Apr 26, 2022 - Economy & Business

Fidelity to offer bitcoin option on 401(k)s

Illustration: Aïda Amer/Axios

Bitcoin is coming to 401(k)s. If companies want them...

Fidelity Investments, which provides retirement plans to 23,000 companies, will soon allow a portion of their contributions to be allocated to bitcoin.

  • MicroStrategy has already said it will offer its employees the plan.

Why it matters: The move by the country's largest retirement plan provider comes at a point of heated debate about the safety of cryptocurrencies as an investment. Retirement plans are crucial pieces of U.S. workers' nest eggs, and excessive risk is sure to draw significant political attention.

What they're saying: “At this stage of cryptocurrency’s development, fiduciaries must exercise extreme care before including direct investment options in cryptocurrency," the U.S. Labor department said in March, before Fidelity's announcement.

  • The statement was aimed at plan fiduciaries, such as Fidelity, "in an effort aimed at protecting the retirement savings of U.S. workers."

Yes, but: People want them.

  • Fidelity said individuals increasingly want to mix cryptocurrencies into their long-term investment strategies. And in turn, there is "growing interest from plan sponsors for vehicles that enable them to provide their employees access to digital assets in defined contribution plans."
  • It cited its own survey of institutional investors last year in saying 30% would prefer to buy an investment product containing digital assets.
  • The same survey found more than 90% of those interested in digital assets expect to have an allocation in their institution's or clients' portfolios within the next five years.
  • When given the opportunity to take some of their paycheck in cryptocurrency, more workers are doing so already.

Details: Fidelity's offering, expected midyear, would permit as much as 20% of an investor's retirement plan to be allocated to bitcoin, although each employer could lower that limit if they choose.

  • The digital assets holdings would be fully integrated with the overall plan platform and supported by typical educational resources available to savers on such plans.

State of play: Overall, few companies have shown interest in making cryptocurrencies available in their retirement plans.

  • The Wall Street Journal noted a recent poll by the Plan Sponsor Council of America which found only 2% of the 63 employers surveyed would consider making cryptocurrency available in their plans.

The bottom line: Fidelity has a huge reach as a retirement plan provider, and the offering is sure to entice employees — especially the younger ones — to press their employers to make them available.

  • But the pension law experts cited in various news reports today cast serious doubt as to whether companies will want to take the risk.
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