Key Takeaways
- • Fidelity announced in April 2022 that it would add a digital assets account option to its 401(k) offerings, allowing eligible participants to hold Bitcoin and ether within their plans.
- • The digital assets account carries an account fee of 0.75% to 0.9% of funds invested in the crypto account, plus a separate trading fee.
- • Employers hold the final say on whether their workers can access Bitcoin in Fidelity 401(k) plans, and the same investment options must generally be offered to all plan participants.
- • Crypto allocations within Fidelity 401(k) plans are capped at 20%, though the employer sets the ceiling and the figure could change.
- • The U.S. Department of Labor did not ban crypto from retirement plans but issued a March 2022 compliance assistance document cautioning fiduciaries that cryptocurrencies have not yet appeared to meet the standard of a prudent investment.
Summary
Fidelity, the largest 401(k) provider in the United States and custodian of more than one-third of all funds invested in 401(k) accounts in the country, announced in April 2022 that it would introduce a digital assets account option alongside its traditional accounts, according to Investopedia. The offering lets employees add Bitcoin to their retirement accounts, with Fidelity describing the option as integrated into its 401(k) investment menu so that buying crypto would be comparable to buying mutual fund shares, subject to an allocation limit.
The digital assets account charges an account fee of 0.75% to 0.9% of the funds invested in it, in addition to a trading fee. Fidelity's plan will not permit allocations above 20% of a retirement portfolio, although the employer determines the actual ceiling and that figure could change.
Access is not automatic. Employers are responsible for the investment options in their plans and have fiduciary obligations to participants. Because most employers administer 401(k) plans so that the same options are available to all participants, an employer's decision to permit crypto effectively determines whether any employee can use it. Investopedia notes this may act as a significant barrier to widespread adoption.
Regulatory caution is also a factor. Investopedia reports that the U.S. Department of Labor has not banned crypto from retirement plans, but in March 2022 it issued a compliance assistance document reminding plan fiduciaries to select "prudent" investments and strongly suggesting that cryptocurrencies had not yet appeared to meet that standard. Investopedia also cites analysts who consider Bitcoin too volatile for a responsible retirement investment, particularly for employees nearing retirement.
The digital assets account charges an account fee of 0.75% to 0.9% of the funds invested in it, in addition to a trading fee. Fidelity's plan will not permit allocations above 20% of a retirement portfolio, although the employer determines the actual ceiling and that figure could change.
Access is not automatic. Employers are responsible for the investment options in their plans and have fiduciary obligations to participants. Because most employers administer 401(k) plans so that the same options are available to all participants, an employer's decision to permit crypto effectively determines whether any employee can use it. Investopedia notes this may act as a significant barrier to widespread adoption.
Regulatory caution is also a factor. Investopedia reports that the U.S. Department of Labor has not banned crypto from retirement plans, but in March 2022 it issued a compliance assistance document reminding plan fiduciaries to select "prudent" investments and strongly suggesting that cryptocurrencies had not yet appeared to meet that standard. Investopedia also cites analysts who consider Bitcoin too volatile for a responsible retirement investment, particularly for employees nearing retirement.
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