Department of Labor Modifies Cryptocurrency Caution, Resumes Non-partisan Position on 401(k)s
On Wednesday, the U.S. Department of Labor announced a reversal of its 2022 guidance, which cautioned retirement plan fiduciaries against offering cryptocurrency as an investment option in 401(k) plans. The department deemed the earlier guidance a deviation from established legal standards under the Employee Retirement Income Security Act (ERISA).
The Employee Benefits Security Administration's Compliance Assistance Release No. 2025-01 officially withdraws the 2022 directive, which instructed fiduciaries to exercise extreme caution before considering cryptocurrency offerings. The Department now deems the warning language inconsistent with ERISA and representative of a shift from its historically neutral approach to investment types.
In a statement, Secretary of Labor Lori Chavez-DeRemer asserted, "The Biden administration's Department of Labor made a choice to put their thumb on the scale... We're rolling back this overreach and making it clear that investment decisions should be made by fiduciaries, not D.C. bureaucrats."
In 2022, the guidance had alerted plan fiduciaries to potential regulatory scrutiny and participant comprehension difficulties associated with offering crypto in retirement plans. The withdrawal signifies a return to evaluating all investment options under the same fiduciary lens without singling out any particular asset class for heightened scrutiny.
While the withdrawal does not guarantee regulatory approval of crypto in retirement plans, it does remove the barriers implemented in 2022, opening the door for plans to consider cryptocurrency investments. Plan fiduciaries, however, must still uphold their duties of prudence, loyalty, and diversification when deciding whether to add any investment option, including cryptocurrencies. Risk assessments remain crucial, as no safe harbor protections are provided for fiduciaries who choose to offer cryptocurrencies.
Industry groups like the Investment Company Institute applauded the DOL for restoring fiduciaries' discretion under ERISA standards, emphasizing that the choice to include cryptocurrency should be left to fiduciaries based on their prudence and loyalty duties.
- With the withdrawal of the 2022 guidance, retirement plan fiduciaries are no longer singled out for heightened scrutiny regarding cryptocurrency offerings, as all investment options are to be evaluated under the same fiduciary lens.
- The Employee Benefits Security Administration's Compliance Assistance Release No. 2025-01 signifies a return to the historically neutral approach to investment types under ERISA, marking a shift from the earlier warning against offering cryptocurrency in retirement plans.
- Industry groups, such as the Investment Company Institute, have praised the DOL for restoring fiduciaries' discretion under ERISA standards, emphasizing that the choice to include cryptocurrency should be made by fiduciaries based on their prudence and loyalty duties.
- The removal of barriers implemented in 2022 has opened up the possibility for retirement plans to consider investing in cryptocurrencies, although plan fiduciaries must still exercise their duties of prudence, loyalty, and diversification when making these decisions, given the inherent risks associated with cryptocurrencies.
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