They solve different problems. One is a tax-advantaged retirement vehicle your employees cannot touch for decades. The other is liquid savings they can reach on a Tuesday. Here is how to think about running both.
Block Rewards Research · blockrewards.com · 9 min read
|
May 2025 DOL rescinds its 2022 caution on crypto in 401(k) menus |
59½ Age at which 401(k) withdrawals generally avoid the early penalty |
After-tax How a payroll bitcoin savings deduction is funded |
|
Scope: United States The Bitcoin Savings Plan is available to Canadian employers today. Block Rewards launches in the United States in Q1 2027 through a licensed US partner. |
Start With the Honest Answer
A 401(k) is the most valuable savings benefit most American employers offer, and nothing in this article should be read as an argument against it. If your plan carries an employer match, that match is the highest-return item in your entire benefits package. Any employee not contributing enough to capture it in full is leaving money on the table, and the right advice is always to fix that first.
The question this article answers is narrower and more practical: what do you offer the employee who is already capturing the match, or the employee who will not touch the plan at all because they cannot afford to lock money away?
That second group is larger than most HR teams assume, and it skews young. It is also the group driving most of your voluntary turnover.
What Each One Actually Is
A 401(k) and a payroll bitcoin savings plan are not competing products. They are different instruments that happen to both run through payroll.
|
|
401(k) |
Bitcoin Savings Plan |
|
Funded with |
Pre-tax or Roth after-tax dollars |
After-tax dollars from net pay |
|
Tax treatment |
Deferred growth, taxed on withdrawal, or tax-free on qualified Roth withdrawals |
No deferral. Capital gain or loss on disposal |
|
Contribution limit |
Annual limit set by the IRS |
None. The employee sets a percentage |
|
Access |
Generally restricted until 59½, with penalties, hardship rules, and loan provisions |
Liquid. The employee can withdraw at any time |
|
Employer match |
Common, and often the main reason to participate |
Employer contribution possible, but outside ERISA |
|
Regulatory frame |
ERISA. The plan sponsor is a fiduciary |
A voluntary payroll deduction. Not a plan asset |
|
Insurance |
Not insured against market loss |
Not insured. Not FDIC or SIPC protected |
|
Volatility |
Depends on the menu |
High, by design |
|
Primary job |
Retirement at 65 |
Building savings you can reach before then |
Read the last row first. That is the whole argument.
The Liquidity Gap Nobody Budgets For
Retirement plans are built on a premise: that the employee’s biggest financial problem is forty years away.
For a meaningful share of the workforce, it is not. It is rent, a security deposit, a car repair, a down payment, or a gap between jobs. Research on savings behavior consistently finds that a large majority of savers reveal a preference for liquidity over tax deferral when the two are in tension, and the behavior is rational. Money you cannot reach does not reduce the anxiety of not being able to reach money.
This is why a 401(k) alone leaves a gap. An employee who is one unexpected expense away from a credit card balance is not reassured by a balance they will be penalized for touching. They need the retirement account and something between the checking account and the retirement account.
Historically that middle layer was a savings account. At the interest rates most Americans actually receive, a savings account preserves dollars and loses purchasing power. That is the gap employees are trying to fill on their own, usually badly, and usually through an app their employer knows nothing about.
|
The design question Not whether employees should own bitcoin. The question is whether the savings they are already attempting, outside your benefits package and without any structure, would be better done inside it, automatically, with records and disclosure. |
What Changed in Washington, and What It Means
Two developments have moved crypto in retirement from a closed question to an open one.
In March 2022, the Department of Labor told 401(k) fiduciaries to exercise “extreme care” before adding cryptocurrency to an investment menu. For three years that language effectively ended the conversation inside most plan committees.
On May 28, 2025, the DOL rescinded that guidance in full through Compliance Assistance Release 2025-01. Its stated reasoning was that an “extreme care” standard does not appear in ERISA and differs from ordinary fiduciary principles. Commentators described the move as a return to neutrality: the DOL now neither supports nor opposes a fiduciary who concludes that a digital asset option is suitable.
On August 7, 2025, Executive Order 14330 directed the DOL and the SEC to facilitate access to alternative assets, digital assets explicitly included, for participants in defined contribution plans, and told the DOL to prioritize actions that reduce the litigation risk constraining fiduciary judgment.
|
Why this is less helpful than it sounds The DOL removed a warning. It did not create a safe harbor. A fiduciary who adds a digital asset option to a 401(k) menu still owes ERISA duties of prudence and loyalty, still has to monitor the option, and still carries personal liability for the decision. |
That is the reason a payroll savings plan is structurally attractive to a cautious employer. It sits outside the plan. The bitcoin is not a plan asset, the employer is not selecting it as an investment option for participants, and no ERISA fiduciary duty attaches to the employee’s decision. The employer’s role is the same as it is for a charitable giving deduction: facilitate the employee’s own choice, keep clean records, and stay out of the investment decision.
That is a materially different risk posture from putting the same asset on a 401(k) menu, and it is available now rather than after a rulemaking cycle.
Where the Two Fit Together
A sensible order of operations, and one you can defend to anyone:
Framed that way, a bitcoin savings plan is not a substitute for anything. It is the fourth item on a list where most employers only offer the first.
|
What we tell employers to tell employees Take the match. Build the cash buffer. Only then consider a volatile asset, with a percentage small enough that a fifty percent drawdown would not change your life. Any provider unwilling to say that out loud is selling something. |
The Employer’s Practical Questions
Does it cost us anything? The Bitcoin Savings Plan is priced per participating employee per month, with no setup fee, no minimum participation, and no contract term. Employers can cover the cost as a benefit or pass it to participants.
Does it complicate payroll? No. It runs as an after-tax deduction line, the same way a stock purchase plan or supplemental insurance does. Wages are paid in dollars and the W-2 is unchanged.
What about employees who do not want it? The plan is opt-in by design, and most employers see participation well short of the whole workforce. A benefit no one is pushed into does not create the internal friction that mandatory programs do.
What do we tell someone whose balance falls? The same thing you would tell them about any volatile holding, which is why disclosure at enrollment matters more here than in almost any other benefit. Employees should see the volatility described plainly before they contribute a dollar, not in a footnote afterward.
The Takeaway
The 401(k) answers “will I be able to retire.” It answers it well, and it should stay the backbone of your package.
It does not answer “can I get ahead before then,” and that is the question keeping your younger employees up at night and moving them between jobs. A liquid, opt-in savings benefit answers a different question for a different employee, outside the plan and outside ERISA.
Most employers do not need to choose. They need to notice that they have only been answering one of the two.
|
Thinking about the gap your 401(k) does not cover? The Bitcoin Savings Plan is live for Canadian employers today. Our US launch is planned for Q1 2027 through a licensed partner. blockrewards.com · info@blockrewards.com |
Sources
This article is general information, not investment, legal, or tax advice. A Bitcoin Savings Plan is not a replacement for traditional retirement savings and is not insured by the FDIC, the SIPC, or any government agency. Bitcoin is a volatile asset and employees can lose money. Employers should consult their own counsel before implementing any digital asset program. © 2026 Block Rewards Inc. All rights reserved.