Key Takeaways
- The Department of Labor’s Employee Benefits Security Administration (EBSA) issued Compliance Assistance Release (CAR) 2022-01 that caused concerns among plan sponsors and fiduciaries about the use of cryptocurrencies in participant directed plans.
- On May 28 of this year, the DOL’s EBSA rescinded that CAR. That should have the effect of reducing, but not eliminating, the concerns.
- This article discusses the two pieces of guidance and the possible outcomes.
The 2022 CAR (2022-01.pdf) had a chilling effect on adding cryptocurrency investments into participant directed plans. The statements in the CAR that raised the most concern were:
- The Department cautions plan fiduciaries to exercise extreme care before they consider adding a cryptocurrency option to a 401(k) plan’s investment menu for plan participants.
- At this early stage in the history of cryptocurrencies, the Department has serious concerns about the prudence of a fiduciary’s decision to expose a 401(k) plan’s participants to direct investments in cryptocurrencies, or other products whose value is tied to cryptocurrencies. These investments present significant risks and challenges to participants’ retirement accounts, including significant risks of fraud, theft, and loss, …
- Based on these and other concerns, EBSA expects to conduct an investigative program aimed at plans that offer participant investments in cryptocurrencies and related products, and to take appropriate action to protect the interests of plan participants and beneficiaries with respect to these investments. The plan fiduciaries responsible for overseeing such investment options or allowing such investments through brokerage windows should expect to be questioned about how they can square their actions with their duties of prudence and loyalty in light of the risks described above.
Continue reading Things I Worry About (11): DOL Cryptocurrency Guidance Withdrawn
