DOL Warns Against Crypto in ERISA Plans

Law360
03/11/2022

The U.S. Department of Labor warned financial advisers responsible for overseeing retirement plans regulated by the Employee Retirement Income Security Act to "exercise extreme care" before adding cryptocurrency products to a 401(k) investment menu given the financial risks involved with crypto assets.

In a compliance assistance document published Thursday, the DOL's Employee Benefits Security Administration said it had serious concerns about exposing 401(k) plan participants to direct investments in cryptocurrencies or products whose value is tied to cryptocurrencies. ERISA plan managers must exercise the highest fiduciary standard of care when giving investment advice, the agency said. The publication provided a fairly stark warning about legal risks for plans if financial advisers add cryptocurrency products to their suite of 401(k) offerings.

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Stephen D. Palley, a partner at Anderson Kill PC who specializes in cryptocurrency, posted on Twitter Friday that the new document "makes it tough" for ERISA retirement plans to offer "even vanilla exposure to crypto."

"I don't think it's fair to paint all digital asset related investments with the same broad brush," Palley told Law360 on Friday. "Sort of rejecting out of hand any kind of cryptocurrency-related investment, it lacks a fair nuance." 

Still, Palley conceded that "If the Department of Labor issues a release saying, 'bad idea if you're a plan fiduciary,' I think you'd have to look very hard at that."

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