Compliance News | March 14, 2022

DOL Warns Against Cryptocurrencies in 401(k) Plans

The DOL has taken an extremely strong position against plan fiduciaries including cryptocurrencies as investment options in self-directed 401(k) plans. The DOL cautions plan fiduciaries to exercise extreme care before including such investments in a plan’s portfolio, including in brokerage accounts.

The DOL also indicates that it will create an investigative program targeted at plans that include cryptocurrency investment options.

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The guidance

On March 10, 2022, DOL issued Compliance Assistance Release No. 2022-01. The guidance points out that:

  • Cryptocurrencies are speculative and volatile investments.
  • It’s a challenge for plan participants to make informed investment decisions about cryptocurrencies.
  • There are custodial and recordkeeping concerns as well as valuation concerns about cryptocurrencies.
  • The regulatory environment for cryptocurrencies is evolving.

In the Compliance Release, the DOL specifies some of the facts and circumstances that it expects plan fiduciaries to consider and warns fiduciaries to be extremely cautious. The DOL also states its belief that, at least with respect to cryptocurrencies, a fiduciary has a duty to look at whether what is being offered under a brokerage window is prudent.

Implications for plan sponsors

The DOL warns plan fiduciaries who do not follow the Compliance Release and decide to include cryptocurrencies in their plan’s portfolio can expect a DOL investigation.

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This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.

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