Rep. Neal Asks Government Watchdog to Study Hazards of Crypto in 401(k)s

 Commentary  June 15, 2022 at 07:44 AM  Share & Print

 
 

What You Need to Know

  • Neal wants GAO to investigate the hazards to retirement savings posed by offering cryptocurrency in retirement plans.

  • He asked GAO to determine the extent to which investment options for cryptocurrency are being offered by firms.

  • After meeting with Fidelity, Labor’s Ali Khawar said he thinks the firm understands the government’s concerns.

House Ways and Means Committee Chairman Richard Neal, D-Mass., asked the Government Accountability Office on Wednesday to investigate the hazards to retirement savings posed by offering cryptocurrency in retirement plans.

“Recent announcements from major DC plan providers indicate that many employers who sponsor DC plans will have the option to allow their employees to invest in cryptocurrencies,” Neal told GAO Comptroller General Gene Dodaro in a letter.

“However, concerns have arisen about the risks to older Americans’ retirement security of using retirement accounts to invest in cryptocurrencies due to their volatility and limited oversight,” Neal said.

Neal noted the Department of Labor’s cautionary guidance issued earlier this year that defined contribution plan sponsors “should exercise extreme care before they consider adding a cryptocurrency investment option to their plan, given the risks and complications these assets pose to both participants and sponsors.”

The Labor Department warned 401(k) plan fiduciaries on March 10 to “exercise extreme care” before including direct investment options in cryptocurrency and published compliance assistance.

ForUsAll Inc., a small-business 401(k) platform, is suing Labor Secretary Marty Walsh and the department to vacate and set aside Labor’s recent threat to investigate plan fiduciaries offering crypto and other digital assets, which was laid out in the March 10 Compliance Assistance Release 2022-01, “401(k) Plan Investments in ‘Cryptocurrencies.’”

Neal asked GAO’s Dodaro to:

  • Determine the extent to which investment options for cryptocurrency are being offered by firms with a listing of the types of firms, for instance by size, offering the options and the extent to which the investment options for cryptocurrency are being utilized by sponsors of 401(k) plans.

  • Describe how DC plans administer cryptocurrency investment options, such as determining their valuation, the types and levels of fees associated with them, and safeguards, if any, that plan fiduciaries report using to maintain their fiduciary obligations to participants and beneficiaries.

  • Assess the oversight of cryptocurrency investment options in 401(k) plans by the relevant agencies, and guidance federal agencies provide to plan sponsors, participants and beneficiaries about investing in cryptocurrency and examine the current restrictions, if any, on investments in cryptocurrency in 401(k) plans.

Ali Khawar, acting assistant secretary of Labor’s Employee Benefits Security Administration, told reporters on May 19 at the Insured Retirement Institute’s annual conference that Labor still has concerns about Fidelity’s crypto 401(k) offering after a recent “cordial but candid” talk with the Boston-based firm.

“We’ve met with” Fidelity, Khawar told reporters. Labor “had an interesting conversation where they [Fidelity] walked us through, in more detail, how they saw their offering working, what they viewed as their protections,” he said. “I think they understand the concerns that we have.”

Khawar added: “This is an important issue for us.”

In his comments at the IRI event, Khawar noted that cryptocurrency is an enforcement focus for EBSA and that Labor’s concern — as noted in a recent cryptocurrency guidance — centers on workers “being marketed crypto in their 401(k), where there’s some element of pushing people into it.”


European Compliance Association

European Compliance Association

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