Dive Brief:
- The U.S. Department of Labor’s Employee Benefits Security Administration on Wednesday rescinded a Biden-era warning that cautioned 401(k) plan fiduciaries against offering cryptocurrency options. The 2022 guidance urged fiduciaries to exercise “extreme care” before adding cryptocurrency to their investment menus.
- The guidance’s language “deviated from the requirements of the Employee Retirement Income Security Act and marked a departure from the department’s historically neutral, principled-based approach to fiduciary investment decisions,” DOL said in a news release.
- DOL said its decision to rescind the guidance “reaffirms its neutral stance” on whether fiduciaries include cryptocurrency in a plan’s investment menu.
Dive Insight:
“The Biden administration’s department of labor made a choice to put their thumb on the scale,” U.S. Secretary of Labor Lori Chavez-DeRemer said in a statement. “We’re rolling back this overreach and making it clear that investment decisions should be made by fiduciaries, not D.C. bureaucrats.”
DOL said the standard of “extreme care” included in the 2022 guidance is not included in ERISA and is a departure from and the act’s ordinary fiduciary principles in a compliance assistance release issued Wednesday.
Instead, “ERISA itself requires that a fiduciary curate a plan’s investment menu ‘with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims’ for the ‘exclusive purpose’ of maximizing risk-adjusted financial returns to the plan’s participants and beneficiaries,” DOL said in the compliance assistance document.
The department noted that while the new guidance specifically references cryptocurrency, the same considerations should be made regarding other digital assets like tokens, coins or crypto assets.
In its 2022 guidance, DOL warned about the risks to participants’ retirement accounts that cryptocurrency could pose, including fraud, theft and loss. The department at the time characterized these investment options as speculative and volatile and noted that participants “are less likely to have sufficient knowledge about these investments, as compared to traditional investments, or to have the technical expertise necessary to make informed decisions about investing in them.”
The Biden administration’s warning against cryptocurrency was published March 10, 2022, and was the subject of an lawsuit by that June, in which a retirement plan provider unsuccessfully alleged that the federal government overstepped its authority in cautioning employers against offering cryptocurrency as an investment option.