The April 26 announcement of the intended offering received swift rebuke from Department of Labor Acting Assistant Secretary of the Employee Benefits Security Administration Ali Khawar this week.
Plan sponsors offering bitcoin in-plan as part of the core investment menu would expose the plan, investment committee and plan participants to myriad risks, says Jerry Schlichter, managing partner at Schlichter Bogard & Denton, who has made a practice of suing plan sponsors for fiduciary breach.
Fidelity’s fee for accounts that include bitcoin will be between 0.75 basis points and 0.90 percent of assets, with lower costs depending on several factors including the plan sponsor and amount invested.
In a Compliance Assistance Release, the DOL stated that it is aware that firms are marketing investments in cryptocurrencies as potential investment options for plan participants.
“Right now, we just don’t have enough investor protection in crypto.
“As fiduciaries with some Fidelity funds in our plan’s investment menu and upon seeing Fidelity’s announcement, our adviser–CAPTRUST—was immediately contacted regarding any potential cryptocurrency exposure,” says Terri Deneen, an EBSCO plan administrator.
Fidelity remains confident that the launch will support plan sponsors in providing digital assets in defined contribution plans, “as an increasing number of their employees are already investing in digital assets,” a spokesperson says.
“We have many other client conversations that have been going on up to the press release and now even more so since the press release,” he says.
But consumer demand alone is not enough to justify the launch, says Laura Varas, CEO of Hearts & Wallets.
With 78% of users trading crypto, the reason given is that, “in exact words, ‘high volatility creates opportunities to make money trading,’” Varas explains.
“It certainly has the potential to increase costs for plan sponsors, and if the costs are increasing for plan sponsors, they could redirect those costs to plan participants,” he says.