US Reviews Rule Allowing Crypto in 401(k) Retirement Plans

White House Begins Final Review of Crypto 401(k) Rule

Imagine being able to put a portion of your retirement savings into alternative assets like digital currencies, real estate, or private equity. That option might soon be available for American workers.

A final rule from the U.S. Department of Labor (DOL) has officially reached the White House for its final review. This regulatory effort stems from an executive order created during the Trump administration.

If approved, the new rule would provide legal protection for employers who choose to include alternative assets—including cryptocurrencies, private equity, and real estate—in their 401(k) retirement plans.

Why Wall Street Has Its Eye on $15 Trillion in 401(k) Assets

To understand why this regulation is creating so much buzz, we have to look at the total money held in U.S. retirement accounts.

Data from the Investment Company Institute (ICI) shows that employer-sponsored savings plans like 401(k)s held $15 trillion at the end of June. That makes retirement funds one of the largest pools of capital in financial markets.

Major financial institutions and asset managers want access to this $15 trillion pool. Opening 401(k) plans to alternative investments could direct significant new capital into digital assets and private investments.

How the Lawsuit Shield Works for Employers

It is worth noting that no business will be forced to offer digital assets or private equity. The proposed rule is entirely optional for employers.

Instead, the rule creates what attorneys call a safe harbor. The regulation arrived at the Office of Information and Regulatory Affairs (OIRA), which reviews major federal rules before publication, as reported by Bloomberg Law.

Under this framework, if an employer thoroughly evaluates six specific factors before adding alternative choices, courts will legally presume the employer acted prudently and responsibly.

The Six Factors Employers Must Evaluate

To qualify for the safe harbor lawsuit protection, plan sponsors must carefully weigh six key elements:

• Historical and expected investment performance
• Associated management fees and administrative costs
• Liquidity and how quickly assets can be converted to cash
• Asset valuation methods and pricing clarity
• Appropriate market benchmarks for comparison
• Overall asset complexity and underlying risks

The Department of Labor highlighted that fear of litigation has historically limited the types of investments companies feel comfortable offering to workers. This rule seeks to lower that legal hurdle.

Expected Timeline: When Could Savers See Changes?

The Office of Information and Regulatory Affairs has up to 90 days to complete its final review.

However, earlier phases of the process moved relatively quickly. Federal records show OIRA received a previous draft on January 13 and cleared it on March 24. The Labor Department formally proposed the rule just one week later.

Once published in the Federal Register, individual companies will decide whether to change their 401(k) fund menus.

Target-Date Funds Could Be the Main Entry Point

Instead of offering direct cryptocurrency trading to individual account holders, target-date funds may serve as the primary investment route.

Target-date funds are automated retirement options that gradually adjust an investor's asset mix from growth stocks to conservative bonds as they near retirement age.

According to research modeling by the Investment Company Institute (ICI), adding a 20% private asset allocation into target-date funds increased the median account balance by 12% over a 40-year period under specific market assumptions.

However, long-term projections depend heavily on positive market conditions. During sustained downturns or volatile cycles, higher-risk alternative assets can suffer significant short-term drawdowns and capital losses.

Concerns Over High Fees, Lawmaker Pushback, and Public Risk

Despite backing from asset managers, the proposal faces strong opposition from lawmakers and consumer advocates.

Comparing Costs: Index Funds vs. Crypto Products

One primary concern is the difference in ongoing management fees, which can reduce total compound growth over several decades:

• Standard S&P 500 index funds in a typical 401(k) charge between 0.03% and 0.10% annually.
• In contrast, specialized crypto retirement options highlighted in market reports carry fees around 1.00% per year.

Lawmaker Objections and Public Perception

In June, three Democratic lawmakers—Senators Edward Markey, Elizabeth Warren, and Representative Stephen Lynch—sent a formal letter urging the Department of Labor to withdraw the rule entirely.

The lawmakers argued that alternative assets like private equity have often underperformed broad stock indexes while charging higher fees.

"DOL should not use Americans' retirement security to prop up an industry searching for its next cash infusion," the lawmakers stated in their letter.

Many retirement savers remain cautious as well. A survey conducted by the National Institute on Retirement Security (NIRS) found that 77% of Americans view having cryptocurrency in retirement plans as a risky move.

What Lies Ahead for Retirement Savers?

The final published text will reveal whether the six-factor test remained intact after tens of thousands of public comments were submitted.

Even if federal regulators approve the final text, company leadership—not Washington officials—will ultimately determine if crypto choices reach employee accounts.