Department of Labor Rescinds Prior Guidance on Cryptocurrency

By: Sherry Porter

In 2022, the Employee Benefits Security Administration (EBSA) of the U. S. Department of Labor (DOL) issued guidance cautioning retirement plan fiduciaries on the investment of 401(k) plan assets in cryptocurrency and other digital assets.  EBSA is the agency that enforces the Employee Retirement Income Security Act (ERISA) which governs employer-sponsored benefit plans.  Under ERISA, fiduciaries of retirement plans are required to exercise prudence in selecting plan investments.  The DOL has generally not provided specific guidance on particular investments but has, through plan investigations, taken issue with various plan investments.

In Compliance Assistance Release 2025-01 (CAR 2025-01), the DOL explains that it is returning to its neutral approach to particular investments and strategies by rescinding the Compliance Assistance Release 2022-01 (CAR 2022-01).  CAR 2022-01 advised retirement plan fiduciaries to “exercise extreme care” when considering cryptocurrency as a plan investment option.  The 2022 guidance noted that cryptocurrency presents significant risks and challenges to plan participants as it was generally highly speculative and volatile and could have a “devastating” effect on a plan participant’s retirement savings. 

CAR 2025-01 notes that the standard of “extreme care” used in the 2022 guidance is not found in ERISA.  Further, when evaluating any potential investment, the DOL urges plan fiduciaries to consider all relevant facts and circumstances which will “necessarily be context-specific”.  This is the general rule when evaluating plan investments anyway so a return to this rule is not really a shift in fiduciary responsibility but rather a sign that cryptocurrency is likely no longer on the top of the DOL’s target list.  Plan fiduciaries should consult their plan advisors about these types of investments to ensure ERISA compliance.

Sherry P. Porter

Sherry Porter has more than twenty years of experience in the employee benefits field.  She began her legal career as an investigator for the U.S. Department of Labor Employee Benefits Security Administration, where she conducted investigations to ensure compliance with ERISA and related laws and negotiated compliance agreements to correct violations.  Ms. Porter regularly advises clients on legislation affecting employee benefit plans, such as HIPAA privacy and security rules and the Patient Protection and... Read More