Republican senator floats bill to bolster crypto options in 401(k) plans

A bill that would bar the Department of Labor from issuing a regulation or guidance that limits the type of investments 401(k) plan participants can choose through a brokerage window has been introduced in the Senate.

The Financial Freedom Act, introduced Thursday by Sen. Tommy Tuberville, R-Ala., is in response to recent Labor Department guidance for 401(k) plan fiduciaries telling them to "exercise extreme care" before selecting cryptocurrency as an investment option in plan menus.

Fiduciaries who include such investment options or who allow such investments through self-directed brokerage accounts "should expect to be questioned about how they can square their actions with their duties of prudence and loyalty in light of" potential risks associated with cryptocurrencies, the guidance, issued March 10, said referring to ERISA's requirements.

Mr. Tuberville said in a news release that his legislation would empower retirement savers to invest as they see fit and ensure that plan sponsors and financial firms are not punished for allowing investors to exercise financial freedom.

"The Biden administration has taken it upon itself to dictate what assets are viewed worthy of retirement investment, taking the decision away from individual investors by issuing regulatory guidance targeting cryptocurrency," Mr. Tuberville said in the news release. "This is government overreach at its finest. The government has no business standing in the way of retirement savers who want to make their own investment choices. When you've earned your paycheck, how you invest your money should be your decision. My legislation makes sure that is the case."

The bill has little chance of moving in a Democrat-controlled Senate.

In issuing its guidance, the Labor Department said incorporating crypto assets in participants' retirement accounts present "significant risks and challenges to participants' retirement accounts, including significant risks of fraud, theft, and loss." The risks exist because cryptocurrencies are speculative and volatile investments; pose custodial and record-keeping challenges; present valuation concerns; and contend with an evolving regulatory environment, the Labor Department added.

Of note, Fidelity Investments on April 26 announced that participants in defined contribution clients' plans can place up to 20% of their 401(k) plan accounts in a stand-alone cryptocurrency investment called a digital assets account. Two Senate Democrats — Elizabeth Warren of Massachusetts and Tina Smith of Minnesota — sent a letter Wednesday to Fidelity CEO Abigail Johnson expressing concern with the move.