Cryptocurrency in retirement plans has shifted from a hypothetical discussion to a real consideration for many plan committees. While available industry data reviewed by GAO indicate that crypto assets in 401(k) plans represented substantially less than 1% of the market based on data through 2022 and early 2024 (GAO, 2024), growing participant interest, especially among younger employees, has put digital assets on the agenda for plan sponsors. Notably, 42% of Gen Z investors held cryptocurrency as of early 2025, compared to just 11% with a retirement account. Investment Policy Statement (IPS) updates are now a prudent response to this changing environment. For a deeper dive, see our 401(k) resources hub.

The Short Answer: What’s Changed for Crypto in 401(k) Plans?

The Department of Labor (DOL) has rescinded its previous cautionary guidance on cryptocurrency, restoring a neutral stance for plan fiduciaries. As stated in Compliance Assistance Release 2025-01:

"Today's release restores the Department's historical approach by neither endorsing, nor disapproving of, plan fiduciaries who conclude that the inclusion of cryptocurrency in a plan's investment menu is appropriate."

However, the DOL emphasized that plan fiduciaries continue to bear the full responsibility for prudent management and participant protection. Plan committees must recognize that while the DOL is no longer discouraging crypto, fiduciary duty and prudent oversight remain essential. For regulatory updates and best practices, visit our 401(k) resources.

What an IPS Is For: The Sponsor’s Perspective

An Investment Policy Statement (IPS) serves as a foundational document for a retirement plan, outlining its investment objectives, strategies, and governance guidelines. It demonstrates procedural prudence under ERISA by documenting that every investment decision, including diversification and thorough documentation, aligns with the plan’s goals and risk tolerance.

Having a well-crafted IPS is a key signal of fiduciary responsibility.

By clearly defining permissible investments and the processes for evaluating new asset classes, sponsors can adapt to market shifts without sacrificing compliance or transparency.

Where Crypto Language Fits in the IPS: Section-by-Section Guide

Adding crypto to a 401(k) plan starts with precise placement in the IPS. Here’s how to address digital assets across major IPS sections:

1. Objectives: Clarify that the plan aims to provide a diversified investment menu, which may include alternative assets like digital currencies.

2. Permissible Assets: Specify, “The Plan may include investments in digital assets, including cryptocurrencies, provided they meet the Plan’s criteria for investment selection and due diligence.”

3. Participant Access: Define eligibility requirements, such as requiring participants to complete an educational program before investing in digital assets.

4. Risk Controls: Include language such as, “Investments in digital assets will be subject to enhanced monitoring due to their volatility and unique risk profile. The Plan will establish specific allocation limits and conduct quarterly reviews.”

5. Vendor Oversight: Confirm that custodians and service providers handling digital assets meet established security and compliance standards. This includes adhering to the DOL’s 2024 cybersecurity guidelines for ERISA plans.

For a full checklist covering policy, process, and provider selection, see our crypto in the 401(k) policy, process & provider checklist for employers.

Controls to Document: Caps, Eligibility, and Access

Industry best practices show that risk controls are non-negotiable when it comes to digital assets. For example, Fidelity Investments allows up to 20% of a participant’s portfolio to be allocated to Bitcoin, while ForUsAll limits crypto exposure to just 5% (cnbc.com, 2025). These caps are designed to contain crypto asset volatility within a manageable portion of the portfolio.

Additionally, liquidity limitations with some digital assets should be taken into account when setting transaction and allocation limits. Setting eligibility requirements, such as mandatory education on digital assets before investing, helps protect participants and reinforces prudent governance.

For further detail on caps, eligibility, and automated safeguards, refer to our post on risk controls for crypto in 401(k) plans: caps, eligibility & auto-features.

Monitoring and Oversight: Staying Prudent with Crypto

Ongoing oversight is a cornerstone of fiduciary compliance. Best practices recommend that plan fiduciaries conduct quarterly reviews of all investment options, with particular attention to alternative assets like crypto due to their unique risk profiles.

Reviews should also be triggered by significant market events or regulatory changes.

Key takeaway: Regular, event-driven monitoring helps keep crypto allocations appropriate and aligned with the plan’s policies.

Documentation of each review process is critical for demonstrating ongoing compliance.

Clause Placeholders: Example IPS Language for Crypto (Not Legal Advice)

Below are sample IPS clauses for digital assets. These are for illustration only: consult legal counsel before adopting any language.

• Objectives: “The Plan aims to provide participants with a diversified range of investment options, including alternative assets, to enhance potential returns while managing risk.”

• Permissible Assets: “Permissible investments include traditional securities and alternative assets such as digital currencies, subject to enhanced due diligence and approval by the Investment Committee, especially for digital assets.”

• Caps: “Allocations to alternative assets shall not exceed 10% of the total portfolio to maintain appropriate risk levels.”

• Eligibility: “Participants must complete an educational program on alternative investments before allocating funds to digital assets.”

• Monitoring: “The Investment Committee will review alternative asset performance quarterly and adjust allocations as necessary.”

• Disclosure: “Participants will receive quarterly statements detailing the performance and risks associated with alternative asset investments.”

For more IPS templates and resources, visit our 401(k) resources hub.

Committee Workflow Add-On: Decision Memo & Meeting Agenda

A transparent workflow is essential for effective governance when updating an IPS. A typical meeting agenda for this process might include:

1. Call to Order

2. Review of Current Investment Policy Statement

3. Presentation on Digital Assets and Market Trends

4. Discussion: Inclusion of Digital Assets in Investment Options

   • Risk Assessment

   • Potential Allocation Caps

   • Participant Education Requirements

   • Review participant feedback or questions regarding digital asset options

5. Fiduciary Considerations and Compliance Review

6. Drafting of Proposed IPS Amendments

7. Next Steps and Action Items

8. Adjournment

Documenting each step builds a strong record for future audits.

For committee templates and workflows, see our 401(k) resources.

Next Steps for Employers: Get Started with a Crypto-Ready IPS

Plan sponsors ready to address cryptocurrency in retirement plans should start by reviewing their IPS, benchmarking risk controls, and establishing a quarterly review cadence. Remember, clear education and regular communication with participants are essential for any new asset class. For support in building a compliant, future-ready plan, get started (for employers).

This content is for informational purposes only and is not legal, tax, investment, or compliance advice.

References

• Government Accountability Office. (2024). 401(k) Plans: Industry Data Show Low Participant Use of Crypto Assets Although DOL's Data Limitations Persist. https://www.gao.gov/products/gao-25-106161

• U.S. Department of Labor. (2025). Compliance Assistance Release No. 2025-01. https://www.dol.gov/agencies/ebsa/key-topics/retirement-benefits/cryptocurrencies/compliance-assistance-release-2025-01

• CNBC. (2025, January 8). Crypto options in 401(k) plans: Here’s what you need to know. https://www.cnbc.com/2025/01/08/crypto-options-in-401k-plans-heres-what-you-need-to-know.html

• Digital Assets Council of Financial Professionals. (2024). Growing number of advisors now recommend crypto. https://401kspecialistmag.com/growing-number-of-advisors-now-recommend-crypto

• Nasdaq. (2025, February). Gen Z: 4 times more likely to have crypto than a 401(k). https://www.nasdaq.com/articles/gen-z-4-times-more-likely-have-crypto-401k