401(k) Crypto Currency Option Coming Soon – from a 401(k) Provider Near You

401k contributions401(k) crypto currency option is close to a reality!  Plan fiduciaries now have a new asset to study, decide upon, and measure.  Plan fiduciaries need to learn the idiosyncrasies of the 401(k) crypto currency option.  Some 401(k) plan participants will soon have the ability to invest in Bitcoin via their retirement plan.  That investment option will be available from Fidelity, the nation’s largest 401(k) provider, by mid-year, according to a recent Fortune article.

Plan sponsors would have to opt-in to allow Bitcoin to be available as a 401(k) crypto currency option.  It is anticipated there will be limits imposed on the amount and types of crypto currency employees are permitted to invest in, within their workplace 401(k) accounts.  This seismic-shift by Fidelity could enable millions of retirement plan participants to invest in Bitcoin without having to set up a separate account on a cryptocurrency exchange.  Plan participants will be able to invest in Bitcoin through Fidelity’s “Digital Assets Account“.  This 401(k) crypto currency option will be part of their 401(k) investment lineup.  That account will also include short-term money market investments to provide the liquidity required for Bitcoin purchases.

Employers will have the opportunity to limit how much an employee can contribute to Bitcoin.  Fidelity’s platform allows no more than 20% of a participants’ contributions to be allocated to crypto currency.  The firm may also offer additional crypto currency options for 401(k) investors in the future.  Account fees will range from 0.75% and 0.90% of account assets, according to a report from the New York Times cited in Fortune.

Surprisingly, the move by Fidelity comes on the heels of a recent announcement from the Department of Labor (DOL).  The DOL expressed “‘serious concerns about plans’ decisions to expose participants to direct investments in crypto currencies or related products, such as NFTs, coins, and crypto assets.’”  At issue is that the majority of 401(k) plan participants are novice investors; Bitcoin is a fairly volatile investment, which may cause participants to panic or exit positions prematurely, compromising their long-term returns and savings goals.  In addition, financial advisors often recommend against investing 100% in digital assets for retirement – another potential risk for 401(k) participants.

Nonetheless, Fidelity claimed that participants want the ability to invest in Bitcoin in their 401(k) plans, and that they can benefit from dollar cost averaging and tax-deferred savings if they do so in their workplace retirement plans.  What’s more, both plan sponsors and participants want Bitcoin as an investment option inside their 401(k) plans, according to Fidelity.

Fidelity is the first high-profile retirement plan provider to offer Bitcoin in its 401(k) plans, according to Fortune.  However, other providers are likely to follow suit.  Plan sponsors interested in offering any 401(k) crypto currency as an investment option in their 401(k) plans should watch the Fidelity model closely.  As with every retirement plan investment decision – it makes sense to seek the help of a qualified retirement plan advisor.  The list of Certified 401(k) Professionals, C(k)P Designation holders is a good starting point.  Another prudent strategy is to check with ERISA Counsel to make certain you have identified all appropriate risks associated with employing crypto currency as an option within the qualified plan.


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