out relative to goals set six to eight months ago or longer.

    Another concern in our field is the Fair Labor Standards Act (FLSA). The Biden administration’s Department of Labor (DOL) had proposed changes to salary thresholds for exemption status. The 2019 threshold set by the Trump administration was $35,568. This was increased to $43,888 effective July 1, 2024, with a further increase to $58,656 planned for January 1, 2025. However, on November 15, 2024, a federal judge in Texas vacated these changes, ruling that the DOL had exceeded its statutory authority. This mirrors a similar situation from 2016, when the Obama administration’s proposed changes were also stayed by a federal judge in Texas. The question now is whether these changes will be permanently shelved, or if the Trump administration will revisit and raise the minimum thresholds again in 2025. Many companies had already begun preparing for these changes, which would require reclassifying more jobs as nonexempt and paying overtime, necessitating major system adjustments.

    Another controversial aspect of the proposed changes was the automatic indexing of salary thresholds every three years, a provision from the Obama administration that Trump didn’t adopt in 2016. It remains uncertain whether the Trump administration will implement such automatic increases. Although, we don’t expect that to happen.

    Further, union and bargaining activities have surged over the past three years, but their future under the Trump administration is uncertain. A federal pay transparency law was proposed recently, but it’s unlikely to advance. However, many states are enacting their own pay disclosure laws, a trend expected to continue. Similarly, while Donald Trump mentioned raising the federal minimum wage to $15 during a debate, nothing further was mentioned in the campaign. States are independently raising their minimum wages, often surpassing federal levels.

    Potential actions

    • Review and update compensation philosophy to address governance of making changes to pay programs impacted by regulatory changes
    • Ensure compliance with exemption status
    • Strengthen foundational areas such as total rewards strategy and compensation philosophy to prepare for any upcoming changes

Next steps

It’s highly likely that the incoming Trump administration will bring significant changes to total rewards, compensation, retirement, employee benefits and investment strategies in 2025. Ultimately, staying vigilant and responsive to these changes will enable organizations to manage the challenges and seize the opportunities presented by the new administration.

Disclaimer

The information included in this presentation is intended for general educational purposes only and should not be relied upon without further review with your WTW consultant. The information included in this presentation is not based on the particular investment situation or requirements of any specific trust, plan, fiduciary, plan participant or beneficiary, endowment, or any other fund; any examples or illustrations used in this presentation are hypothetical. As such, this presentation should not be relied upon for investment or other financial decisions, and no such decisions should be taken on the basis of its contents without seeking specific advice. WTW does not intend for anything in this presentation to constitute “investment advice” within the meaning of 29 C.F.R. § 2510.3-21 to any employee benefit plan subject to the Employee Retirement Income Security Act and/or section 4975 of the Internal Revenue Code.

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Authors


Managing Director, Retirement

Head of Delegated Portfolio Management, U.S.
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Health and Benefits, North America
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Emory Todd
Health, Wealth and Career Leader – North America
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Managing Director, Work & Rewards
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