Tuberville Returns With Call for Crypto Access in 401(k) Plans

The Republican senator also argued that the DOL should not be dictating what investments may be offered through the self-directed brokerage window in retirement plans.

Senator Tommy Tuberville, R-Alabama, has returned with a bill pushing back on Department of Labor guidance warning off the inclusion of cryptocurrency in defined contribution retirement plans.

On Thursday, Tuberville reintroduced the Financial Freedom Act, legislation he first introduced in May 2022, which calls to roll back any DOL guidance that limits the type of investments self-directed 401(k) account investors can select through a brokerage window. He made the announcement one day after the Securities and Exchange Commission made a proposal calling for adviser-managed investments, including cryptocurrencies, to be run by qualified custodians.

Tuberville’s bill points to March 2022 guidance in which the DOL warned that fiduciaries could be liable if offering cryptocurrency through a participant-directed option. The bill also refers to a concern that various attorneys who specialize in the Employee Retirement Income Security Act have pointed out: The guidance would make other types of investments offered through the brokerage window in 401(k) plans subject to DOL rebuttal or warnings.

“Meddling in 401(k) investments through overregulation restrains financial growth and restricts personal liberty,” Tuberville said in a statement. “The federal government shouldn’t choose winners and losers in the investment game. Bureaucrats have no business telling hardworking Americans how to manage their savings accounts.”

Tuberville said the bill would ensure that “everyone who earns a paycheck” can invest however they would like through their retirement plans.

Retirement plan provider ForUsAll Inc. made a similar argument about the wide-ranging impact of DOL guidance on the self-directed brokerage window in a complaint to the DOL last year. ForUsAll provides retirement savers with an exchange run by cryptocurrency provider Coinbase. San Francisco-based Coinbase noted on Wednesday that Coinbase Custody Trust Co. is a qualified custodian, as recognized by the SEC.

Neither ForUsAll nor the DOL immediately responded to request for comment.

The March 2022 DOL guidance noted that employers and investment firms could be subject to investigation and enforcement actions should they allow individuals using brokerage windows to invest in cryptocurrency. Tuberville’s bill seeks to bar such investigations and enforcement actions.

“The state of the crypto guidance is unsettled, but I think that if Congress amended ERISA like this, then it would make it clear that plan fiduciaries are allowed to consider whatever financial and risk factors they believe to be appropriate for their plan and participants,” says Joshua Lichtenstein, who leads the ERISA and fiduciary practice for Ropes & Gray LLP. “That is how ERISA has always worked, but the ESG rule under the [President Donald] Trump administration and the crypto guidance both represent an erosion of that bedrock principle.”

Lichtenstein said legislation like the one proposed by Tuberville would be similar to the DOL’s current environmental, social and governance rule in terms of being “neutral” on what factors can be considered in investments: “An amendment like this would help to reassert that plan fiduciaries can decide what is or is not appropriate for their plans, without specific investment limits imposed by the DOL,” he says.

Co-sponsors of Tuberville’s bill include Senators Cynthia Lummis, R-Wyoming; Rick Scott, R-Florida; and Mike Braun, R-Indiana.

Earlier this month, Tuberville said he added support to a resolution from Braun and Representative Andy Barr, R-Kentucky, seeking to nullify a DOL rule that permits, but does not require, ESG strategies to be used in retirement plan investing.

Senators Sanders and Warren Introduce Social Security Expansion Act

The bill, proposed this week, aims to make Social Security solvent for 75 years and to increase benefits, especially for lower-income workers and retirees.

The Social Security Expansion Act, introduced earlier this week by Senators Bernie Sanders, I-Vermont, and Elizabeth Warren, D-Massachusetts, aims to make Social Security solvent through the end of the 21st century, while also enhancing benefits.

The bill would create a tax of 12.4% on investment income for individuals making $200,000 or more and married couples making $250,000 or more, matching the combined employee and employer payroll rates.

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The bill would also make all income greater than $250,000 subject to the full Social Security payroll tax rate; currently, income greater than $160,200 is not subject to the full payroll tax rate. Under the bill, income between $160,200 and $250,000 would not be taxed differently at first, but the $160,200 threshold would be allowed to rise normally until it reaches $250,000, projected to happen in 2035. At that point, all income would be subject to the full payroll rate. Additionally, any income greater than $250,000 would not be counted for benefit calculation purposes.

Since the bill would raise taxes, it must be formally introduced first in the House of Representatives. Sponsored in the House by Representatives Jan Schakowsky, D-Illinois, the bill was referred to the House Committee on Ways and Means on Tuesday. The bill has 26 co-sponsors in the House, as of today, all of whom are Democrats. Republicans control the House, and the Committee on Ways and Means is chaired by Representative Jason Smith, R-Missouri.

A statement from Sanders’ office said the bill would make Social Security solvent for at least the next 75 years, based on a study conducted by Stephen Goss, the chief actuary at the Social Security Administration.

Goss’ report explained that the bill would change the cost-of-living index used to calculate Social Security benefit increases from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to the Consumer Price Index for the Elderly (CPI-E). The report estimated that the cost-of-living adjustment would increase by “0.2 percentage points per year on average” as a result.

According to the Bureau of Labor Statistics, the CPI-E is a statistic which weighs inflation to account for the spending patterns of those aged 62 and older, such as their higher proportional spending on health care. The Bureau warned that this statistic has certain limitations, such as a smaller sample population, and currently has no official usage.

According to a factsheet for the bill, it would also increase the Special Minimum Benefit to 125% of the poverty line, “or over $18,000 for a single worker who had worked their full career.”

The bill would also increase the first income-percentage “bend point” from 90% to 95%. This means that, going forward, 95% of the first $1,115 in monthly wages (for 2023, indexed to inflation) would count toward Social Security benefits, up from 90%. This has the effect of frontloading benefit increases such that low-income workers benefit proportionally more from them.

Sanders’ office estimates that the annual Social Security benefit would increase on average by $2,400 a year.

The Senators propose the bill shortly after President Joe Biden was called a “liar” by Republicans during this State of the Union address for saying they were threatening to cut Social Security and Medicare to reduce the national debt. The risk of future retirees seeing reduced Social Security payments due to lack of funding has been a policy topic for years, with the Congressional Budget Office warning last December that the trust fund payments may be depleted by 2033, resulting in a 23% cut in planned benefit payments in 2034.

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