On Thursday, the Department of Labor (DOL) published compliance assistance for 401(k) plan fiduciaries who are considering plan investments in cryptocurrencies. The DOL called it an effort to “protect the retirement savings of U.S. workers and came one day after President Biden signed an Executive Order on Ensuring Responsible Development of Digital Assets.
Published by the department’s Employee Benefits Security Administration (EBSA), Compliance Assistance Release No. 2022-01 cautions plan fiduciaries to exercise extreme care before they consider adding a cryptocurrency option to a 401(k) plan’s investment menu for plan participants.
As of 2019, private pension plans held an estimated $6.2 trillion on behalf of about 91 million defined contribution 401(k) plan participants.
READ THE FULL COMPLIANCE ASSISTANCE RELEASE NO. 2022-01 HERE
The Employee Retirement Income Security Act of 1974 (ERISA) requires plan fiduciaries to act solely in the financial interests of plan participants and adhere to the standards of professional care in considering investment options for participants in 401(k) plans.
“Today’s announcement reminds plan fiduciaries of their important role in selecting investment options for 401(k) plan menus,” EBSA’s Acting Assistant Secretary Ali Khawar said in a statement. “At this stage of cryptocurrency’s development, fiduciaries must exercise extreme care before including direct investment options in cryptocurrency.”
The department said it “has serious concerns about the prudence of a fiduciary’s decision to expose a 401(k) plan’s participants to direct investments in cryptocurrencies, or other products whose value is tied to cryptocurrencies.”
On Wednesday, President Biden signed the executive order, part of which instructs the Federal Reserve to explore the development of a U.S. Central Bank Digital Currency (CBDC) and currency-linked stablecoin.
“This effort prioritizes U.S. participation in multi-country experimentation and ensures U.S. leadership internationally to promote CBDC development that is consistent with U.S. priorities and democratic values,” according to a fact sheet released with the order.
READ THE DIGITAL ASSETS EXECUTIVE ORDER HERE
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
