DOL Warns Against Plan Investments in Cryptocurrency | JD Supra

Given the present market volatility, the U.S. Division of Labor’s (DOL) considerations associated to the addition of cryptocurrencies in certified retirement plans appears prescient. In Compliance Help Launch No. 2022-01, the DOL cautioned plan sponsors and fiduciaries that they need to train “excessive care” in contemplating to supply cryptocurrency as an funding choice to contributors underneath a professional outlined contribution plan (resembling a 401(ok) plan). Seeking to ERISA’s exacting fiduciary obligation of prudence and the requirement that fiduciaries act solely within the curiosity of contributors, the DOL reminded plan fiduciaries that such requirements are the “highest recognized to legislation.”  

In gentle of these requirements, the DOL defined that it could have “critical considerations” concerning the prudence of a fiduciary’s resolution to reveal contributors or direct investments to cryptocurrencies, or different funding merchandise tied to cryptocurrency for the next causes:

• Funding in cryptocurrency is extremely speculative and unstable;
• It’s tough for plan contributors to make knowledgeable funding choices, or separate reality from hype, with respect to cryptocurrency;
• Cryptocurrency brings with it custodial and recordkeeping points (e.g., it isn’t readily valued or obtainable to pay advantages or plan bills);
• Cryptocurrency valuations should not dependable or correct resulting from the truth that consultants disagree as to how it’s to be valued; and
• Cryptocurrency rules are evolving and a few cryptocurrency continues to stay exterior of any regulatory framework.

Because of these considerations, the DOL defined that the Worker Advantages Safety Administration (EBSA) expects to conduct investigations aimed toward plans providing participant investments in cryptocurrency and related merchandise and take any motion that it deems acceptable to guard the pursuits of contributors in such plans.   

Whereas the DOL’s steering was aimed toward fiduciaries of outlined contribution plans, outlined profit plan fiduciaries and funding consultants ought to heed the steering as properly in directing the funding of outlined profit plan property which are topic to ERISA. As well as, whereas ERISA doesn’t apply to governmental plans, and sure opting out church plans, fiduciaries of such plans ought to take into account this steering as properly in making their funding selections.