A Republican senator on Wednesday reintroduced a bill that would prevent 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.
The bill, the Financial Freedom Act, is in response to March 2022 Labor Department guidance for 401(k) plan fiduciaries telling them to "exercise extreme care" before selecting cryptocurrency as an investment option in plan menus.
The bill's sponsor, Sen. Tommy Tuberville, R-Ala., first introduced the legislation in May during the previous congressional session.
"The Biden administration can't keep its hands off of Americans' finances," Mr. Tuberville said in a statement. "Meddling in 401(k) investments through overregulation restrains financial growth and restricts personal liberty. The federal government shouldn't choose winners and losers in the investment game. Bureaucrats have no business telling hardworking Americans how to manage their savings accounts. My bill ensures that everyone who earns a paycheck has the financial freedom to invest in their futures however they see fit."
The bill is co-sponsored by Sens. Cynthia Lummis, R-Wyo., Rick Scott, R-Fla., and Mike Braun, R-Ind.
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.
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 said referring to ERISA's requirements.
