The Department of Labor (“DOL”) recently issued Compliance Assistance Release No. 2025-01 (the “Release”), reversing previous guidance that cautioned plan fiduciaries offering investments in digital assets in participant-directed pension plans (“401(k) Plans”).
In 2022, the DOL issued Compliance Assistance Release No. 2022-01, which expressed the DOL’s concern regarding 401(k) Plans offering participants the opportunity to invest their account balances in cryptocurrency and digital asset investments and urged plan fiduciaries to exercise “extreme care” when choosing such investments products.
The new Release rescinds the standard of “extreme care” and indicates that this standard is not found in ERISA and differs from ordinary principles governing the conduct of plan fiduciaries selecting a 401(k) Plan’s investment menu.
Under ERISA, when selecting and maintaining an investment option on a 401(k) Plan’s menu, crypto or otherwise, fiduciaries are expected to act with care, skill, prudence, and diligence or a prudent person acting in a like capacity and familiar with such matters. The Release’s removal of the “extreme care” standard does not remove a plan fiduciary’s duties or liabilities when including a cryptocurrency or digital asset investment option on a 401(k) Plan’s investment menu.
Legal Tokens
When considering adding direct investments into cryptocurrencies, products linked to cryptocurrencies, or other digital assets, 401(k) Plan fiduciaries must consider and should document their analysis of the appropriateness of the investment option, including its cost and related expenses, level of risk, and the adequacy of the disclosure provided to participants.
401(k) Plan fiduciaries must also consider that every investment option must be available to every participant, so that the disclosures must be understandable by the average participant and not just a select group of participants that may have experience with this particular asset class. In particular, a prudent 401(k) Plan fiduciary might give careful consideration to several risk factors, including the potential for a high asset value volatility, changing legal, regulatory and political landscapes, and custodial and security concerns, associated with cryptocurrency and other digital asset investments.
Seward & Kissel LLP actively monitors legal and regulatory changes and their impact on the digital assets industry. For additional information, please contact a member of Seward & Kissel’s Digital Assets Group or ERISA Group.
