DOL Has 'Grave Concerns' With Fidelity's Bitcoin 401(k) Move: WSJ

“2) Obstacles inhibit participants from making informed decisions;

“3) 401(k) plans and their creators, facilitators and other promoters face unique and disabling custodial, cybersecurity and record-keeping challenges;

“4) Financial experts lack any sort of industry standard valuation model or accounting requirements regarding the value of cryptocurrencies, which can fluctuate wildly; and

“5) It is challenging, if not impossible, for fiduciaries to even explain the possible application of regulatory requirements on crypto-related issuances, investments, trading or other activities (especially given some of the wildly inaccurate legal advice offered to cryptocurrency and other fintech firms).”

Benz, Levine Weigh In

Christine Benz, director of personal finance for Morningstar, tweeted on Tuesday her concerns with Fidelity’s move.

“With this Fido/crypto in 401(k) plans news, a bunch of things can be true at once. 1) Some ppl will make a lot of money in crypto. 2) Some will lose a lot. 3) Fiduciaries should find it difficult/impossible to justify putting crypto in retirement plans,” she said on Twitter.

In addition, Jeff Levine, who is Buckingham Wealth Partner’s chief planning officer, explained on Twitter Tuesday: “I understand the allure of crypto, but… If I was the fiduciary of an employer plan (maybe other than a solo-k), there is close to a 0% chance I’d add a crypto option to my investment line-up right now given the current regulatory environment.”

For Levine, “Adding crypto as a plan investment option is like begging to be put under a microscope and/or sued by plan participants the first time there’s a significant/sustained drop.”

DOL Investigations

Labor also explained that it intends “to conduct investigations targeting retirement plans that offer participant investments in crypto and related products, and plan fiduciaries should expect to be questioned over how their actions aligned with their fiduciary duties of prudence and loyalty,” Stark pointed out.

Labor’s “remarkably candid crypto-related guidance signals that advisers or related curators of certain retirement plans, who recommend any crypto-related investment, are not just suspect, but their actions could also amount to a per se breach of fiduciary duty,” Stark warned.

As the Supreme Court recently explained in Hughes et al. versus Northwestern University et al., “even in a defined-contribution plan where participants choose their investments, plan fiduciaries are required to conduct their own independent evaluation to determine which investments may be prudently included in the plan’s menu of options, and the failure to remove imprudent investment options is a breach of duty,” Stark said.