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Three Republican Senate members have submitted the draft of a bill to the Senate to encourage investment managers to offer Bitcoin and other cryptocurrencies in 401(k) retirement plans.
U.S. Senators Pat Toomey and Tim Scott, and U.S. Representatives Peter Meijer jointly established the Retirement Savings Modernization Act to expand American retirement savings.
Specifically, the bill permits American workers to diversify the asset class included in their 401(k) plans. In addition, the bill seeks to amend the Employee Retirement Income Security Act of 1974 (ERISA) to buttress that private sector retirement plan sponsors may offer plans that cut through several asset classes.
Apart from cryptocurrencies, the bill also takes into consideration other non-traditional investment options like private equity, hedge funds, real estate, and other asset classes as alternatives for the fiduciaries. Notably, expenses incurred for these asset classes are higher than that of traditional investments, and the bill addresses that such expenses will be accepted.
Already, pension plans have included some of these alternative asset classes but 401(k) plans failed to do the same due to the anticipated litigation risks. The Retirement Savings Modernization Act assures that while diversifying to include a variety of asset classes, managers of workplaces would not have to breach their fiduciary duties.
A section of the bill reads, “A fiduciary shall not be liable for a breach of fiduciary duties under this section solely for – recommending, selecting, or monitoring any covered investment as an investment option for a plan.”
401(k) Plans to Include Cryptocurrencies
Prior to this time, two Senators had frowned at crypto inclusion in 401(k) plans which was experimented by Fidelity Investment. Senators Elizabeth Warren of Massachusetts and Tina Smith of Minnesota both wrote to the investment firm, citing that there was almost no demand for such an offering which bears “significant risks of fraud, theft, and loss.”
“In short, investing in cryptocurrencies is a risky and speculative gamble, and we are concerned that Fidelity would take these risks with millions of Americans’ retirement savings,” their letter read
Only a few days later did Senator Tommy Tuberville of Alabama introduce the Financial Freedom Act which allows Americans to add crypto to their 401(k) retirement savings plan without regulatory approval.
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