DOL Rescinds 2022 Cryptocurrency Guidance for 401(k) Plans

Today, the U.S. Department of Labor’s Employee Benefits Security Administration rescinded a 2022 compliance assistance release directed at plan fiduciaries considering plan investments in cryptocurrencies.

The 2022 guidance, published by the DOL’s Employee Benefits Security Administration, directed plan fiduciaries to exercise “extreme care” before they consider adding a cryptocurrency option to a 401(k) plan’s investment menu for plan participants. In the guidance, EBSA points out, the Employee Retirement Income Security Act of 1974 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.

According to the Department’s release today, this guidance strayed from the requirements of ERISA.

“The Biden administration’s department of labor made a choice to put their thumb on the scale,” said U.S. Secretary of Labor Lori Chavez-DeRemer in a statement. “We’re rolling back this overreach and making it clear that investment decisions should be made by fiduciaries, not DC bureaucrats.”

The DOL said that, by rescinding the 2022 guidance, it is “neither endorsing, nor disapproving of, plan fiduciaries who conclude that the inclusion of cryptocurrency in a plan’s investment menu is appropriate.”

At the time of the 2022 guidance, the EBSA position was that cryptocurrencies tend to be too speculative and volatile investments to serve a meaningful purpose in tax-qualified retirement plans. As the release explained, at this stage in their development, cryptocurrencies have been subject to extreme price volatility, which may be due to the many uncertainties associated with valuing these assets. Other issues cited by the EBSA include the speculative conduct of crypto market participants and the security risks demonstrated by widely published incidents of theft and fraud.

In April, Senator Tommy Tuberville, R-Alabama, reintroduced legislation that aims to reverse guidance issued by the Department of Labor’s Employee Benefits Security Administration in 2022 that discourages retirement plans from including cryptocurrency assets or other alternative investments in their offerings.

The Financial Freedom Act would prohibit the secretary of labor “from constraining the range or type of investments that may be offered to participants and beneficiaries of individual retirement accounts who exercise control over the assets in such accounts,” according to a Tuberville statement.