Financial service firms were warned by the U.S. Department of Labor March 10 about exposing 401(k) participants to investments in cryptocurrencies at this early stage in their history.
Cryptocurrencies can risk retirement savings as there are valuation concerns, said Ali Khawar, Employee Benefits Security Administration acting assistant secretary, as reported by the Department of Labor. Inexperienced participants can be misled about risks and rapid price changes. The evolution of the regulatory landscape may impact investments.
"These investments can easily attract investments from inexperienced plan participants with expectations of high returns and little appreciation of the risks the investments pose. It can be very hard for ordinary investors to separate fact from hype,” Khawar said.
The Compliance Assistance Release aims to protect the retirement benefits of all workers across the United States.
Compliance No. 2022-01 outlines plan fiduciaries to exercise extreme care and caution before they consider adding a cryptocurrency as an option to a 401(k) plan’s investment menu for plan participants, the Department of Labor said.
As outlined in the Employee Retirement Income Security Act of 1974, plan fiduciaries are required to act solely in the financial interests of plan participants and adhere to the standards of professional care in considering investment options for participants in 401(k) plans.
An estimated $6.2 trillion was held in private pension plans on behalf of about 91 million 401(k) plan participants, the department reported.
