DOL Release Focuses on 401(k) Investment in Cryptocurrencies

On March 10, 2022, the DOL published Compliance Assistance Release No. 2022-01. The release announces that the DOL’s Employee Benefits Security Administration (EBSA) may investigate 401(k) plans that offer opportunities to invest in cryptocurrencies and related products.

The release reminds these plans of their fiduciary duties to their participants, to “act solely in the financial interests of plan participants and adhere to an exacting standard of professional care.” In the context of 401(k) plans, these duties include an obligation to evaluate potential investment opportunities and make sure that those opportunities available to participants are prudent. To meet this obligation, the plan must remove imprudent opportunities from the plan, and the failure to do so is a breach of fiduciary duty.

The DOL believes that investments in cryptocurrencies and related products are at high risk of fraud, theft or loss. These investments are highly speculative and subject to price volatility. Cryptocurrencies are surrounded by hype and are so new that they are difficult to evaluate, since very few investors have the technical expertise necessary to make informed decisions about them. Since they are not recorded and tracked in traditional ways, being lines of code, they are vulnerable to manipulation and loss. They are difficult to appraise and do not conform to traditional regulatory frameworks. For these and other reasons, the agency is concerned that plans take steps to protect the interests of participants if they make these sorts of investments.

Plan fiduciaries should be aware of this release and expect the DOL to take further action regarding cryptocurrencies.

Compliance Assistance Release No. 2022-01 »