Lawmakers Press DOL, SEC on Crypto Exposure in 401(k)s
Lawmakers are calling attention to the potential risks of adopting private equity investments into 401(k) plans.
U.S. Sens. Elizabeth Warren (D-MA) and Bernie Sanders (I-VT) on Wednesday issued a letter to the Department of Labor (DOL) and the Securities and Exchange Commission (SEC) cautioning the usage of alternative investments in retirement plans.
Sens. Dick Durbin (D-IL), Jeff Merkley (D-OR), Chris Murphy (D-CT), Tina Smith (D-Minn.), and Ron Wyden (D-OR) also signed the letter.
The letter, directed to Labor Secretary Lori Chavez-DeRemer and SEC Chairman Paul Atkins, condemned the financial instruments for their volatility and opaqueness, touching on the investments lack of transparency and illiquidity.
“Private investments, including private equity, rely on long-term capital, and as a result, usually stipulate lengthy lock-up periods for investors,” the senators wrote. “This of course makes these investments illiquid, meaning they are not easily sold to other investors or convertible into cash. This raises serious concerns during economic downturns when retirement savers are seeking to access their investments.”
It also called out the DOL and SEC for embracing private markets in retirement plans. Atkins has been vocal over his support of expanding cryptocurrencies in 401(k) plans, while the DOL in May rescinded previous guidance that had discouraged fiduciaries from offering crypto options, including tokens, coins, crypto assets, and any derivatives thereof, in retirement plans.
Chavez-DeRemer would go on to describe the prior administration’s direction as “governmental overreach,” before stating that investment decisions should be made by fiduciaries instead of federal regulators.
“Now, the DOL has pulled that safety net out from under workers, reversing course on crypto protections abruptly and without clear reasoning,” Sens. added.
Lawmakers also raised concerns over President Donald Trump’s possible financial benefit in issuing August’s executive order. It cited a report from The Wall Street Journal that found the Trump family had amassed “as much as $5 billion in paper wealth” following the launch of a crypto token from Trump’s venture, World Liberty Financial.
“How can the American people trust the advice they get from an Administration that stands to potentially further profit by this move?” the senators questioned in the note.
The letter concluded by asking the DOL and SEC to answer questions on the possible impacts of cryptocurrencies in 401(k) plans by Nov. 17.
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news. She is originally from Queens, New York, but now resides in Denver, Colorado.
