The best approach is using encrypted password managers, disk encryption like VeraCrypt, and secure secret storage instead of plain text files because plaintext passwords remain a major security risk.

No mainstream operating system is inherently "best" at protecting passwords stored in plain text files. If passwords are stored as plain text, any OS is vulnerable if an attacker gains access to the file.

That said, some operating systems provide stronger built-in security features:

Linux (Enterprise Distributions)
Strong file permissions and access controls.
Supports SELinux and AppArmor for mandatory access control.
Widely used for secure servers.
Windows Server
Integrates with Active Directory.
Supports BitLocker drive encryption.
Offers NTFS permissions and Microsoft Defender security features.
OpenBSD
Security-focused operating system with a strong emphasis on secure defaults.
Popular in environments where security is the top priority.
Best Practice

Instead of storing passwords in text files:

Use a password manager (e.g., Bitwarden, KeePass, or 1Password for administrative credentials).
Store application secrets in a secret management solution such as HashiCorp Vault, AWS Secrets Manager, Azure Key Vault, or Google Secret Manager.
Encrypt sensitive files if they must be stored on disk.
Restrict file permissions so only authorized users can access them.
Never store user passwords in plain text; store hashed and salted passwords using algorithms such as Argon2id, bcrypt, or scrypt.

Bottom line: If passwords are stored in plain text files, the operating system alone cannot adequately protect them. Proper encryption, access controls, and secure secret management are far more important than the choice of OS.