What You Need to Know
- Labor cautions plan fiduciaries to exercise extreme care before considering cryptocurrency as a 401(k) plan option.
- Financial services firms have begun marketing investments in crypto as potential investment options for 401(k) participants.
- Labor has serious concerns about exposing participants to direct investment in cryptocurrencies.
The Labor Department on Thursday warned 401(k) plan fiduciaries to “exercise extreme care” before including direct investment options in cryptocurrency and published compliance assistance.
Labor’s Employee Benefits Security Administration released Compliance Assistance Release No. 2022-01, which 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,” Labor said.
The Employee Retirement Income Security Act 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,” the announcement states.
Ali Khawar, EBSA’s acting assistant secretary, said the compliance guidance “reminds plan fiduciaries of their important role in selecting investment options for 401(k) plan menus. At this stage of cryptocurrency’s development, fiduciaries must exercise extreme care before including direct investment options in cryptocurrency.”
Labor’s guidance lists the following concerns with cryptocurrencies:
Speculative and volatile investments: The Securities and Exchange Commission has cautioned that investment in a cryptocurrency is highly speculative. At this stage in their development, cryptocurrencies have been subject to extreme price volatility.