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Fidelity, ForUsAll Give 401(k) Investors Access to Cryptocurrency


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Retirement savers in some 401(k) plans are starting to gain access to cryptocurrencies like bitcoin.

Fidelity Investments, the largest 401(k) plan provider by total assets, begins offering Digital Asset Account for customers this fall, a spokesperson confirmed.

Employers who fund a 401(k) plan through Fidelity can choose to offer an account to employees, allowing them to allocate a portion of their savings to bitcoin.

For its part, ForUsAll, a plans administrator geared towards startups and small businesses, in September also rolled out crypto for 401(k) savers, said David Ramirez, CEO. of the company said.

Investors can buy into six cryptocurrencies: bitcoin, ethereum, solana, polkadot, cardano, and USDC. Ramirez said ForUsAll plans to add five more in the coming weeks.

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The company seems to be the first admin to offer cryptocurrency as 401(k) investment options.

The moves come as the US Department of Labor in March urged employers to be “extremely careful” before exposing workers to cryptocurrencies. The regulator cited “significant risks” to investors, such as speculation and volatility.

Meanwhile, investor interest in cryptocurrencies spikes amid record growth in 2021. But the price has dropped to what some call “crypto winter. “

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BitcoinFor example, it has lost more than 66% of its value from its peak last November. (For comparison, S&P 500 Index down about 20% over the past year.) Bitcoin’s current price, around $21,000 a coin, has almost tripled its value since the start of 2020, and the S&P 500 has gained about 17% in that time. .

Fidelity declined to disclose how many customers have chosen to offer bitcoin accounts to workers.

Fifty ForU All customers have provided crypto to employees, and 100 more are expected to join soon, Ramirez said. Those 150 plans would account for about 27% to 28% of total customers. Ramirez estimates 70% to 80% of new customers have requested crypto offers.

“Our core goal has always been to provide equal access to wealth creation,” says Ramirez. “We don’t feel it’s fair that Americans will be left behind in a 401(k).”

Different approaches to an alternative property

On a technical level, Fidelity and ForUsAll both offer cryptocurrencies to investors in different ways.

Fidelity’s bitcoin account is an option that sits alongside other 401(k) investments such as traditional stock and bond funds. Digital Assets accounts contain bitcoin and short-term investments, like cash, intended to help facilitate day-to-day transactions.

ForUsAll’s is part of a “broker window”, essentially a portal through which investors can access dozens of additional investments that are not technically part of the market. core 401(k) options.

ForUsAll also intends to offer alternative asset classes such as private equity, venture capital and real estate through the future window, Ramirez said.

Fidelity and ForUsAll have installed certain roadblocks to limit investors’ overall 401(k) allocation to cryptocurrencies. For example, ForUsAll limits an investor’s allocation to 5% of their current portfolio balance and sends an alert to the investor if the stock exceeds 5% in the future. Meanwhile, investors cannot put more than 20% of their balance into Fidelity’s service, although employers can choose to lower that limit.

But the employer maybe not so fast to provide cryptocurrencies or alternative assets to workers due to legal risks, experts said. Workers and other parties have brought numerous lawsuits against companies over the past decade over 401(k) payments that are allegedly risky and expensive.

ForUsAll sued the Department of Labor over its cryptocurrency compliance bulletin released in March. That case is still unresolved.

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