DOL axes earlier warning about cryptocurrency in 401(k) plans 

In CAR 2022-01, DOL advised 401(k) plan fiduciaries to “exercise extreme care” when considering cryptocurrency as a potential investment option for participants. That guidance listed several reasons why DOL believed cryptocurrency presented “significant risks and challenges” to participants, including that it is highly speculative and volatile, which could have a “devastating” effect on participants’ retirement savings. Although that guidance stopped short of saying that cryptocurrency is inherently imprudent, DOL expressed “serious concerns” about the prudence of a fiduciary’s decision to “expose” participants to these assets, whether as a direct investment option or through brokerage windows. DOL also said it intended to investigate participant-directed plans with cryptocurrency offerings to determine whether fiduciaries had satisfied their ERISA duties of prudence and loyalty. (The guidance offered no viewpoint on defined benefit plan investments in cryptocurrency.)

CAR 2025-01 says that the previous guidance’s standard of “extreme care” is not found in ERISA and differs from the law’s ordinary fiduciary principles. An accompanying news release characterizes the earlier guidance as a departure from DOL’s “historically neutral, principles-based approach to fiduciary investment decisions.” DOL emphasizes that its rescission of the 2022 guidance marks a return to the agency’s neutral stance by neither endorsing nor disapproving of plan fiduciaries who determine that offering cryptocurrency in a 401(k) plan’s investment menu is appropriate. While DOL’s cautionary statements in the 2022 guidance also encompassed participants’ ability to invest in digital assets through brokerage windows, CAR 2025-01 makes no mention of the potential availability of cryptocurrency investments through brokerage windows.

Whether DOL might retract other Biden-era subregulatory guidance remains to be seen. For example, in December 2021, DOL released a statement cautioning fiduciaries of “typical” defined contribution plans about offering private equity investments as components of professionally managed asset allocation funds, such as target-date or balanced funds. Like CAR 2022-01, the statement was couched in terms of protecting participants’ retirement savings from “unwarranted risks.”