Somehow, Shakespeare seems to have anticipated crypto; the ongoing kerfuffle over offering crypto in the investment menus of 401(k) plans is seeming more and more to be simply “sound and fury, signifying nothing.” For those of you who may have missed it, in the past several weeks, just to hit the highlights, Fidelity announced it would offer crypto investment options in 401(k) plans, the Department of Labor warned against offering crypto in 401(k) plan investment options, and investment platform provider ForUsAll sued the Department of Labor over that warning. All are about the same thing – the effort by vendors to plans to include Bitcoin in retirement plan options. There is a lot to be said about whether Bitcoin and the like belong in retirement plans and whether the option should even be offered to employees, as well as about the reasons for this sort of gold rush into this area by service providers to plans.
But none of it may even matter. If you read your Wall Street Journal weekend edition this past Saturday, you found article after article about the crypto crash, and one has to wonder at this point how many participants in 401(k) plans really even want such an investment option. Certainly, there are always going to be people who want to be able to make big, bold bets in their 401(k) plans, but just like most employees learned not to overweight their holdings towards their employer’s stock, so too is it likely that most will not want to incur the risk of this type of investment.
But to the extent it does still matter, I have one significant question for plan sponsors considering either offering such an option or even signing up with a vendor who pushes the option, which is have they thought about who bears the fiduciary risk of including crypto? As I often say about ERISA litigation, all is hunky-dory when the markets are going up, but once they start falling, the lawsuits against plan fiduciaries will pile up fast. I assume that the option to invest in Bitcoin and the like is generally going to be provided in a way that seeks to leave the risk on the participants of the investment choice, but decades of ERISA litigation leave me skeptical that this will hold up in court. So who will be liable for imprudent crypto investment options? Plan sponsors and named fiduciaries should study this question closely before agreeing to offer the option to participants.