Ok, I admit, the Department of Labor has a heavy task keeping insurance companies like Principal Life Insurance Company from ripping off their own 401k clients… but one really has to wonder…. is the Department of Labor corrupt or are they simply stupid people? This headline appeared in the November 16th issue of Pensions and Investments financial news… ok, in this lawsuit, the litigant wants the DOL to shut up about warning 401k investors about the foibles of investing in crypto. It also just happens the litigants sell crypto to investors, so yes, I can see why they don’t regulators snooping around in their business. After all, they have a right to make money off the uneducated 401k investors.
As luck would have it, less than a month later, some rich kid got caught stealing billions of dollars invested in crypto from unwary investors, which leaves this lawsuit in the “mute-point stage.” I suspect the DOL will prevail in their asking the court to scrub this case since the plaintiffs have no standing to win this case, but one question remains unanswered… why would anyone, let alone a certified Fiduciary managing any kind of retirement account, not recognize the serious hazards of putting funds into crypto? A second question…. why would the DOL even permit crypto be marketed to such plans in the first place?
The fact is, the DOL is encouraging hard working employed workers, often barely being paid a living wage, trying to save their savings for a retirement to throw their money away with worthless schemes such as those involving crypto.
Apparently there is pending litigation involving the investments in 401k plans using crypto. On March 10, 2022, the U.S. Department of Labor published compliance assistance for 401(k) plan fiduciaries considering plan investments in cryptocurrencies, in an effort aimed at protecting the retirement savings of U.S. workers.
Published by the department’s Employee Benefits Security Administration, Compliance Assistance Release No. 2022-01 cautions plan fiduciaries to exercise extreme care before they consider adding a cryptocurrency option to a 401(k) plan’s investment menu for plan participants. As of 2019, private pension plans held an estimated $6.2 trillion on behalf of about 91 million defined contribution 401(k) plan participants.
The Employee Retirement Income Security Act of 1974 requires plan fiduciaries to act solely in the financial interests of plan participants and adhere to the standards of professional care in considering investment options for participants in 401(k) plans. The announcement reminded plan fiduciaries of their important role in selecting investment options for 401(k) plan menus. “… Fiduciaries must exercise extreme care before including direct investment options in cryptocurrency” said Employee Benefits Security Administration Acting Assistant Secretary Ali Khawar.
So then the warning was to use “extreme care,” I wonder what has changed since then. To fully understand the facts, I found a website that tries to explain this case. Octoberthree.com has as a motto, “Perspective matters,” where they offer “A Different Perspective on Defined Benefit Plans.” To further explain, they claim to “…design plans that mitigate risk, manage costs, and deliver real value.” The company has a team of approximately 100 defined benefit plan consultants located in most major cities nationwide. I have to admit a bit of envy… they appear to be a very professional company that is positioned to present a new perspective to retirement plans, albeit defined benefit plans only!
What drew my attention in their website is the fact that they include 401k plans in their Topics section. There was a link to the page, but it did not exist. A link did exist for defined contribution plans, which leaves one to believe they may add those plans to their client list as well. I think that would be a good idea. In fact, a substantial part of their website is devoted to defined contribution issues, like the SECURE 2.0 Act.
I guess my long (and boring) point is that what Octoberthree is doing is good… I applaud them on their efforts to sort out the issues with these plans and work to help fiduciaries through the maze of complexities and confusion. The old saying that laws are made to be broken definitely applies to the DOL. They often fail to enforce the laws that should be enforced
