Why Fiduciaries Must Be Wary of Crypto in 401k Plans

Cryptocurrency investment is not for the faint of heart. In November 2021, Bitcoin was worth $68,000 but fell below $20,000, and its volatility makes investing a hazardous business. Such a volatile nature is why investors need to be very careful while investing in cryptocurrency.  

By early 2022, Fidelity Investments became the first firm in America to announce that employees could add crypto—in this case, Bitcoin—to their 401(k)-retirement plan. The news of an investment option for workers appealed to employers, employees, and retirees. Employers want more labor attraction, while workers are excited about being able to increase savings even higher than before. Also, retirees took notice because it means they might finally be able to get back some money lost during recent market fluctuations.  

Employers’ employee retirement plans can be a tempting target for those looking to sue. Facing an uptick in litigation, employees’ lawyers are using Employee Retirement Income Security Act of 1974 (ERISA) as their weapon of choice and footing the bill with losses up front before any profits come out.  

This may sound like bad news, but there’s some good too. Since 401(k)s operate under such strict rules and regulations set forth by law, lawsuits involving these types custody arrangements will likely continue until the current president leaves office (or gets impeached).