On Thursday a San Francisco-based 401(k) retirement provider ForUsAll filed suit against the United States Department of Labor (DOL) and Martin Walsh as Labor secretary in U.S. District Court in Washington, D.C. Currently, the firm has assets under management (AUM) of more than $1.7 billion.

ForUsAll sued DOL for planning an investigation into companies that offers crypto investment options to 401(k) holders. The firm said that the regulators had also discouraged employers from planning their retirement using cryptocurrencies. According to the lawsuit filed under APA, the DOL's attempt to restrict the use of cryptocurrency in defined contribution retirement plans. 401(k) plans offer participants investments in cryptocurrency and related products.

In March 2022 the guidance against incorporating crypto in 401(k) plans was first issued by DOL. The guidance deals with rising awareness regarding the risks like fraud, theft for adding crypto to retirement investment schemes, and lack of regulation for these assets. Other issues were also highlighted including the volatile nature of cryptocurrencies, difficulties in book-keeping, valuation concerns, and economic impacts. Based on these and other concerns as per the guidance at that time 401(k) plans are expected to be investigated by DOL's Employee Benefits Security Administration (EBSA). Hence setting up an investigative program according to the warning released by DOL. An Administrative Procedure Act (APA) provision that protects against arbitrary official intrusion on private rights is cited by the firm as grounds for withdrawing the DOL compliance assistance release issued in March.

According to ForUsAll CEO Jeff Schulte because of their distaste for a certain asset class, the government is suddenly attempting to restrict American investment options. They are trying to effect a ban for which they don’t have permission from the legal authority. “This lawsuit seeks to preserve the rights of American investors to choose how to invest money in their own retirement accounts,” reads the lawsuit.

In April Acting Assistant Secretary of the department’s EBSA unit, Ali Khawar was contacted through a letter by a group of 11 financial industry trade associations. It stated objection regarding the "rulemaking nature" of the release without stating a position on the inclusion of cryptocurrency in pension plans. Some quarters have responded sharply to the DOL release. At the end of April, ten investor, consumer, worker, and retiree organizations wrote to Khawar in support of the release. It highlighted that it was consistent with the Employee Retirement Income Security Act of 1974, which established the 401(k) program and imposed strict duties on fiduciaries. Around 150 companies from ForUsAll have signed up for 401(k) plans on crypto.

In June 2021 ForUsAll first partnered with Coinbase. It is offering up to 5% of 401(k) savings in 50 different cryptocurrencies. More than 80,000 retirement savers are now served across 500 plans by the startup. Additionally, Fidelity offers its customers the option of diversifying their retirement savings with Bitcoin up to 20%. Recently DOL was recently joined by various politicians, notably Elizabeth Warren, in urging caution and pushing back against the trend.

Indrani bose

CBW - External Analyst

INDIA