The U.S. Department of Labor has been sued by a 401(k) plan administrator over its cryptocurrency guidance. “This lawsuit seeks to preserve the rights of American investors to choose how to invest money in their own retirement accounts.”
U.S. Labor Department Sued Over Crypto Guidance
The U.S. Department of Labor (DOL) and Secretary of Labor Martin J. Walsh have been sued over the department’s Compliance Assistance Release No. 2022-01. The guidance, titled “401(k) Plan Investments in ‘Cryptocurrencies,’” was issued on March 10.
The lawsuit alleges that the Labor Department breached its statutory purview by threatening “an investigative program” aimed at plan sponsors that offer digital assets.
According to the court document:
This lawsuit seeks to preserve the rights of American investors to choose how to invest money in their own retirement accounts.
The plaintiff is Forusall Inc., which provides administrative and other services to retirement plans. The company claims to be “the first company to announce that it would make cryptocurrency available to 401(k) plan participants through a self-directed window,” the lawsuit details.
The complaint states:
DOL’s issuance of the Release was arbitrary, capricious, and otherwise not in accordance with law, and in excess of DOL’s statutory jurisdiction, authority, or limitations, and is therefore ‘unlawful and [shall be] set aside.’
Following the Labor Department’s crypto guidance, Fidelity Investments Inc. announced that it will allow bitcoin in 401(k) accounts.
Fidelity’s decision troubled the Labor Department. “We have grave concerns with what Fidelity has done,” said Ali Khawar, Acting Assistant Secretary of the Labor Department’s Employee Benefits Security Administration.
The financial services firm’s decision to allow bitcoin in 401(k) retirement accounts also raised concerns among some lawmakers, including U.S. Senator Elizabeth Warren (D-MA). She subsequently sent a letter to Abigail Johnson, the CEO of Fidelity Investments, questioning the financial services giant’s plan to allow bitcoin investments in 401(k) accounts.
Some lawmakers, on the other hand, are worried about the Labor Department’s attempt to prevent Americans from investing in crypto assets for retirement. Responding to the DOL’s crypto guidance, U.S. Senator Tommy Tuberville (R-AL) introduced the Financial Freedom Act. The lawmaker described the bill as “legislation to prohibit the U.S. Department of Labor (DOL) from issuing a regulation or guidance that limits the type of investments that self-directed 401(k) account investors can choose through a brokerage window.”