Compliance November 15, 2022

DOL Rejects ForUsAll’s ‘Tactical Retreat’ in Crypto Retirement Case

The DOL shot back at 401(k) provider ForUsAll’s offer to drop its suit if the court confirmed a DOL warning about crypto in retirement plan as “not binding.”

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The U.S. Department of Labor is fighting back against the latest move by retirement provider ForUsAll in an ongoing dispute over DOL guidance cautioning plan fiduciaries and employers from providing cryptocurrency as an investment option within 401(k) plans.

The latest ForUsAll request had seen the retirement plan provider offer to drop the lawsuit, as long as the court confirmed the DOL’s initial guidance would not be enforced. This would essentially allow fiduciaries and plan sponsors to provide cryptocurrency assets without fear of regulation, ForUsAll said.

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On Monday, the DOL shot back in its response, saying ForUsAll misrepresented the guidance to fit its own purposes and that the court has no jurisdiction over the enforcement of “cryptocurrency investment offerings for an indefinite period of time.”

“In short, the parties now all agree that this case should not proceed further,” the DOL, the defendants in the case, said in its response. “The Court should grant Defendants’ pending motion to dismiss and reject ForUsAll’s effort at a tactical retreat.”

The battle between the DOL and ForUsAll is taking place even as the cryptocurrency market faces increased scrutiny by regulators after the collapse of multi-billion dollar exchange FTX on November 8. According to retirement plan fiduciaries and advisers, that case and the related market crash of established cryptocurrencies such as bitcoin have the industry second-guessing recent moves to give retirement participants access to digital assets in their 401(k)s.

ForUsAll originally sued the DOL in June, saying that guidance the department gave calling on fiduciaries and plan sponsors to use “extreme care” in considering cryptocurrency in retirement plans went beyond the DOL’s regulatory authority as provided by The Employee Retirement Income Security Act, and in addition did not go through the proper comment period. On November 1, ForUsAll reversed course, saying it would drop the suit if the court and DOL confirmed the guidance was not binding.

In a conversation with PLANADVISER earlier this month, ForUsAll co-founder and CIO David Ramirez made the case that the DOL guidance was not only warning against providing cryptocurrency in retirement plans, but also gave the department the right to question any investment offering made to participants, even through the self-directed brokerage window, which is often used to offer savers access to alternative investments.

“If I exclude crypto from investment options, then I’m taking an active bet that the wider market is wrong,” Ramirez said. “It’s my fiduciary responsibility to really understand this blockchain technology and its importance in a whole variety of areas.”

ForUsAll did not immediately respond to request for comment about the DOL’s latest court filing.

In its response, the DOL said the guidance purposefully does not take a “definitive position” on fiduciaries’ responsibilities regarding the self-directed brokerage window. The department noted that the court, in this case, should not dictate guidance or regulation going forward.

“Most significantly, [ForUsAll’s motion] would put the Court in the position of policing any modifications the Department makes in its approach to cryptocurrency investment offerings for an indefinite period of time,” the DOL said in its response. “That could lead to the Court being asked to interfere with agency enforcement proceedings in ways contrary to the separation of powers, and to the agency being handcuffed in its response to rapidly changing circumstances.”

The DOL response said ForUsAll misrepresented the initial guidance as stating that allowing cryptocurrency in retirement plans “does not violate a fiduciary duty.” What the guidance actually said, according to the department’s response, is that cryptocurrency as an investment option may comply with fiduciary duties and prudence, depending “on the specific circumstances in a given situation.”

The country’s largest retirement plan recordkeeper, Fidelity Investments, and small business plan provider ForUsAll currently have plan sponsor clients providing participants access to cryptocurrency within their 401(k) accounts.

ForUsAll offers the asset through the self-brokerage retirement window and requires a waiver of understanding, as well as a short quiz about cryptocurrency and blockchain, the technology used to create the asset. A spokesperson for Fidelity said in an email that the Boston-based firm has had plan sponsors signed up since the fall offering access to Fidelity’s Digital Assets Account as a part of their core 401(k) line up.

The DOL response also argued that ForUsAll’s request for the court to put conditions on the dismissal of the suit goes out of the bounds of the law.

“That is not the way this works,” the DOL response reads. “ForUsAll cannot bring a lawsuit over which the Court lacks jurisdiction and then turn around and request that the Court ‘retain Jurisdiction’ (that it does not have) to bind Defendants in perpetuity.”

Data & Research November 15, 2022

53% of Savers Who Rely on Workplace Plans Don’t Work with Advisers

U.S. consumers have a growing appetite for professional financial advice, but more than half of people relying on their employer-sponsored plan don’t go beyond self-service options, according to Hearts & Wallets.  

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More than half of U.S. savers who rely on their workplace retirement plan as their primary financial resource do not sign up for more than the most basic self-service assistance, according to new research from Hearts & Wallets provided to PLANADVISER.

Among plan participants who say they rely on their workplace plan for financial resources, 34% say they get no financial service or advice, and 19% only use self-service advice focused on one topic, according to Hearts & Wallets. The other less than half of participants in the group get more professional assistance covering multiple topics, the researcher said.

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The gap in financial advice provides opportunity for retirement plan advisers and sponsors to give better guidance about the role of professionals in helping to manage investments, taxes and retirement planning, says Hearts & Wallets CEO and founder Laura Varas. Participants might see the value in advice if given choices such as how to manage inflation, or how to set up an in-plan guaranteed income solution, she says.

“Plan participants are getting less robust advice offerings,” Vara says. “It would be helpful to participants if they had more explicit communication about what they can get through their plan for more personalized financial advice.”

Recent research shows that American workers are stressed about having enough to save for retirement amid rising inflation, but that they are keeping up with their workplace retirement plan deferrals. A separate survey of more than 2,000 working adults released Monday by the National Association of Personal Finance Advisors said 70% of employees believe they would perform better at their jobs if their employer offered more financial wellness benefits.

The Hearts & Wallets research showed that, despite financial advice services likely adding costs for participants, more savers seem willing to absorb the additional fees than in the past.

The survey, which included 5,993 U.S. households and was conducted from August 15 to September 15, found that more than one in four households (27%) agree they “see value in paying for professional financial advice, whether or not I use a financial adviser today,” nine percentage points higher than in 2012. Meanwhile, nearly a quarter (23%) of households agree “my financial adviser is a partner to me” in 2022, up from 15% in 2012.

“We find growing appreciation for financial advice overall, as well as people feeling like their financial adviser is a partner,” Varas says. “When a consumer understands the financial adviser role and knows what to expect, they are more likely to agree that the person is a partner.”

Varas notes that new entrants into the financial advice space—such as blooom, Savvy and Betterment—do a better job of marketing their services, with clear guidance on the benefits of the service and costs.

“When young people talk about their [retirement] plan, they’re talking about it more like a subscription,” she says. “It should be way easier to help people with these really important decisions by telling them how much more it will cost and what they’ll get. You don’t have to wonder with Netflix or HBO if you’re getting a premium subscription or basic.”

The increased interest in professional advice comes at a time when the survey group has concerns about inflation (46%), the U.S. economy overall (41%) and social security’s future (36%). Among those with concerns about inflation, more than a third have 90% of their investable assets in cash, providing yet another opportunity for advisers, according to Rye, New York-based Hearts & Wallets.

“The financial services industry can support consumers in their struggle with inflation, especially when it comes to education about why high cash holdings can be counterproductive,” Varas says. “Additionally, there are myriad solutions to the concern about making assets last throughout retirement.”

The survey also found a trend toward retirement savers being more comfortable with leaving their money in a former employer’s plan. That data showed an 8% increase since 2012, with 22% saying they are fine leaving their money with a former employer’s plan.

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