(PlanSponsor) - Senator Tommy Tuberville, R-Alabama, has returned with a bill pushing back on Department of Labor guidance warning off the inclusion of cryptocurrency in defined contribution retirement plans.
On Thursday, Tuberville reintroduced the Financial Freedom Act, legislation he first introduced in May 2022, which calls to roll back any DOL guidance that limits the type of investments self-directed 401(k) account investors can select through a brokerage window. He made the announcement one day after the Securities and Exchange Commission made a proposal calling for adviser-managed investments, including cryptocurrencies, to be run by qualified custodians.
Tuberville’s bill points to March 2022 guidance in which the DOL warned that fiduciaries could be liable if offering cryptocurrency through a participant-directed option. The bill also refers to a concern that various attorneys who specialize in the Employee Retirement Income Security Act have pointed out: The guidance would make other types of investments offered through the brokerage window in 401(k) plans subject to DOL rebuttal or warnings.
“Meddling in 401(k) investments through overregulation restrains financial growth and restricts personal liberty,” Tuberville said in a statement. “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.”
Tuberville said the bill would ensure that “everyone who earns a paycheck” can invest however they would like through their retirement plans.
Retirement plan provider ForUsAll Inc. made a similar argument about the wide-ranging impact of DOL guidance on the self-directed brokerage window in a complaint to the DOL last year. ForUsAll provides retirement savers with an exchange run by cryptocurrency provider Coinbase. San Francisco-based Coinbase noted on Wednesday that Coinbase Custody Trust Co. is a qualified custodian, as recognized by the SEC.
Neither ForUsAll nor the DOL immediately responded to request for comment.
The March 2022 DOL guidance noted that employers and investment firms could be subject to investigation and enforcement actions should they allow individuals using brokerage windows to invest in cryptocurrency. Tuberville’s bill seeks to bar such investigations and enforcement actions.
“The state of the crypto guidance is unsettled, but I think that if Congress amended ERISA like this, then it would make it clear that plan fiduciaries are allowed to consider whatever financial and risk factors they believe to be appropriate for their plan and participants,” says Joshua Lichtenstein, who leads the ERISA and fiduciary practice for Ropes & Gray LLP. “That is how ERISA has always worked, but the ESG rule under the [President Donald] Trump administration and the crypto guidance both represent an erosion of that bedrock principle.”
Lichtenstein said legislation like the one proposed by Tuberville would be similar to the DOL’s current environmental, social and governance rule in terms of being “neutral” on what factors can be considered in investments: “An amendment like this would help to reassert that plan fiduciaries can decide what is or is not appropriate for their plans, without specific investment limits imposed by the DOL,” he says.
Co-sponsors of Tuberville’s bill include Senators Cynthia Lummis, R-Wyoming; Rick Scott, R-Florida; and Mike Braun, R-Indiana.
Earlier this month, Tuberville said he added support to a resolution from Braun and Representative Andy Barr, R-Kentucky, seeking to nullify a DOL rule that permits, but does not require, ESG strategies to be used in retirement plan investing.
By Alex Ortolani
February 17, 2023
