Compliance August 30, 2023

Court Rules for DOL on ForUsAll Crypto Complaint

A federal court has dismissed a case alleging that the DOL overstepped its bounds when warning recordkeepers and fiduciaries against offering cryptocurrency in retirement plans.

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A federal judge has dismissed a complaint brought against the Department of Labor by recordkeeper ForUsAll Inc. alleging the department overstepped by recommending caution in the use of cryptocurrency in retirement plans. 

DC District Court Judge Christopher Cooper Tuesday ruled that retirement plan provider ForUsAll had no basis for a legal complaint that the DOL caused it to lose clients by issuing a bulletin in March of 2022 warning about the risk of allowing participants to invest in cryptocurrency.  

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ForUsAll, which offers cryptocurrency to participants through the self-directed brokerage window, had alleged the warning caused “approximately one-third of the plans” that had been interested in the offering to walk away after the bulletin was issued. The release, Compliance Assistance Release No. 2022-01, was not binding, but only guidance. ForUsAll claimed the DOL was making an “arbitrary and capricious attempt” to limit the use of cryptocurrency in defined contribution plans and therefore was overstepping its authority under the Employee Retirement Income Security Act. 

The San Carlos, California-based retirement plan provider was seeking for a DOL declaration that the bulletin was unlawful along with an injunction preventing the department from regulating about the guidance. Judge Cooper found that, even if ForUsAll could prove it had lost business from the warning, the court relief it was seeking would not necessarily solve its problem. 

“None of this requested relief, however, appears likely to redress ForUsAll’s alleged injury because ForUsAll fails to show that these actions would cause the third-party fiduciaries to renew their discussions or enter into the contemplated partnerships,” Cooper wrote. “Nor is the Release final agency action subject to judicial review. For these two reasons, the Court grants the Department’s motion to dismiss.” 

The complaint in ForUsAll Inc. v. United States Department of Labor was first filed in the District of Columbia District Court on June 2, 2022. In that complaint, ForUsAll said that guidance the department gave calling on fiduciaries and plan sponsors to use “extreme care” in considering cryptocurrency in retirement plans went beyond its regulatory authority as provided by ERISA, and in addition did not go through the proper comment period.  

On November 1, ForUsAll reversed course, saying it would drop the suit if the court and DOL confirmed the guidance was not binding. 

The DOL response said ForUsAll misrepresented the initial guidance as stating that allowing cryptocurrency in retirement plans “does not violate a fiduciary duty.” Rather, the department argued that the guidance only noted that cryptocurrency as an investment option may comply with fiduciary duties and prudence, depending “on the specific circumstances in a given situation.” 

Judge Cooper ultimately agreed, noting that the release “is not a final agency action and is therefore unreviewable.” 

The DOL’s announcement from 2022 was positioned as protecting the retirement savings of U.S. workers from market volatility, as well as legal risk. The announcement noted that “at this stage of cryptocurrency’s development, fiduciaries must exercise extreme care before including direct investment options in cryptocurrency.” 

Cooper found that, even if the court followed through with ForUsAll’s request to retract the guidance, nothing would change in terms of cryptocurrency investing in retirement plans. 

“The release reminds retirement plans that they have fiduciary obligations to participants under ERISA, outlines a list of ‘significant risks and challenges’ associated with cryptocurrency investments that the department finds troubling, and alerts plans that the department expects to conduct inquiries and investigations to ensure that these plans are complying with their duties when offering investment options in this area,” Cooper wrote. “All of this would remain the same if the court vacated the order.” 

Neither ForUsAll nor the DOL responded to request for comment on the ruling.  

Data and Research August 30, 2023

Hispanic Workers Continue to Lag in Retirement Savings

Access gap, low employer matches and a lack of tax benefits discourage workers from participating in retirement plans, Boston College research shows.

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Because of widespread lack of access to a retirement plan, many Hispanic workers are falling behind in retirement savings, according to the Center for Retirement Research at Boston College. 

Only three out of every 10 Hispanic workers are participating in an employer retirement plan, and CRR attributes this to the fact that many of them are employed in low-wage blue-collar or service industries that often do not offer any employee benefits. 

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These jobs, such as roofing, dishwashing, food preparation, landscaping, hotels, maid and janitorial services are also often filled by recent or undocumented immigrants, according to the researchers.  

Other important factors to consider is that many undocumented workers may be paid in cash, and therefore are saving more than the data might suggest. These workers may also be sending money back to their home country where they are either buying or building a house that they can use when they retire and return home. 

The Economic Policy Institute estimated that only four out of 10 Hispanic workers have a retirement plan in their current jobs. On the positive, the bulk of individuals who have a retirement plan take advantage of it, as three out of four Hispanic workers who have access to a plan are participating in one.  

In addition, the EPI argues that low pay, low employer matches and low or no tax benefits discourage participating in defined contribution plans that require workers to contribute to the plan and take a penalty if workers need to access the funds before age 59½. 

However, the CRR points out that the lack of retirement savings is particularly concerning as life expectancy among Hispanic men and women is higher than among non-Hispanic, white men and women.  

But at the same time, retirement saving for future generations is looking more positive. The number of Hispanic people with at least a bachelor’s degree has more than doubled over the past 15 years, and research has shown that more educated people, who usually earn more, are also more likely to have an employer retirement plan.  

College attendance varies across ethnic groups, though, as people of Cuban descent are among the most likely to have a bachelor’s degree, whereas people of Mexican descent have one of the lowest rates of college degrees and Puerto Ricans have among the lowest incomes – both indications that they are in the types of jobs that do not provide a retirement plan.  

Kezia Charles, a senior director at WTW, says financial literacy is also an important part of the puzzle and recommends that employers work with employee resource groups or affinity groups to help certain segments of their participants with financial literacy and financial awareness.  

“We are seeing more and more employers … looking at the diversity of financial planners to ensure that people are able to find someone they can relate to, and they can have a meaningful conversation with,” Charles says. 

She adds that another tactic that some employers have invested in is allowing family members access to financial wellness benefits, such as online trainings and financial literacy tools.  

“We know that for many people, the decision that they’re making about how to use their money [is] not just an individual decision. It’s also about providing resources for their families,” Charles says.  

The retirement savings gap has been a focus of both federal and state policymakers, with SECURE 2.0 Act legislation boosting incentives for workplaces to offer retirement plans, and some states mandating employers provide the benefit. 

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