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Service Providers May Allow Investment in Cryptocurrency, but Plan Administrators Should Proceed with Extreme Caution

Recently, one of the country’s largest retirement plan providers announced they were adding a digital assets account to their retirement plan platform that would allow employers to make cryptocurrency, such as Bitcoin, a potential investment option for plan participants.  As we previously reported here, prior to that announcement, the DOL had issued guidance cautioning plan fiduciaries to “exercise extreme care” before adding a cryptocurrency option to a retirement plan’s investment lineup or even through a plan’s brokerage window. The DOL guidance went so far as to say that it expected to investigate plans that offer “participant investments in cryptocurrencies and related products, and to take appropriate action to protect the interests of plan participants and beneficiaries with respect to these investments.” The DOL cautioned that plan fiduciaries who allowed cryptocurrency as a plan investment option “should expect to be questioned” about how their decisions to allow investments in cryptocurrency align with their… Continue Reading

DOL Issues Guidance Cautioning 401(k) Fiduciaries Against Offering Crypto as an Investment Option

The DOL issued guidance reminding responsible 401(k) plan fiduciaries of their ongoing duty to monitor investments and cautioning that the DOL “has serious concerns about the prudence of a fiduciary’s decision to expose a 401(k) plan’s participants to direct investments in cryptocurrencies, or other products whose value is tied to cryptocurrencies.” The DOL listed five reasons why cryptocurrency investments and their derivatives (collectively, “Crypto”) may not be a prudent selection at this time and threatened that 401(k) plan fiduciaries who allow Crypto as an investment option (even if through a brokerage window) “should expect to be questioned about how they can square their actions with their duties of prudence and loyalty.” Accordingly, 401(k) plan fiduciaries who are contemplating including or retaining Crypto as a plan investment option should factor this DOL guidance into their decision-making process.   Compliance Assistance Release No. 2022-01 is available here.

Retirement Plan Cybersecurity—Truth, Justice, and the DOL Way

At a time when digital security and cyberattacks are key concerns for individuals and businesses alike, plan sponsors and other plan fiduciaries have a key role to play in protecting retirement plan assets and data. Otherwise known as “responsible plan fiduciaries,” these individuals and certain plan service providers have a fiduciary duty to ensure there is a robust cybersecurity program in place to keep plan assets and data secure. As we previously reported on our blog here, the DOL recently issued guidance in this arena to keep employers and plan fiduciaries compliant. The DOL is now specifically targeting employers and plan fiduciaries who fail to adequately protect employee retirement plan assets from hackers and cyberthieves, so the time to act is before the DOL issues a plan audit and before participants are victimized by cybercriminals or hackers. The DOL requires that plan fiduciaries responsible for prudently selecting and monitoring service… Continue Reading

Guidance on Benefit Plan Cybersecurity Best Practices

Plan participants now enroll, change elections, review benefits, apply for plan loans and hardship distributions, and access account information through websites and cellphone apps. As electronic access to plan information has increased, so has the interest of hackers in obtaining the wealth of information stored electronically. Recently, the DOL?ÇÖs Employee Benefits Security Administration (the ?Ç£EBSA?Ç¥) issued the following cybersecurity guidance documents to help plan sponsors comply with their duties to protect plan information: Tips for Hiring a Service Provider with Strong Cybersecurity Practices: These tips are intended to help plan sponsors and plan fiduciaries meet their duties under ERISA to prudently select and monitor service providers. They include a list of questions to ask and considerations to make when evaluating potential service providers. Cybersecurity Program Best Practices: This guidance provides a list of 12 best practices intended to help plan fiduciaries mitigate cybersecurity risks and make prudent decisions when selecting… Continue Reading

Proposed Rule Addressing Fiduciary Duties of Prudence and Exclusive Purpose with Respect to Proxy Voting and the Exercise of Shareholder Rights

The DOL?árecently published a proposed rule (the ?Ç£Proposed Rule?Ç¥) that would amend the current investment duties regulations to provide guidance regarding how plan fiduciaries should exercise their duties of prudence and exclusive purpose with respect to proxy voting and the exercise of shareholder rights. Prior to the Proposed Rule, the DOL had addressed such fiduciary duties in sub-regulatory guidance and individual letters, which did not provide plan fiduciaries with consistent and clear guidance on how they must exercise their duties for proxy voting and other exercises of shareholder rights. Specifically, the Proposed Rule: Codifies the DOL?ÇÖs long-standing position that plan ?Ç£fiduciaries must carry out their duties prudently and solely in the interests of the participants and beneficiaries and for the exclusive purpose of providing benefits to participants and beneficiaries and defraying the reasonable expenses of administering the plan?Ç¥ when deciding whether, and when, to exercise shareholder rights, including the voting… Continue Reading

DOL Issues Proposed Rule to Amend the Investment Duties Regulation

The DOL?árecently issued a proposed rule to amend the ?Ç£investment duties?Ç¥ regulation at found at 29 CFR 2550.404a-1 (the ?Ç£Regulation?Ç¥). The proposed rule would provide investment guidance to ERISA plan fiduciaries in light of recent trends in environmental, social, and governance (?Ç£ESG?Ç¥) investing. ERISA requires plan fiduciaries to act ?Ç£solely?Ç¥ in the interest of plan participants and beneficiaries and for the ?Ç£exclusive purpose?Ç¥ of providing benefits and paying reasonable administrative expenses and prudently selecting investments for the plan. In the past, the DOL has periodically issued guidance addressing fiduciary duties under ERISA with respect to ESG-based investment decisions, including Interpretive Bulletin 94-1, which described a ?Ç£tie-breaker standard,?Ç¥ whereby ESG considerations could be the deciding factor when competing investments served the plan?ÇÖs economic interests equally. Later Interpretive Bulletins emphasized that it would be a violation of ERISA to accept reduced returns in favor of ESG goals, but that in certain cases,… Continue Reading

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