0311 637934103031538118 Crypto in 401(k) plans: Why fiduciaries should be cautious

Crypto in 401(k) plans: Why fiduciaries should be cautious

Read Time:1 Minute

– Employers are facing an uptick in litigation alleging ERISA fiduciary breach claims based on the investment options and administrative fees in 401(k) plans.
– Under ERISA, fiduciaries are required to make prudent investment decisions that minimize the risk of large losses and act in the best interests of the plan participants.
– The volatility of cryptocurrencies and the potential for negative valuation swings could be deemed too risky to be prudent investment choices.
– The US Department of Labor released Compliance Assistance for firms marketing investments in cryptocurrencies to 401(k) plans as potential investment options for plan participants, cautioning plan fiduciaries to exercise extreme care before adding crypto to a 401(k) plans investment menu.
– Many employers use an investment policy statement (IPS) to help govern 401(k) management by the plan fiduciaries. If theyre considering offering crypto as an investment option, it would be wise to have the IPS reviewed by outside counsel to ensure that it caters for crypto.
– At present, fiduciary liability insurance policies do not typically exclude specific investment options. However, if theres a rise in litigation around 401(k) plan investments in cryptocurrencies, underwriters may address that exposure in a variety of ways, including crypto exclusions, higher retentions, lower coverage limits, and increased premiums.

 

 

0311 637934103031538118 Crypto in 401(k) plans: Why fiduciaries should be cautious
Crypto in 401(k) plans: Why fiduciaries should be cautious 3

Leave a Reply

%d bloggers like this: