- A retirement plan provider alleged in a lawsuit June 2 that the federal government overstepped its authority in cautioning employers against offering cryptocurrency investment options (ForUsAll, Inc. v. U.S. Department of Labor, No. 1:22-cv-01551 (D.D.C. June 2, 2022)).
- The suit alleged the U.S. Department of Labor’s warning was an “arbitrary and capricious attempt to restrict the use of cryptocurrency in defined contribution retirement plans, in excess of its authority under the Employee Retirement Income Security Act.” DOL’s failure to advance its position through formal rulemaking — which includes a notice and comment process — violated federal law, it said.
- The suit asked that the court vacate the warning and prevent DOL from enforcing its position.
Thursday’s lawsuit targets a warning DOL issued in March cautioning 401(k) plan fiduciaries to “exercise extreme care” in considering cryptocurrency investment options for workers. The agency cited risks associated with such investments and told employers it would target such offerings for investigation.
The warning came as plan providers work to make cryptocurrency investment options available. Just weeks after DOL’s warning, Fidelity announced it would add a bitcoin investment option to its plan offerings, citing “growing interest from plan sponsors” in digital assets within defined contribution plans.
At the same time, employer groups have urged DOL to withdraw the warning; like the lawsuit, they've argued DOL should go through the formal notice-and-comment process. Speaking at a conference last month, the acting head of DOL’s Employee Benefits Security Administration noted that if the department had gone through that lengthy process, the “regulatory landscape was not going to look the same,” Pensions & Investments reported. But “political expediency is not a valid justification for deciding not to comply with the APA,” the lawsuit argued.
A failure to require that DOL adhere to that process could have repercussions for other investment strategies, the lawsuit continued: “Defined contribution plans governed by ERISA hold approximately $10 trillion in assets — and where those assets may be invested should not be subject to the arbitrary whims of an agency that has no such authority.”
DOL did not respond to a request for comment.