DOL Rescinds Biden-Era Guidance on Crypto in 401(k) Plans

Although the rescission is not expected to have much of an immediate impact on 401(k) plans, it signals a significant change in course.

“It takes away a little bit of the shield that plan fiduciaries, plan administrators had under the prior guidance, where there was a new duty of extreme care being imposed,” Pillsbury partner Colleen E. Lamarre, who is part of the Executive Compensation and Benefits practice, told Pensions & Investments. “Here, it's really kind of getting back to the traditional fundamentals of ERISA, which is leaning on that duty of prudence and care.”

In an interview with Bloomberg Law, Lamarre said that “the menu of investment options will remain largely the same,” adding that “quite frankly, employees and participants weren’t necessarily requesting crypto assets to be included in plan investment menu lineups.”

For deferred contribution plans, including 401(k) plans, to offer a crypto investment option, “the plan fiduciaries have to understand it, the large plan administrators, the large third-party plan administrators, custodians, have to offer it in a way that the plan fiduciaries feel comfortable, and then there's got to be some demand by participants,” Lamarre told Pensions & Investments, adding that “otherwise, the uptake will be very slow, if at all.”

Any defined contribution plan crypto offerings in the near future will likely be done through self-directed brokerage accounts, according to Daniel N. Budofsky, partner and leader of Pillsbury’s derivatives and structured products group.

“And the reason for that is there has been tremendous amount of uncertainty, and that uncertainty still exists,” he told Pensions & Investments, referencing ambiguity in the way digital assets are regulated.

Budofsky noted that the Department of Labor’s decision to rescind the 2022 guidance is in line with the approach that the Trump administration has taken in its first few months. That effort “is consistent with the executive orders that seek to make the U.S. a leader in cryptocurrency globally,” he said.

In an interview with Bloomberg Law, Budofsky noted that while it is too soon to tell, digital asset treasury companies could be the cleanest way for institutional 401(k) investors to buy crypto shares.

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