401(k) Group Sues DOL Over Crypto Crackdown
The lawsuit “challenges DOL’s arbitrary and capricious attempt to restrict the use of cryptocurrency in defined contribution retirement plans."
ForUsAll Inc., a small-business 401(k) platform, is suing Labor Secretary Marty Walsh and the department to vacate and set aside Labor’s recent threat to investigate plan fiduciaries offering crypto and other digital assets.
Labor warned plan fiduciaries of their liability for crypto risks in Compliance Assistance Release 2022-01, “401(k) Plan Investments in ‘Cryptocurrencies,’” issued March 10.
The lawsuit, filed Thursday in the U.S. District Court for the District of Columbia, “seeks to preserve the rights of American investors to choose how to invest money in their own retirement accounts.”
ForUsAll is represented by Groom Law Group.
Brought under the Administrative Procedure Act, the lawsuit “challenges DOL’s arbitrary and capricious attempt to restrict the use of cryptocurrency in defined contribution retirement plans, in excess of its authority under the Employee Retirement Income Security Act (“ERISA”), and without following the notice and comment process required under the APA,” it states.
Labor’s release threatens “to open investigations of plan fiduciaries that offer cryptocurrency,” and also announces “a new obligation to monitor investments in ‘brokerage windows,’ despite the fact that DOL’s own ERISA Advisory Council just reported to Secretary Walsh that: (i) DOL regulations say there is no such obligation; (ii) fiduciaries do not currently engage in such monitoring; and (iii) no additional regulations are necessary on the topic,” the lawsuit states.
DOL “has never previously asserted that there is a general fiduciary obligation to select or monitor individual investments within a brokerage window, nor has any court held that such an obligation exists,” according to the suit.
ForUsAll maintains that it “is targeted by the new DOL rule reflected in the Release and has suffered injury as a result. Indeed, a senior DOL official explicitly named Plaintiff as a service provider whose business the Release is intended to stymie.”
On its website, ForUsAll prompts companies who want to offer a “self-directed crypto window” in their 401(k) plans to set up a call.
Cryptocurrency, the lawsuit states, “is a widely accepted asset class. Tens of millions of Americans have included it in their portfolios, as have some of the nation’s largest institutional investors, including Harvard University’s endowment.”
President Joseph Biden “has formally declared it to be the policy of the United States to ‘promote’ the development and use of cryptocurrency,” the lawsuit states.