On April 11, 2022, Lisa Tavares was quoted in Bloomberg Law on new cryptocurrency guidance from the U.S. Department of Labor (DOL) that threatens to upend the way regulators treat workplace retirement plans that allow participants to trade individual stocks and bonds on their own.
According to the article, employers could be responsible for risky crypto trades their workers make in workplace 401(k)s under the new guidance. The DOL’s employee benefits enforcement agency will launch what it’s calling “an investigative program” that requires plan officials to “square their actions with their duties of prudence and loyalty” if they allow crypto investments in self-directed accounts, according to the guidance.
Brokerage windows historically have been mostly off-limits to DOL regulators—the product of an unofficial covenant between the government and plan sponsors that keeps employers off the hook for poor investments and lets workers steer their own investments inside tax-advantaged plans. That could change with the Labor Department’s new playbook for cryptocurrency in 401(k)s. “This is a very damning statement about brokerage windows,” said Tavares.
Until recently the Employee Benefits Security Administration hadn’t explicitly said whether plans had a duty to monitor individual investments within a brokerage window. Regulators in 2012 backtracked guidance that would have classified brokerage windows as designated investment alternatives—mutual funds or exchange-traded menu options that require strict oversight. A civilian advisory council recommended little to no change in the brokerage window review or disclosure process after a year-long review in 2021.
“I think the decision to put in a brokerage window in the first place is a fiduciary decision, but we have thought that what is or is not in the brokerage window did not require fiduciary oversight, so you need to be very careful,” Tavares said.
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