On June 2, ForUsAll Inc. filed suit against the United States Department of Labor (DOL) in federal district court in D. C., over its latest soft guidance issued in March on the use of cryptocurrency investments (Crypto) in plans. Compliance Assistance Release No. 2022-01) Last June, ForUsAll Inc. became one of the first providers to begin offering Crypto funds via brokerage windows in retirement plans. See, “Why Would Anyone Invest In Crypto Through A Retirement Plan?”. The lawsuit maintains that the DOL’s guidance was arbitrary and capricious and exceeded its regulatory authority by: inventing a new standard of care, “extreme care” for fiduciaries considering adding Crypto as a plan option; announced a new fiduciary obligation to monitor Crypto in brokerage windows; and threatened to open investigations of plan fiduciaries that offer Crypto. It also alleged that the DOL failed to follow the proper steps for issuing guidance under the Administrative Procedures Act, requiring a chance for public comment. The suit asks the court to vacate and set aside the guidance and enjoin the DOL from attempting to enforce it.
Since the DOL issued its guidance, industry groups including the American Bankers Association, the American Benefits Council and others have criticized it and requested it be withdrawn. However, many employee benefits practitioners don’t believe Crypto in plans is a good idea. Meanwhile EBSA still doesn’t have a confirmed head as the Senate narrowly failed to confirm Lisa Gomez on June 8. However her nomination is still alive because Majority Leader Chuck Schumer, D-New York, voted against the nomination, allowing him to bring it to the floor again in the future.
Crypto Still Risky.
While the lawsuit could rescind the DOL guidance, it’s this author’s opinion that Crypto is still a very risky investment for retirement assets for the reasons expressed in the guidance and my prior blog article. Brokerage windows may be a less risky way for fiduciaries to offer Crypto to participants who demand it, but that doesn’t make it a good idea. Under the current climate, fiduciaries should carefully consider whether to offer Crypto and carefully document their decision in case they are questioned by the DOL. Stay tuned as we will continue to monitor the progress of the suit and guidance in this developing area.