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September 07, 2022 at 09:11 AM
What You Need to Know
- Even as the DOL expressed concerns about cryptocurrencies, Fidelity said in the spring that it would let retirement plans offer Bitcoin.
- Plan fiduciaries are encouraged to exercise caution as they advise clients on this evolving investment option.
- Von Wald says employers should pay attention to the Labor guidance.
Wendy Von Wald would like to see retirement plan sponsors think hard and talk to their lawyers before trying to add cryptocurrency options to the investment menu.
Von Wald is the fiduciary liability product manager at Travelers — a New York-based insurer that protects retirement plan sponsors and other plan fiduciaries against the risk that angry participants will sue about asset growth problems.
Fidelity suggested in April that it wanted to let plan sponsors offer Bitcoin through its core 401(k) plan lineup.
Von Wald has been in charge of fiduciary products at Travelers since 2016. Before that, she spent 16 years working as a fiduciary liability product specialist and product manager, first at Aon and then at Chubb.
She has a bachelor’s degree from Denison University and a law degree from the University of Denver.
Here are some things Von Wald said about cryptocurrency-based retirement plan investment options in a recent email interview.
The interview has been condensed and edited.
THINKADVISOR: What’s wrong with putting cryptocurrency in a 401(k) plan?
WENDY VON WALD: A 401(k) plan is intended to provide participants with income once they retire. It isn’t designed to include investments that could be viewed by some as unsafe.
Because of the uncertainty and volatility that comes with cryptocurrency, investing in it comes with significant potential risks, including theft, fraud and loss.
For plan providers and fiduciaries, this is relatively new territory, and they’ll want to give strong analysis and consideration before deciding to make crypto a 401(k) investment option.
Is this a problem that’s come up in the real world?
This space is constantly evolving, so navigating the issue is definitely unusual.
In March, the Department of Labor issued a strongly worded warning to 401(k) plan fiduciaries advising that they “exercise extreme care” before considering adding cryptocurrencies to a retirement plan’s investment menu.
I think this was put out as a measure to reduce the commonality of this problem and mitigate the risk of these problems existing in the first place.
If plan fiduciaries continue to exercise caution in their offerings and recommendations, the hope is that this doesn’t become a big, common problem.
How does offering a crypto-linked investment option compare with offering another kind of unusual investment option, such as an investment instrument tied to the value of an art collection?
Any nontraditional investment option for a 401(k) plan will likely generate more scrutiny and discussion than something that is offered by a majority of plans, such as stock mutual funds and bond mutual funds.
Anything that could be perceived or is considered to come with higher risk or volatility will face challenges before being offered by a plan. Cryptocurrency is no different, which is why it has been added to the ongoing conversation.
