Department of Labor Getting Sued for Its Position Against Crypto in 401(k) Accounts

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A retirement company has sued the US Department of Labor (DOL) and Secretary of Labor Martin Walsh over the agency’s Compliance Assistance Release No. 2022-01 guidance. This guidance, titled “401(k) Plan Investments in ‘Cryptocurrencies,” was introduced to prevent retirement investment providers from offering crypto plans on March 10.

The lawsuit by Forusall Inc. argues that the DOL violated its statutory purview by threatening “an investigative program” against retirement plan sponsors that offer digital asset support. The court document detailed:

“This lawsuit seeks to preserve the rights of American investors to choose how to invest money in their own retirement accounts.”

Forusall Inc. is a retirement administrative provider and renders other services teetering on retirement plans. The company claims that it was “the first company to announce that it would make cryptocurrency available to 401(k) plan participants through a self-directed window,” according to the document.

The complaint further stated:

“DOL’s issuance of the Release was arbitrary, capricious, and otherwise not in accordance with [the] law, and in excess of DOL’s statutory jurisdiction, authority, or limitations, and is, therefore ‘unlawful and [shall be] set aside.’”

Fidelity Investments Inc. announced earlier this year that it would allow Bitcoin in its 401(k) accounts despite the Labor Department’s crypto guidance. This decision troubled the DOL, as the Acting Assistant Secretary of the Labor Department’s Employee Benefits Security Administration, Ali Khawar, noted: “We have grave concerns with what Fidelity has done.”

Department of Labor Could Disenfranchise Americans from Investing: US Lawmakers

Fidelity’s announcement to allow Bitcoin in its 401(k) got several lawmakers talking, with Senator Elizabeth Warren (D-MA) raising concerns. However, other lawmakers are worried about the Department’s attempt to disenfranchise American citizens from investing in digital assets.

US Senator Tommy Tuberville (R-AL) recently introduced the Financial Freedom Act, which he described as a “legislation to prohibit the US 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.”