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April 26, 2022 at 01:15 PM
Fidelity’s plan to allow investors to put Bitcoin in their 401(k) accounts risks the retirement security of Americans, the Labor Department told The Wall Street Journal.
“We have grave concerns with what Fidelity has done,” Ali Khawar, acting assistant secretary of the Employee Benefits Security Administration, told The Journal Thursday in an interview.
Other industry officials agreed that Fidelity is taking a huge gamble — and could be setting itself up for a Labor Department investigation — by allowing Bitcoin in 401(k) plans.
“Say it ain’t so, Fidelity?” John Reed Stark, president of John Reed Stark Consulting and former chief of the SEC’s Office of Internet Enforcement, wrote Tuesday in a lengthy LinkedIn post. “Shocked that Fidelity would take on so much risk not only for its customers but also for itself.”
Fidelity announced Tuesday that, starting later this year, the 23,000 or so firms that use Fidelity Investments to administer their retirement plans will have the option to offer Bitcoin through Fidelity’s core 401(k) plan lineup.
Labor, which regulates 401(k) investing, “has made it quite clear that retirement-related crypto-recommendations by a fiduciary will likely trigger strict scrutiny and a DOL investigation,” Stark said.
Labor warned 401(k) plan fiduciaries on March 10 to “exercise extreme care” before including direct investment options in cryptocurrency and published compliance assistance.
Stark, also a senior lecturing fellow at Duke University Law School, noted that Labor’s guidance applies to “any 401(k) or other pension adviser or curator (company-sponsor, broker, promoter, etc.) who recommends any crypto-related investment.”
Labor, Stark wrote, has “jurisdiction over 401(k) plans, and administers and enforces” the Employee Retirement Income Security Act, or ERISA, which covers most private-sector pension plans.
Specifically, Stark explained that Labor “expresses concern” that:
“1) Digital assets are highly speculative and volatile;
