The Department of Labor recently issued Compliance Assistance Release No. 2025-01 rescinding Compliance Assistance Release No. 2022-01 that directed 401(k) plan fiduciaries to exercise “extreme care” before adding cryptocurrency as a plan investment option. While the DOL’s recent guidance rescinds its 2022 guidance, it neither blesses cryptocurrency as an appropriate retirement plan investment option nor modifies ERISA’s fiduciary duties.
It is important for plan fiduciaries to be mindful that ERISA’s fiduciary duties associated with the selection and monitoring of retirement plan investment options still apply to the evaluation of whether cryptocurrency is an appropriate addition to a 401(k) plan’s investment menu the same way they apply to any investment option or potential investment option.
Even with the recent guidance, plan fiduciaries and their investment advisors may still conclude that cryptocurrency is not an appropriate addition to the 401(k) plan’s investment menu, given some of the characteristics of cryptocurrency. The ERISA fiduciary concerns raised by the DOL in its 2022 guidance still exist even with that guidance being rescinded, such as: (i) extreme volatility, (ii) difficulties making informed risk evaluations, (iii) valuation challenges, (iv) fraud and theft risks, (v) recordkeeping and custodian vulnerabilities, and (vi) regulatory uncertainty. Furthermore, the addition of cryptocurrency to a 401(k) plan’s investment menu could draw the attention of plaintiffs’ attorneys.
