A San Francisco-based pension provider filed a lawsuit this month against the Department of Labor over its warning in March that trustees should exercise extreme caution before adding a crypto option. -currency on the investment menu of a 401(k) plan.
The company, ForUsAll, filed a lawsuit in the U.S. District Court for the District of Columbia on June 2. She claims the DOL guidelines amounted to “a ban on cryptocurrency investment without conducting a formal notice-and-comment rule-making process,” according to Bloomberg Law. The lawsuit asks the court for an injunction to prevent regulators from enforcing the guidelines and to prevent investigations outside the scope of the Employee Retirement Income Security Act (ERISA).
In a blog post about the lawsuit, Fisher Phillips, an Atlanta-based law firm, said the DOL advice did not serve as an explicit ban. However, the company said, the guidelines had told trustees that they should conduct a thorough evaluation before offering crypto in their 401(k) menu options and would likely be subject to investigation by the Benefits Security Administration (EBSA) if they took the initiative to add crypto. The result, according to ForUsAll’s lawsuit, is an “arbitrary and capricious” attempt to restrict the use of cryptocurrency in pension plans.
ForUsAll bills itself as the first 401(k) platform to provide access to cryptocurrency. In the lawsuit, the company says DOL guidelines have dampened pension plan requests to add cryptocurrency as an option, according to Fisher Phillips. The company’s lawsuit alleges that the DOL circumvented the Administrative Procedure Act (APA) rule-making process by rushing its advice in response to several Super Bowl ads promoting crypto, fearing that the caution drives employees to put their retirement savings in crypto. According to the lawsuit, the guidelines were issued without the notice and comment procedures required by the APA, which could have taken months or even years, according to Fisher Phillips.
Jeff Schulte, the company’s CEO, told Bloomberg Law that the DOL guidelines broke with precedent that had “left plan sponsors to fend for themselves to oversee self-selecting investment participants.” The DOL guidelines made it an “armchair financial adviser” that effectively prohibited the inclusion of any asset class in 401(k) plans, he said.
“When the federal government says it’s launching a survey program and that any small business owner who decides to make cryptocurrency available – even through a self-directed brokerage account – should expect to be questioned, it’s trying to effect a ban,” Schulte said.
Schulte said the DOL’s advice has made it difficult for investors to decide how best to invest for their retirement.
“We believe it is extremely important that ordinary Americans have the freedom to choose what they see best, and the self-directed brokerage account has been a reliable tool for achieving this for decades,” he said. he declares. “We think the Department of Labor’s overreach sets a troubling precedent, simply because they don’t like cryptocurrency.”
In May, Ali Khawar, acting deputy secretary of the DOL and principal deputy assistant secretary for EBSA, told Bloomberg Law that the agency’s guidelines did not represent a ban or an attempt to create “a back door for regulate brokerage windows in a whole new way”. .” Khawar said the guidance serves to highlight the volatility of cryptocurrency investments and the difficulty of determining their market value.
ForUsAll, Fidelity Investments and various trade organizations representing plan sponsors and pension funds have made public calls on the Department of Labor to revoke its guidelines. Shortly after the DOL released its guidelines in March, Fidelity released a crypto product for 401(k) investors.
Additionally, Fisher Phillips noted, Sen. Tommy Tuberville (R-AL) on May 5 introduced the Financial Freedom Bill that would prohibit the DOL from limiting the types of investments workers can invest in through their accounts. self-directed brokerages, including 401(k)s.
In his article, Fisher Phillips indicated that employers evaluating digital assets for their 401(k) investment menu should consider EBSA’s scrutiny for now. To include a cryptocurrency on their menu, they will want to have a “robust” monitoring process and be prepared for a possible EBSA audit.
“While several financial experts expect that crypto may eventually have a place in 401(k) offerings, the timing of this adoption and the parameters of such inclusion remain to be seen,” according to the post.