Pension Advisor Sues US Department of Labor Over ‘Arbitrary’ Crypto Advice

A financial planning firm allowing clients to include crypto in their 401(k) plans is suing the feds.

In a new case against the US Department of Labor (DOL), retirement company ForUsAll said that the department is engaging in an “arbitrary and capricious” campaign against digital assets.

The lawsuit invokes the Administrative Procedure Act (APA) in asking the United States District Court for the District of Columbia to vacate the DOL Compliance Assistance Release that was distributed March 10.

“This lawsuit seeks to preserve the rights of American investors to choose how to invest money in their own retirement accounts. Brought as part of the APA, this lawsuit challenges the arbitrary and capricious attempt of the DOL to restrict the use of cryptocurrency in defined contribution pension plans, beyond its authority under the Employee Retirement Income Security Act (ERISA), and without following the notice and comment process required under the APA.

The DOL guidance document says digital assets,

“At this early stage in the history of cryptocurrencies, the Department is seriously concerned about the prudence of a fiduciary’s decision to expose participants in a 401(k) plan to direct investments in cryptocurrencies. …

These investments present significant risks and challenges to participants’ retirement accounts, including significant risks of fraud, theft and loss…”

Among the DOL’s specific concerns were the speculative nature of crypto, volatility risks, the investor’s need to make informed decisions, as well as the ever-changing regulatory environment.

The ForUsAll court filing goes on to say that the DOL guidance note directly contradicts the intents and instructions of the crypto-related executive order that President Joe Biden signed on March 9.

“The day after President Biden ordered federal agencies to work together to ‘promote’ the development and use of cryptocurrency, DOL took the opposite route by nonetheless releasing the statement, which… made up a standard of care, “extreme care”…announced a new requirement to monitor investments in “brokerage windows”…focused exclusively on cryptocurrency risk…raised the specter that other regulators might stop trading in one of the most widely recognized cryptocurrencies… [and] threatened to investigate trustees of plans that offer cryptocurrency.

ForUsAll also draws attention to the fact that ERISA does not consider any particular asset class as “presumed imprudent” or require “paternalism” regarding investments and warns of the potential future impact of the authorization of the targeting of cryptocurrencies by the DOL.

“While this lawsuit arises in the context of cryptocurrency, unless the principles at play here are addressed to compel DOL to operate strictly within the limits of its legal authority and to follow the law in undertaking actions of agency, tomorrow illegal federal agency action could just as easily extend to any other type of investment or investment strategy that senior DOL officials (in this administration or any future administration) find not quite to their liking.

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Featured Image: Shutterstock/Juri_kam/Natalia Siiatovskaia

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