US Lawmakers Introduce Bill Allowing Crypto Investments in 401(k) Retirement Plans – The Retirement Savings Modernization Act was introduced Thursday by Senators Pat Toomey (R-PA), Tim Scott (R-SC), and Representative Peter Meijer (R-MI) to the United States Senate Committee on Banking, Housing, and Urban Affairs. The bill aims to bolster Americans’ retirement savings by allowing workers to diversify assets included in defined contribution plans, such as 401(k) plans, the announcement details.
“This legislation will amend the Employee Retirement Income Security Act of 1974 (ERISA) to clarify that private sector retirement plan sponsors may offer plans, including both pensions and 401(k)s, that are prudently diversified across the full range of asset classes.” Senator Toomey opined, “With inflation at record highs, a stock market downturn, and a potential recession on the horizon, many Americans are rightfully concerned about their financial future,” elaborating: “By providing 401(k) savers with access to the same asset classes as pension plans, my legislation will open the door to a more secure retirement for millions of Americans.”
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While pension plans and 401(k) plans are covered by the same legislation, the former have included asset classes not available in public markets since 1982. Meanwhile, “almost never incorporate exposure to alternative assets because to fiduciaries’ expected legal risk,” according to the announcement. “Digital assets” are listed as a “covered investment” in the bill.
Senator Scott stated, “Inflation has undermined and devalued the savings that many Americans have worked their entire lives to accumulate.” “This law would modernize retirement programs so that they may offer more diverse assets with higher returns. American workers and their families have earned the right to live their lives with confidence, knowing that their hard-earned money will be secure when they choose to retire.”
Until the 1970s, most private-sector workers in the United States relied on pension systems for retirement. The vast majority of private-sector employees now rely on 401(k) plans. “However, pension plans have consistently outperformed 401(k) plans because they diversify across the full spectrum of asset classes, putting one in every five dollars in alternative asset classes such as private equity,” the lawmakers stated. Representative Meijer stressed: “Americans deserve flexibility with their retirement options, especially in times of fiscal uncertainty.”
In March, the US Department of Labor (DOL) issued a warning concerning crypto investments in 401(k) plans. “The department has substantial concerns regarding the prudential judgment of a fiduciary to expose 401(k) plan members to direct investments in cryptocurrencies or other items whose value is connected to cryptocurrencies,” the DOL noted. “These investments pose considerable risks and challenges to the retirement savings of participants, including significant threats of fraud, theft, and loss.”
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Despite the Labor Department’s warning, Fidelity, a major 401(k) plan administrator, said in April that bitcoin will be available as an investment option in its new 401(k) products. The Labor Department was concerned by the financial giant’s decision. Senator Elizabeth Warren (D-MA) is likewise concerned, and she has demanded explanations from Fidelity about its decision to accept bitcoin in 401(k) plans.
In May, a U.S. senator filed a bill preventing the Labor Department from interfering with retirement account investments. US Treasury Secretary Janet Yellen stated in June that cryptocurrency is “very risky,” adding that it is unsuitable for most retirement savers.
