The debate over including cryptocurrency in retirement plans continued this week, as the Labor Department now appears ready to up the ante and a key lawmaker on Capitol Hill is asking questions.
The latest development comes from House Ways & Means Committee Chairman Rep. Richard Neal (D-MA), who has asked the Government Accountability Office (GAO) to examine various aspects of cryptocurrency in retirement plans. In a June 15 letter to GAO Comptroller General Gene Dodaro, Neal asked the agency to provide additional information about the available cryptocurrency investment offerings and what oversight of those options exists.
“Recent announcements from major DC plan providers indicate that many employers who sponsor DC plans will have the option to allow their employees to invest in cryptocurrencies,” wrote Neal. “However, concerns have arisen about the risks to older Americans’ retirement security of using retirement accounts to invest in cryptocurrencies due to their volatility and limited oversight.”
Neal’s letter cites the DOL’s March 10 compliance assistance bulletin, cautioning that DC plan sponsors should exercise extreme care before they consider adding a cryptocurrency investment option to their plan, given the potential risks and complications.
Neal asked GAO to examine the following issues:
- Determine the extent to which investment options for cryptocurrency are being offered by firms with a listing of the types of firms, for instance by size, offering the options and the extent to which the investment options for cryptocurrency are being utilized by sponsors of 401(k) plans.
- Describe how DC plans administer cryptocurrency investment options, such as determining their valuation, the types and levels of fees associated with them, and safeguards, if any, that plan fiduciaries report using to maintain their fiduciary obligations to participants and beneficiaries.
- Assess the oversight of cryptocurrency investment options in 401(k) plans by the relevant agencies, and guidance federal agencies provide to plan sponsors, participants and beneficiaries about investing in cryptocurrency and examine the current restrictions, if any, on investments in cryptocurrency in 401(k) plans.
While not mentioning Fidelity by name, Neal’s letter appears to allude to the firm’s April 26 announcement that it will move forward with a new “digital assets” capability for 401(k) plans.
DOL Mulling Formal Guidance
Also this week, Labor Secretary Marty Walsh confirmed that the DOL is looking at going beyond the compliance assistance bulletin and issuing formal guidance on crypto investing in the retirement space. During a June 14 House Education and Labor Committee hearing to examine the policy priorities of the DOL, Walsh indicated as much under questioning by Rep. Burgess Owen (R-UT).
When asked by Owen about the DOL’s recent guidance on cryptocurrency and why the department did not follow the Administrative Procedure Act’s notice and comment rulemaking process, Walsh explained that the DOL issued the preliminary guidance due to concerns it had. “We made a recommendation because we were concerned about employees having 20% of their retirement savings put into cryptocurrency. And I think that our role is to make sure that we’re protecting the rights of American workers and investments going in, and since we made that determination, we’ve seen lots of losses in the cryptocurrency space,” Walsh told Owen.
“We’re looking at potentially going through the rulemaking process moving forward on the industry as a whole,” he added, noting that this was a “one-off investment” that they wanted to let investors know that they have major concerns about it. “We didn’t tell them that they couldn’t do it, but we told them we had major concerns with it,” he emphasized.
Meanwhile, legislation has been introduced in Congress that would preserve the ability of retirement savers to invest their 401(k) funds in cryptocurrency by prohibiting the DOL from issuing guidance that limits the type of investments that self-directed 401(k) account investors can choose through a brokerage window.
Additionally, recordkeeper ForUsAll has filed suit against the DOL for its recent “arbitrary and capricious” attempt to restrict the use of cryptocurrency in DC plans, contending, among other things, that the department did not go through the APA’s formal rulemaking process when it issued the crypto guidance in March.
