The U.S. Department of Labor has proposed a rule change that would expand permissible investments inside 401(k) plans, including exposure to digital assets. This move marks a significant shift from the Biden-era DOL's cautious stance, which had discouraged crypto investments due to litigation risk.
The new position takes no side on cryptocurrency, instead focusing on providing guidance for fiduciaries to make informed decisions. The proposal eliminates any categorical prohibition on investment types and introduces a six-factor safe harbor framework to guide fiduciaries' decisions.
To prudently include a crypto-related investment, a fiduciary must evaluate and document: risk-adjusted performance, fee appropriateness, liquidity, valuation methodology, benchmarking against a meaningful comparator, and whether the fiduciaries actually understand what they're offering. This framework is designed to provide clarity for plan administrators and reduce litigation risk.