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Retirement savers in some 401(k) plans are starting to get access to cryptocurrencies like bitcoin.
Fidelity Investments, the largest provider of 401(k) plans by total assets, began offering a Digital Assets Account to clients this fall, a spokesperson confirmed.
Employers sponsoring a 401(k) plan through Fidelity can choose to offer the account to workers, allowing them to allocate a share of their savings to bitcoin.
For its part, ForUsAll, a plan administrator geared toward startups and small businesses, in September also rolled out crypto to 401(k) savers, said David Ramirez, the company’s CEO.
Investors can buy into six cryptocurrencies: bitcoin, ethereum, solana, polkadot, cardano and USDC. ForUsAll intends to add five more in the coming weeks, said Ramirez, who declined to disclose which ones.
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The firms appear to be the first administrators to make crypto available as 401(k) investment options.
The moves come as the U.S. Department of Labor in March urged employers to “exercise extreme care” before giving workers exposure to cryptocurrency. The regulator cited “significant risks” for investors, such as speculation and volatility.
Meanwhile, investor interest in crypto spiked amid record growth in 2021. But prices have since plunged in what some have taken to calling a “crypto winter.”
Bitcoin, for example, has lost more than 66% of its value from its high point in November last year. (For comparison, the S&P 500 Index is down about 20% in the past year.) Bitcoin’s current price, around $21,000 a coin, is almost triple its value from the beginning of 2020, and the S&P 500 is up about 17% over that time.
Fidelity declined to disclose how many clients have opted to offer the bitcoin account to workers.
Fifty ForUsAll clients have made crypto available to employees, and an additional 100 clients are expected to join soon, Ramirez said. Those 150 plans would represent about 27% to 28% of total clients. Ramirez estimated 70% to 80% of new clients have been asking to make crypto available.
“Our core goal has always been to provide equal access to wealth creation,” Ramirez said. “We just didn’t feel it was fair Americans would be left behind in the 401(k).”
Differing approaches to an alternative asset
At a technical level, Fidelity and ForUsAll offer crypto to investors in different ways.
Fidelity’s bitcoin account is one option that sits alongside other 401(k) investments like traditional stock and bond funds. The Digital Asset Account holds bitcoin and short-term, cash-like investments, which are meant to help facilitate daily transactions.
ForUsAll’s is part of a “brokerage window,” essentially a portal through which investors can gain access to dozens of additional investments that aren’t technically part of the core 401(k) options.
ForUsAll intends to make alternative asset classes like private equity, venture capital and real estate available through the window in the future, too, Ramirez said.
Fidelity and ForUsAll have installed certain guardrails to limit investors’ overall 401(k) allocations to crypto. For example, ForUsAll limits investor allocations to 5% of their current portfolio balance and sends investor alerts if that share exceeds 5% in the future. Investors, meanwhile, can’t put more than 20% of their balance into Fidelity’s offering, though employers can choose to lower that cap.
But employers may not be so quick to make cryptocurrency or alternative asset classes available to workers due to legal risk, experts said. Workers and other parties have brought multiple lawsuits against companies over the past decade-plus over allegedly risky and costly 401(k) funds.
ForUsAll sued the Labor Department over its cryptocurrency compliance bulletin issued in March. That case is yet unresolved.