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ForUsAll Alt 401(k), Serves Crypto Smorgasbord to Participants

Technology Driven Employee Benefits ForUsAll makes Cryptocurrency and alternative investments available in workplace retirement plans.  ForUsAll, a retirement investment platform provider for small businesses, has introduced the Alt 401(k), a first-of-its-kind 401(k) that allows employers to provide alternative investments – specifically cryptocurrency – to retirement plan participants.  ForUsAll has partnered with cryptocurrency platform Coinbase International to bring the Alt 401(k) to market and make cryptocurrency investments available to retirement savers.

According to a press release from ForUsAll, key features of the Alt 401(k) include:

  • A full turn-key automated 401(k) for employers, with both traditional and alternative investment options
  • Employees can transfer up to 5% of their balances into a secure account that has exposure to certain cryptocurrencies
  • Employees will be able to buy, hold, and sell over 50 different cryptocurrencies
  • Employees will get ongoing portfolio monitoring and education

Alt 401(k) enables American workers to access the same alternative investments that were previously only available to institutions and wealthy investors.  Professional investors have been shifting more of their portfolio allocations to alternative investments.  Alternative investments  encompasses private equity, venture capital, real estate, and allocations to cryptocurrency.

Institutional investors have been ramping up cryptocurrency and other alternative investment allocations.  But some observers question if it makes sense to mimic that approach inside defined contribution plans?  These types of investments were seldom available in 401(k)s.

That said, the complexity of alternative investments like cryptocurrency means it’s essential for employers to educate workers on these asset classes, and also provide prudent advice.  Alternative investments require some level of sophistication and expertise, so it will be important for employers to ensure employees aren’t going it alone when making these critical investment decisions for their future.

According to ForUsAll, Alt 401(k) may provide benefits to investors that include:

  • Tax Efficiency: Currently, cryptocurrency acquired, held and sold within a 401(k) are typically treated just like other investments for tax purposes.  Any gains are tax-deferred until the money is withdrawn from the 401(k).  Or an owner may opt to use a tax-free option such as the Roth.  Moreover, 401(k) investors do not have a taxable event until they sell their cryptocurrency to rebalance their portfolio after significant appreciation.
  • Diversification: Cryptocurrency may add diversification benefits.  A small relative allocation may increase expected return without commensurately increasing the level of overall risk in the portfolio.
  • Help for Employees: Like most emerging technologies, cryptocurrency has the potential for both great returns and great risk.  To help employees use cryptocurrencies appropriately, ForUsAll provides personalized help and automatically alerts participants when their allocations exceed 5% of their portfolio.
  • Savings Incentive: Recent studies looking at interest in cryptocurrencies show that roughly half of people surveyed are interested in owning digital assets.  Giving workers access to cryptocurrency in their workplace retirement plan may help to engage participants and increase savings overall.  This is especially prevalent among younger employees who have disproportionately adopted cryptocurrencies.
  • Convenience and Security: ForUsAll’s Alt 401(k) plan gives employees access to owning cryptocurrencies that are stored using methods such as “cold” or offline storage.  Employees may be able to access their crypto holdings similarly to how they access other retirement investments.  This is without having to manage digital wallets or private keys.

How does Alt 401(k) work?  Employers can opt to include cryptocurrency in a self-directed window inside their 401(k) along with their investment menu.  Participants can then transfer up to 5% of their portfolio into a cryptocurrency window, where they can invest in more than 50 cryptocurrencies.  ForUsAll closely monitors participants’ portfolio allocations and alerts employees when their allocation gets to be more than 5% of their portfolio.  This makes it easy for employees to rebalance into traditional mutual funds, ensuring their asset allocation is in alignment with their goals and objectives for retirement.

While cryptocurrency may serve to engage more participants, the Alt 401(k) may still be a “wait-and-see” proposition.  Cryptocurrency comes with known and unknown risk.  There could be unforeseen fiduciary implications for plan sponsors and retirement plan committees.  That said, ForUsAll has chosen to act as a 3(38) fiduciary for its new alternatives and cryptocurrency option. The 3(38) fiduciary therefore has full control over the investment selection and monitoring.

In addition, fees are another consideration.  Participants who choose to use the cryptocurrency window pay an account fee of 8.3 basis points per month, and a per-transaction fee of 50 bps. Employers who already offer a ForUsAll retirement plan do not pay for adding the option, according to the firm.

Steff Chalk

Steff Chalk

Managing Editor at 401kTV
Steff C. Chalk is Executive Director of The Retirement Advisor University, a collaboration with UCLA Anderson School of Management Executive Education. Steff also serves as Executive Director of The Plan Sponsor University and is current faculty of The Retirement Adviser University.
Steff Chalk

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