In 2019, when Jeffrey Epstein was arrested, and the first public scrutiny fell on Leon Black — co-founder of private capital giant Apollo Global Management — many public pension funds faced a simple choice: do we continue investing with a firm deeply connected, even if indirectly, to a convicted sex offender?

Almost all chose not to divest.    Funds asked questions. One major plan paused new commitments. But nearly all maintained existing exposures.

At the time, the narrative trustees were given — both publicly and privately — was this:

Leon Black’s relationship with Epstein was personal, isolated, and unrelated to Apollo’s business. Apollo itself had never done business with Epstein.

That representation, backed by a commissioned Dechert LLP review released in 2021, was enough to calm many boardrooms. But the public record today — rich with subsequent reporting, legal filings, government investigations, and newly released DOJ emails — shows that premise was deeply flawed, if not false.

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What Naked Capitalism and Other Sources Showed Back in 2019–2023

In July 2023, finance observers at Naked Capitalism laid out what was already obvious from the early media coverage of the Black–Epstein ties:
Leon Black had paid Epstein eye-popping sums — tens of millions of dollars annually — for “tax advice” despite Epstein having no recognized tax credentials, and there was legitimate skepticism about whether that amounted to anything more than paying for influence or access. The Senate Finance Committee was openly probing the arrangement as emblematic of how super-wealthy elites use opaque tax structures to avoid taxes altogether.

The commentariat also noted that many pensions did not act even when the story broke — that file shows PSERS froze new commitments and other investors expressed concerns, but most limited partners simply let the issue fade.

Naked Capitalism was blunt: paying $158 million to someone unlicensed for tax or estate planning — and doing so without a formal fee agreement — was not only “unseemly” but abnormal even by private-markets standards.

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What the Government and Press Have Disclosed Since

1. The Financial Times’ 2026 Emails Dump

In early 2026, a tranche of Department of Justice emails released as part of the Epstein files showed that Apollo’s leadership may have mischaracterized key facts:

• Epstein was not just a personal advisor to Leon Black — he was given internal financial documents from Apollo executives, including current CEO Marc Rowan, and was involved in discussions over firm tax arrangements.
• Epstein requested and reviewed sensitive tax receivable agreement figures and potential tax strategies for Apollo’s internal transactions, contradicting earlier Apollo statements that no business was conducted with Epstein.
• Emails indicate that not just Black, but Rowan and co-founder Josh Harris, were earmarked as needing to sign off on Epstein-connected plans — placing them squarely inside matters previously described as personal affairs.

That’s a seismic shift: the firm’s public defense was personal dealings only; the record now shows Epstein engaged in substantive discussions over corporate and tax strategy involving multiple senior executives.   https://www.ft.com/content/092d9e44-ec17-4da7-8b58-e43bf09113ab

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Why This Matters to Public Pensions

1. Pension Boards Relied on a False Premise

In 2019–2021, trustees were told:

• Apollo had no corporate relationship with Epstein
• Black’s payments were personal and non-business-related
• Nothing in Apollo’s governance or operations was implicated

That representation was material to trustees’ fiduciary judgments — especially for those whose due diligence pointed to reputational risk, governance risk, and long-term fund performance.

Today’s evidence suggests that the premise trustees used to decline divestment was incorrect.

That’s not just a reputational wrinkle — it’s a fiduciary risk oversight failure.

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2. The Naked Capitalism Frame Was Right About the Real Question

Back in 2019, commentators questioned the real value of Epstein’s services and whether the arrangement was something other than benign advice. Naked Capitalism suggested:

Paying someone like Epstein $158 million, without a professional fee agreement or credentials, was implausible outside of influence, access, or other undisclosed benefits — especially when vetted tax professionals could have done similar work for a fraction of that fee.

That same skepticism now resonates with the newer evidence showing Apollo executives shared sensitive tax-related information with Epstein — something that goes well beyond “advice.”    https://www.nakedcapitalism.com/2023/07/former-apollo-chief-leon-black-has-more-jeffrey-epstein-splaining-to-do-with-tax-evasion-alleged-rape-of-autistic-16-year-old.html

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The Broader Governance Pattern Pensions Should Recognize

This episode fits a much larger pattern — one these same pensions have repeatedly confronted in private markets:

When you ask managers for transparency on governance concerns, the first answer is usually a controlled narrative.
Only later, often under external pressure or legal document release, does a more complex, less flattering story emerge.

This is the same dynamic you’ve documented in retirement investment analytics — where private-market disclosures are often opaque until forced into daylight.

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The Fiduciary Question Trustees Must Now Ask

Not:

Should we feel bad about Apollo’s historic transgressions?

But:

Did we make our 2019 divestment decision based on facts that were materially incorrect?
If so, should we revisit that decision now?

And if Apollo’s prior disclosures were materially inaccurate:

1. Did trustees receive updates that corrected the record at the time?
2. Did pensions perform iterative due diligence as new facts emerged?
3. Did funds that continued to invest explain how they evaluated the governance impact?
4. Should pension committees reopen investment decisions in light of new evidence?

These are not political questions. They are fiduciary ones.

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What Pension Fiduciaries Should Do Now

In light of the newly revealed evidence and other reporting:

1. Request Apollo to explain, in writing, the extent of Epstein’s involvement in firm matters now shown after 2019 facts.

Trustees should demand transparent, verifiable responses from Apollo on:

• What documents were shared with Epstein
• Who in Apollo communicated with Epstein
• What strategic matters Epstein was consulted about
• Whether Apollo’s prior statements to investors continue to be accurate

2. Re-evaluate all Apollo commitments against fiduciary standards

This should include:

• Governance risk assessments
• Reputational risk analyses
• Operational due diligence
• Cost/benefit of continuing exposure vs. risk mitigation

3. Consider divestment, or exit strategies where appropriate

Funds that maintain significant exposure should periodically reassess whether continued involvement aligns with prudent investor standards — especially when the manager’s transparency has been called into question.

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Conclusion: This Is Not Ancient History

What happened with Apollo in 2019 was not settled history. Too many trustees accepted an incomplete — and now demonstrably inaccurate — narrative. The Naked Capitalism critique back then was more than snark; it was fundamentally right about the depth and implications of the relationships at play.

Pensions can no longer rely on the original premise they were given.

It’s time to ask: Should we continue to invest with a manager whose senior leadership repeatedly mischaracterized material governance facts to public investors?

That is the commonsense fiduciary question of 2026.

Sources-

https://www.truehoop.com/p/when-josh-harris-and-jeffrey-epstein https://www.thedp.com/article/2026/02/penn-marc-rowan-jeffrey-epstein-files-emails https://www.haaretz.com/us-news/2026-02-04/ty-article/.premium/pro-trump-billionaire-on-gaza-board-of-peace-linked-to-jeffrey-epstein-in-new-doj-files/0000019c-2887-db08-abdd-6b8ffaff0000 https://www.inquirer.com/news/marc-rowan-plane-epstein-penn-20260130.html

United States public pensions (confirmed in public sources)

• Pennsylvania PSERS (Public School Employees’ Retirement System of PA) — PSERS board resolution for Apollo Investment Fund IX notes prior PSERS commitments to multiple Apollo partnerships and states PSERS had committed $620m to Apollo-managed partnerships since 2012 (as of that 2017 resolution).
• California CalPERS (CA Public Employees’ Retirement System) — identified in SEC filings as one of Apollo’s “Strategic Investors.”
• California CalSTRS (CA State Teachers’ Retirement System) — CalSTRS’ own Private Equity Portfolio Performance table lists multiple Apollo vehicles (e.g., Apollo Investment Fund IX; Apollo Hybrid Value Fund II; Apollo Investment Fund X) with commitments shown.
• Florida State Board of Administration (Florida SBA) — Florida SBA performance report lists multiple Apollo private equity funds (e.g., Apollo Investment Fund IV, V) with commitment amounts; separate reporting also describes commitments to Apollo credit funds.
• Virginia Retirement System (VRS) — reported commitments to Apollo vehicles (e.g., $50m in 2020 and $250m commitment reported in 2022).
• Teachers’ Retirement System of Texas (TRS Texas) — reported as a major investor/LP in Apollo funds (e.g., Reuters/industry coverage of Apollo funds; PERE notes TRS Texas as a major investor in Apollo Investment Fund VIII).
• Teachers’ Retirement System of Louisiana (TRSL) — reported commitments to Apollo strategies (e.g., Apollo Natural Resources fund commitments, plus later credit commitments).
• New York City Teachers’ Retirement System (TRS of the City of New York) — Reuters reported NYC pension commitments to Apollo and mentions TRS NYC’s specific commitments to Apollo funds.
• New York State Aug 2013: Apollo Investment Fund VIII, L.P. — $400 million commitment (NYSCRF report).
  • (Report dated 2015-08): Apollo Natural Resources II, L.P. — $400 million commitment (NYSCRF report).
  • Dec 2021: Apollo Impact Mission Fund — $150 million commitment (Monthly Transaction Report; also states Apollo is an “existing relationship” and notes “no placement agents”).
  • Dec 2022: Apollo Investment Fund X, L.P. — $350 million commitment (Monthly Transaction Report).
  • Mar 2023: Apollo Excelsior PE Co-Invest, L.P. — $350 million commitment (Monthly Transaction Report).
• Los Angeles City Employees’ Retirement System (LACERS) — LACERS performance update document references Apollo Investment Fund VI (example of an Apollo commitment appearing in a LACERS consultant report).

Canada (confirmed)

• CPP Investments (Canada Pension Plan Investment Board / CPPIB) — CPPIB’s own press release states it made a US$150m commitment to an Apollo private equity fund (older but directly documented).
• Ontario Teachers’ Pension Plan (OTPP) — documented deal with Apollo-affiliated funds (CareerBuilder acquisition) showing direct co-investment/transaction participation alongside Apollo funds.

UK public pensions (confirmed)

• London Pensions Fund Authority (LPFA) — industry pension press reports LPFA selecting Apollo (manager selection / mandate).
• Cumbria Local Government Pension Scheme (LGPS) — a published LGPS alternatives holdings spreadsheet includes an “APOLLO MULTI-CREDIT FUND” line item.

An industry piece from Plan Sponsor featuring a bogus study by industry lawyers is making the rounds with a tidy, outrage-ready statistic: https://www.planadviser.com/erisa-settlements-provided-68-per-plaintiff-in-2025/?utm_source=newsletter&utm_medium=email&utm_campaign=PAdash

“Median participant recovery: $67.79.
Average plaintiff attorney fee: $1.59 million.”

And the implied message is obvious:

“The real problem in 401(k) lawsuits is the lawyers, not the fiduciary misconduct.”

That framing is not just misleading.
It’s a defense narrative that flips the economics of ERISA litigation on their head.

Let’s do the math the article avoids.

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What the settlement numbers actually say

Using the same figures being cited:

• Total settlements: $5.3 million per case
• Plaintiff fees: $1.59 million
• Participant recovery: $3.71 million

That means participants received 70% of the settlement dollars.

Not the lawyers.

Now the part no one mentions:

Those settlements typically represent 10–20% of the actual damages.

That’s not speculation. That’s how settlement economics work in these cases after years of motion practice, discovery fights, and judicial hostility at the pleading stage.

If $5.3 million is ~15% of actual damages, then:

Actual participant losses ≈ $35.3 million

That’s the real number.  Wall Street Defense attorneys force the participants to take $3.71 million of the $35 million taken from them.

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The number they don’t want you to see

As actual damages are roughly $35 million per case, then the hidden story is this:

Defense lawyers are helping fiduciaries settle cases for 15 cents on the dollar.

That’s about $30 million per plan in losses that never get repaid.

And the trade press wants you mad at the lawyers who took a third of the clawed back 15%.

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Why settlements are so small relative to damages

Because courts increasingly:

• Dismiss cases before discovery,
• Demand “meaningful benchmarks” that don’t exist,
• Misapply standing rules,
• Treat revenue sharing and proprietary funds as normal,
• Block prohibited transaction claims at the pleading stage.

This forces plaintiff firms into a brutal risk calculus:

Take a discounted settlement now, or risk total dismissal later.

That is not a sign the cases lack merit.

That is a sign the legal environment is tilted.

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The inversion

Here’s the real flow of money per case:

Where the money goes	Approx. amount
Participant losses	$35,000,000
Settlement paid	$5,300,000
Participant recovery	$3,710,000
Plaintiff attorneys	$1,590,000
Unrecovered losses kept by fiduciary ecosystem	~$30,000,000

And the headline focuses on the $1.59 million.

That’s the inversion.

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Why this narrative exists

Because if the story were told honestly, it would read:

“401(k) fiduciaries and service providers avoided repaying $30 million per case thanks to procedural defenses and judicial pleading barriers.”

That’s not a comfortable story for an industry publication.

So instead, they write:

“Look how much the lawyers make.”

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What this really shows

These cases are not evidence of plaintiff excess.

They are evidence of how hard it is to hold fiduciaries accountable under modern ERISA jurisprudence.

Despite:

• Documented fee disparities,
• Revenue sharing conflicts,
• Proprietary fund steering,
• Opaque CIT and annuity structures,
• Consultant conflicts,

Participants are recovering pennies on the dollar.

And the industry wants you to blame the only people who forced any recovery at all.

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The uncomfortable truth

If plaintiff firms disappeared tomorrow, participants wouldn’t keep that $1.59 million.

They would lose the entire $35 million.

Because nothing else in the system is forcing fiduciaries to return money.

Not regulators.
Not consultants.
Not auditors.
Not recordkeepers.

Only litigation.

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The punchline the industry hopes you miss

That $68 statistic is not proof lawsuits are broken.

It’s proof that:

Fiduciary breaches in 401(k) plans are so large, and recoveries so discounted, that even billions returned looks small when averaged out.

And the real scandal is not what the lawyers took.

It’s what the fiduciary ecosystem got to keep.

The retail side of a trillion-dollar secret hiding in plain sight

The phrase is crude. Intentionally so.

Definition and Etymology of “Annuity Whore”  https://iask.ai/q/Definition-of-annuity-whore-f7vv190  

The term “annuity whore” is a derogatory slang expression used within the financial services industry, particularly among stockbrokers, investment advisors, and insurance agents.^[1] It refers to a financial professional who aggressively pushes or sells annuities to clients—often regardless of the client’s actual financial needs—primarily to capture the high upfront commissions associated with these products.^[2] [3]

Inside parts of the brokerage and insurance world, “annuity whore” is slang for the advisor who pushes annuities first, asks questions later—because annuities are where the money is. Not the client’s money. The advisor’s.

And in 2026, as indexing, ETFs, and fee transparency squeeze traditional commissions to dust, the least transparent corner of the financial system has quietly become the revenue engine for huge swaths of the advisory industry:

State-regulated insurance products.  Annuities.  Spread.  Hidden fees.  Misleading performance.

Not disclosed like an expense ratio.
Not benchmarked like a mutual fund.
Not visible on Morningstar.
Not visible on your statement.

But worth trillions.

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The modern advisor compensation problem

As trading commissions went to zero and clients learned to ask, “What’s your fee?”, many advisors didn’t become fee-only fiduciaries.

They went where the fees are invisible.

They went to insurance.

They went to annuities.

And they wrapped it in the most comforting phrase in finance:

“Retirement income planning.”

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The three channels where annuities quietly dominate

1) Independent insurance / hybrid advisors (often CFPs)

• RIA + insurance agent at the same time
• Insurance license is the revenue engine
• Annuities are often the largest payout product
• “Fiduciary advice” on the front end, insurance contract on the back end

Many of these advisors are credentialed by the CFP Board and truthfully say they are fiduciaries.

They are.

But the product they recommend:

• does not disclose spread,
• cannot be benchmarked like a fund,
• embeds compensation inside the contract,
• and, in retirement plans, can create ERISA conflicts.

That’s the fiduciary paradox.

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2) Wirehouses and regional broker-dealers

At firms like Merrill Lynch, Morgan Stanley, Stifel, and Edward Jones:

• There are dedicated annuity desks
• Internal wholesalers
• Payout grids that reward annuity production
• Retirement campaigns built around “guaranteed income”

Do their 10-Ks say, “50% of this branch’s book is annuities”?

No.

They bury it in:

“commissions and fees,”
“insurance revenues,”
“transactional revenues.”

It’s disclosed.
Just not in a way a client could ever piece together.

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3) Retail retirement accounts and IRA rollovers

This is the part that almost no one measures correctly.

Annuities don’t show up in:

• ETF flow tables
• Mutual fund league tables
• Morningstar categories

They show up on insurance company balance sheets as general account reserves.

According to the Federal Reserve Financial Accounts (Z.1):

• Life insurers’ individual annuity reserves ≈ $2.8 trillion
• Household life insurance & annuity entitlements ≈ $6.7 trillion

That is not fringe money.
That is one of the largest pools of retirement assets in America.

There are literally thousands of different insurance products and some are worse than others.   There are some responsible people in the industry calling out the worst products but they are a minority.

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Why the public massively underestimates annuities

Because they are not counted like investments.

They are counted like insurance liabilities.

Which means:

• No ticker
• No expense ratio
• No performance chart
• No easy comparison

Just a crediting rate… set by the insurer… after they take their spread.

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How to tell if your advisor lives off annuities

You don’t ask them.

You read what they are required to disclose.

1. Look up the firm on the SEC site:
   SEC AdviserInfo
   Read the Form ADV Part 2. Search for:

• insurance products
• annuities
• revenue sharing
• affiliates

2. Look up the broker on:
   FINRA BrokerCheck
3. Look for dual registration:

• Investment adviser
• Insurance agent

That combination is where the annuity money lives.

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The uncomfortable truth

A very large portion of the financial advisory industry would struggle to survive on transparent fees alone.

Annuities solve three problems for advisors and firms:

1. High, durable compensation
2. Client stickiness (hard to move once placed)
3. A simple retirement income story

And for clients, they sound comforting:

• “Principal protection”
• “No volatility”
• “Guaranteed income”

What almost no one asks:

• What is the spread?
• What is the insurer earning versus you?
• How is the advisor paid inside this?
• Could this be replicated cheaper with transparent investments?

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Even fiduciaries sell them

This is where it gets uncomfortable for the industry.

A CFP can say, honestly:

“I am a fiduciary, and this annuity is in your best interest.”

And believe it.

Because the system never forces reconciliation between:

• fiduciary duty,
• opaque product economics,
• and embedded compensation.

That’s the gap.

That’s the dirty secret.

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Why this matters beyond retail (and why it’s explosive)

As documented at the Commonsense 401k Project, even retirement plans have quietly filled with these products. But the retail side is much bigger and has been hiding in plain sight for decades.

You are not looking at a fringe misuse.  https://commonsense401kproject.com/2026/01/23/fixed-annuities-are-the-dirty-secret-hiding-in-401k-and-403b-plans/ 

You are looking at a dominant distribution product in American retirement investing that:

• is opaque,
• is compensation-heavy,
• and is sold by people calling themselves fiduciaries.

That’s not a small problem.

That’s structural.

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The thesis

If your advisor talks endlessly about:

“income,”
“guarantees,”
“sleep at night,”

…and you see insurance contracts instead of transparent funds…

You may not have a fee problem.

You may have an annuity problem.

And the way to tell is not what they say.

It’s what they disclose in the fine print they hope you never read.

You can benchmark a mutual fund.
You can benchmark an index fund.
You can even benchmark a synthetic stable value fund—if you know what you’re doing.

But you cannot benchmark a General Account or Separate Account fixed annuity.

That is not an accident. That is the design.

And it is the reason fixed annuities do not fit inside an ERISA fiduciary framework built on comparability, measurability, and transparency.

You’ve written for years that GA/SA annuities are prohibited transactions in practice. The missing piece most fiduciaries, consultants, and courts still don’t grasp is this:

Fixed annuities have comparables in the marketplace.
They do not have a legitimate benchmark.

That difference is everything.

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What a benchmark actually is (and why annuities can’t have one)

From the CFA Institute’s trustee framework and the Restatement of Trusts logic applied in cases like Brotherston, a benchmark must:

1. Be investable
2. Be transparent
3. Use market value accounting
4. Allow apples-to-apples fee and performance comparison
5. Reflect the same risk profile

SEC-registered mutual funds do this perfectly. That’s why 401(k)s are built around them.

As your book chapter explains, fee transparency + performance transparency is the foundation of fiduciary oversight. Once disclosures improved in 2012, litigation increased, and fees fell. That is how the system is supposed to work.

Annuities break this system at step one.

They use:

• Book value accounting
• Opaque spread compensation
• No market pricing
• No fee disclosure
• No investable comparator

So what do consultants do?

Annuities Are a Prohibited Transaction — DOL Exemptions Do Not Work Update 1/21/26

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The fake benchmarks consultants use

1) Money market funds

2) Short Treasuries

3) Hueler Pooled Fund Index

4) Synthetic stable value peer medians

These are not benchmarks. They are deflection devices.

Because these comparators are far less risky than a General Account annuity.

You’ve documented the risk differential from Fabozzi/Griffin:
GA annuities carry roughly 10× the credit risk of diversified synthetic stable value.

Yet consultants routinely say:

“This annuity is competitive with money markets”
“This annuity is in line with Hueler”
“This annuity beats cash”

That is like benchmarking a junk bond fund to a Treasury bill.

It is not just wrong. It is intentionally misleading.

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What fixed annuities actually have: comparables

There is only one legitimate way to evaluate a fixed annuity:

Compare its crediting rate to the highest-credit, lowest-spread annuity in the market.

And there is one firm everyone knows fits that description.

TIAA as the market comparable

TIAA:

• Carries equal or higher S&P/Moody’s ratings than most GA providers
• Is known to take the lowest spreads in the industry
• Operates at scale
• Has enormous general account assets
• Is itself a party in interest in ERISA plans

Which is precisely why they should be forced to disclose their spread.

You estimated ~150 bps to NBC. TIAA refused to comment.

TIAA Exposed for Excessive Hidden Annuity Spread Fees — Again

That refusal tells you something critical:

The spread is the fee.
And they will not say it out loud.

If TIAA—widely believed to be the lowest spread provider—is keeping ~150 bps, then what are the others keeping?

200? 250? 300?

The Stable Value Efficient Frontier

This is the only meaningful comparison available in the marketplace.

Not money markets.
Not Hueler.
Not synthetic stable value.

Another annuity with the same risk profile and better credit.

---

Why synthetic stable value is not a valid “benchmark” for annuities

Synthetic stable value:

• Diversified bond portfolios
• Multiple wrap providers
• GIPS-presentable components
• Market value transparency underneath
• 1/10th the credit risk

Consultants love to say:

“Your annuity rate is similar to what Hueler shows.”

That is not benchmarking. That is concealing spread.

Because if a product with 1/10th the risk produces a similar crediting rate, the only explanation is:

The annuity spread is enormous.

. Fees drive performance. Transparency exposes fees. Litigation lowers fees.

Annuities are built so this cannot happen.

Stable Value: Why General Account and Separate Account Products Are ERISA Prohibited Transactions — and Why Diversified Synthetic Stable Value Is Not

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Why courts and consultants get fooled

Because they are trained to think in terms of benchmarks.

And annuities do not have one.

So defense experts muddy the water:

• “No apples-to-apples benchmark”
• “Unique accounting”
• “Principal protection”
• “Smoothing”
• “Different objectives”

All true.

All irrelevant.

Because you are not looking for a benchmark.

You are looking for a comparable.

And that is another annuity with:

• Better credit
• Lower spread
• Higher crediting rate

That’s it.

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The fraud hiding in plain sight

When a consultant tells a plan committee:

“This annuity is competitive with stable value peers”

They are comparing:

• A 10× risk product
• To a 1× risk product
• With a similar rate

That statement is materially misleading.

It disguises the embedded fee.

It disguises the risk.

It disguises the prohibited transaction.

---

Why SEC registered mutual funds don’t have this problem

Because:

• Expense ratios are visible
• Performance is visible
• Benchmarks are obvious
• AMVR works
• SPIVA works
• Brotherston logic works

You can’t hide.

Weak state regulated Annuities are the only major asset class in 401(k)s where none of this applies.

Which is why they proliferate in:

• Small plans
• Insurance-sold plans
• Legacy menus
• Consultant-controlled plans

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The single question fiduciaries never ask

“What is the spread relative to TIAA?”

If that question were asked in every RFP, annuities would disappear from 401(k)s overnight.

Because there is no good answer.

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The reason this matters for ERISA

ERISA fiduciary law assumes:

• Transparent fees
• Comparable performance
• Objective benchmarks
• Measurable prudence

Fixed annuities are constructed to defeat all four.

They can only be evaluated by comparables, not benchmarks.

And the industry intentionally substitutes fake benchmarks to prevent fiduciaries from seeing the spread.

That is not poor practice.

That is systemic concealment.

The bridge between Trust Law, ERISA, and what modern pensions forgot

When Congress wrote the Employee Retirement Income Security Act, they did not invent fiduciary duty.

They imported it from the Restatement (Second) of Trusts.

When the investment industry professionalized itself after the 1960s scandals, the CFA Institute did not invent fiduciary duty either.

They translated trust law into operational rules for investment professionals:

• Put the client first
• Disclose conflicts
• Present performance honestly
• Disclose fees fully
• Avoid structures you cannot explain

The CFA Code, GIPS, and the Asset Manager Code are not “best practices.”

They are trust law made practical.   https://commonsense401kproject.com/2026/01/30/before-erisa-before-the-sec-there-was-trust-law/

Which is exactly why private equity, hedge funds, opaque annuities, and many modern pension structures cannot comply with them.

Not don’t comply.

Cannot comply.

---

Trust law asks one simple question

Can the beneficiary see what you are doing with their money?

CFA standards ask the same question in three ways:

Trust Law	CFA Code	GIPS	Asset Manager Code
Duty of loyalty	Put client first	Net of all fees	Investors first
Duty to disclose	Conflicts disclosure	Verifiable performance	Full fee transparency
Duty of prudence	Fair dealing	Reproducible returns	No preferential treatment
Duty to inform	Honest communication	Independent valuation	Independent oversight

If you can’t meet CFA standards, you can’t meet trust standards.

And if you can’t meet trust standards, you are violating the spirit of ERISA.

---

Why this is exploding now

Aannuites and private-equity and of course crypto show the same thing:

These products are engineered to sit outside:

• The Investment Company Act of 1940
• The trust-law spirit of ERISA
• The transparency discipline of CFA standards

That is not accidental.

GIPS requires:

• Reproducible performance
• Net-of-fee reporting including underlying fees
• Independent valuation
• Audit rights

Private equity contracts forbid those things.

Annuity contracts obscure those things.

You cannot be GIPS-compliant and run those structures the way they are run today.

---

The uncomfortable fact for CFA charterholders in pensions

Tens of thousands of CFA charterholders sign this every year:

“Place the integrity of the profession and the interests of clients above their own.”

Many public pensions are staffed and advised by CFA charterholders.

And yet they:

• Accept performance reporting that is not GIPS-reconstructible
• Accept contracts that waive fiduciary duty by general partners
• Accept fee structures that cannot be fully disclosed
• Participate in performance games that influence bonuses and narratives

This is not ignorance.

This is looking the other way.

---

Why CalPERS, Kentucky, Minnesota, and others all converge here

Kentucky literally wrote CFA standards into law in 1991 and again in 2017 — and then ignored them.

In Ted Siedle’s Minnesota work, you see the same structural problem without the CFA overlay:

• Opaque alternatives
• Governance conflicts
• Self-policing fiduciaries
• Performance that cannot be independently verified

CFA standards would expose both instantly, and will be featured in an upcoming CALPERS report I am assisting Ted Siedle on.

Because CFA standards were designed precisely to prevent:

• Cherry-picking
• Opaque valuations
• Hidden fees
• Self-dealing
• “Trust us” reporting

---

Why GIPS is the bright-line test

Look at the CFA GIPS firm list.

• BlackRock — listed
• JPMorgan Asset Management — listed
• Apollo Global Management — not listed
• KKR — not listed
• Carlyle Group — only liquid credit listed
• Blackstone — credit/insurance listed, not PE/real estate

That is not a coincidence.

Traditional managers can comply.
Private equity structures cannot.

---

The key insight

CFA standards are not aspirational ethics.

They are a functional test of whether an investment structure is compatible with fiduciary duty.

If a manager cannot meet them, a pension fiduciary should not be hiring them.

Period.

---

Why this ties directly back to trust law

A trust court would never allow:

• Secret contracts
• Manager-set valuations
• Hidden fees
• Preferential GP treatment
• Performance that cannot be independently verified

CFA standards say the same thing, in modern language.

ERISA says the same thing, in statutory language.

They are the same rulebook.

---

Why this matters now more than ever

Because modern legislation and regulatory trends increasingly say:

“As long as you document the process, it’s fine.”

Trust law and CFA standards say:

“If the structure itself prevents transparency, it’s not fine.”

That’s the clash happening in pensions today.

---

The blunt conclusion

If public pensions required and enforced:

• CFA Code adherence
• GIPS-compliant reporting
• Asset Manager Code compliance

Most hedge fund, private equity, opaque annuity, and alternative structures in public plans would disappear overnight.

Not because of politics.

Because they fail the fiduciary test that predates ERISA by centuries.

And that is exactly why CFA standards are needed now more than ever.

Lifetime Income Annuities in 401(k) Violate ERISA and CFA Fiduciary and Ethical Standards

Modern 401(k) Plans and Public Pensions Are Violating Rules Written 300 Years Ago

When Congress passed Employee Retirement Income Security Act in 1974, it did not invent fiduciary duty.

It imported it.  Many State Fiduciary laws claim to be similar to ERISA.

The intellectual backbone of ERISA is not a securities statute. It is not an accounting rule. It is not a pension innovation.

It is the law of trusts — as summarized in the Restatement (Second) of Trusts.

That matters, because trust law is old. Very old. And very clear.

---

What a trustee is allowed to do (and not do)

For centuries, courts imposed simple rules on trustees:

1. Duty of Loyalty — the trustee may not benefit himself, directly or indirectly.
2. Duty of Prudence — the trustee must invest as a careful person would with his own money.
3. Duty of Impartiality — treat beneficiaries fairly.
4. Duty to Inform — beneficiaries are entitled to know what is being done with their property.
5. Duty to Avoid Conflicts — even the appearance of self-dealing is forbidden.

These rules were codified and clarified in the Restatement by the American Law Institute.

Then Congress lifted them into ERISA.

---

ERISA is trust law applied to pensions

The people who wrote ERISA — Jacob Javits, Ted Kennedy, and others — were responding to pension looting like the Studebaker-Packard collapse.

Their solution was simple:

Treat pension managers like trustees.

That’s why ERISA uses phrases like:

• “solely in the interest of participants”
• “exclusive purpose”
• “prudence”
• “party in interest”
• “prohibited transaction”

Those are trust law phrases, not finance phrases.

---

The SEC laws did the same thing for retail investors

The Investment Company Act of 1940 did for mutual funds what ERISA did for pensions:

It forced:

• Daily pricing
• Fee transparency
• Independent oversight
• Restrictions on affiliated transactions

Why? Because 1920s investment trusts were abusing investors using the same tricks we see today in private markets.

---

Now look at many 401(k)s and other Public and Private Pensions

Ask a simple trust-law question:

If a trustee invested a widow’s trust in a vehicle where:

• Fees were hidden,
• Pricing was stale for weeks,
• Managers set their own valuations,
• Contracts were secret,
• And advisers were paid for steering money there,

would a court say that trustee met the duty of loyalty and prudence?

Of course not.

But that is exactly how modern pension and 401(k) alternative structures operate.

---

The great workaround of the last 30 years

Private equity, hedge funds, CITs, annuities, and “separate accounts” were all engineered to sit:

• Outside the Investment Company Act  (SEC registered funds)
• In gray zones of ERISA disclosure
• Behind NDAs and proprietary claims
• Beyond meaningful benchmarking
• Under poor state regulation, outside federal regulation ie annuities and CITs

They are, functionally, pre-1940 investment trusts wearing modern legal costumes.

And they would fail a basic trust-law exam.

---

They are about a system that would make an 18th-century English chancery judge say:

“This trustee is hiding the books from the beneficiary.”

Which was the one thing trust law never allowed.

---

The irony

We didn’t need new laws to prevent this.

We wrote them in:

• 1940 (Investment Company Act)
• 1974 (ERISA)

Both based on trust law principles hundreds of years old.

The problem is not the absence of law.

The problem is that modern finance learned how to engineer around the spirit of those laws while technically staying inside the words.

---

The architects of U.S. investment law would look at:

• Private equity in 401(k)s https://commonsense401kproject.com/2026/01/17/the-supreme-courts-intel-case-is-about-secrecy-fake-benchmarks-and-fiduciary-illusions/
• Opaque annuities https://commonsense401kproject.com/2025/11/01/annuities-are-a-prohibited-transaction-dol-exemptions-do-not-work/  https://commonsense401kproject.com/2025/11/22/annuities-the-erisa-regulatory-hole-no-one-wants-to-talk-about/
• CIT secrecy   https://commonsense401kproject.com/2025/12/07/wall-street-journal-exposes-target-date-cit-corruption-but-theyve-only-scratched-the-surface
• Crypto

And say   “We already outlawed this in 1940 and 1974. How did it come back?”

The question courts and regulators should be asking

Not:

“Is this permitted by the plan document?”

But:

“Would this be permitted if this were a private trust and the beneficiary demanded the books?”

That is the fiduciary test ERISA was built on.

And it’s the test many modern retirement structures cannot pass.

Appendix: The Quiet Erosion of Trust Law Inside ERISA

The story above makes a simple point: ERISA is trust law applied to pensions.
Its backbone is the Restatement (Second) of Trusts. Its cousins are the disclosure regimes of the Securities Act of 1933, the Securities Exchange Act of 1934, and the structural protections of the Investment Company Act of 1940. Congress imported those principles into the Employee Retirement Income Security Act after pension looting scandals.

This appendix addresses a harder claim:

Over time—and especially in recent years—new rules, exemptions, and litigation trends have weakened ERISA’s trust-law core, not by repealing it, but by engineering around it.

How erosion happens (without saying “weaken ERISA”)

Modern changes rarely say, “reduce fiduciary duty.” Instead, they:

1. Redefine what counts as adequate disclosure
   Long documents, layered structures, and “proprietary” claims substitute for clarity. Participants receive information, but not usable information.
2. Expand what can be treated as ‘prudently justified’
   Illiquid, opaque, hard-to-benchmark assets are normalized inside daily-valued plans so long as a paper process exists.
3. Rely on exemptions and safe harbors
   Prohibited-transaction exemptions, rollover rules, and advice frameworks create compliance paths that dilute the bright lines trust law once enforced.
4. Narrow who can sue and when
   Litigation doctrines and standing rules reduce the practical ability of beneficiaries to challenge conflicted structures, even when trust-law principles would condemn them.
5. Shift oversight from structure to documentation
   If the file shows a process, courts increasingly defer—even when the underlying structure obscures fees, conflicts, or valuation risk.

The pattern across administrations (and visible now)

This trend did not begin with any single administration. But the current legislative and regulatory push—often framed around ESG, choice, or access to private markets—accelerates the shift from trust principles to paper compliance.

For example, proposals emphasizing “pecuniary factors only” or expanding access to private assets in retirement plans may sound participant-protective. In practice, without parallel requirements for fee transparency, independent valuation, and real benchmarking, they risk:

• Making it easier to justify opaque alternatives on a “financial” rationale
• Hardening the legal defense that complexity equals prudence
• Further distancing ERISA practice from the Restatement’s simple tests: loyalty, prudence, disclosure, and conflict avoidance

What trust law would still ask

A chancery judge applying trust law would ask:

• Can the beneficiary see the fees?
• Can the beneficiary verify the value?
• Can the beneficiary compare the investment to a known benchmark?
• Is anyone in the chain paid more if this option is chosen?

If the answer to any of those is “no” or “we can’t disclose,” trust law’s presumption is against the trustee.

Modern ERISA practice too often presumes the opposite: if it’s disclosed somewhere and documented, it is presumed acceptable.

Why this matters for today’s reforms

When new laws or rules are proposed—whatever their stated political goal—the test should be:

Do they move ERISA closer to or farther from its trust-law roots?

If a change:

• Expands opacity,
• Normalizes illiquidity without valuation safeguards,
• Relies on exemptions over bright lines,
• Or makes challenges harder for beneficiaries,

then it functionally weakens ERISA, even if the statute’s words remain untouched.

The through-line

From 1933 to 1940 to 1974, Congress responded to financial abuse the same way:
force sunlight, ban conflicted structures, empower beneficiaries.

When modern policy trends move in the opposite direction—toward complexity, exemptions, and reduced accountability—they don’t repeal those laws.

They hollow them out.

That is the quiet erosion this article warns about.

/

For years, Morningstar has positioned itself as the independent umpire of the mutual fund world.

The star ratings.  The analyst reports.  The fiduciary consulting.

If Morningstar approves it, fiduciaries feel safe.

But buried in Morningstar’s own SEC filings is something most plan sponsors, consultants, and courts do not realize:

Morningstar is deeply embedded in the business of helping insurance companies design retirement plan investment menus built around CITs, annuities, and proprietary insurance wrappers — the very structures now raising ERISA prohibited transaction concerns.

This isn’t speculation. It’s in their Form ADV.

---

Morningstar Retirement: Not What People Think

Morningstar Investment Management’s “Retirement” division does not simply analyze mutual funds.

They explicitly say they: “construct custom model portfolios for employer-sponsored retirement plans using the investment options available in a plan’s lineup.”

That sounds harmless — until you read the next sentence:  “The universe of underlying holdings is generally defined by the Institutional Client and can include investment products that are affiliated with that Institutional Client.”

Translation:  If Lincoln, MetLife, TIAA, Principal, Empower, or an insurance platform defines the menu, Morningstar builds portfolios using those proprietary insurance products.

They are not evaluating an open market of mutual funds.   They are working inside insurer-defined universes.

---

The MetLife Smoking Gun

Morningstar has a dedicated ADV brochure for: “Advisory Services to MetLife ExpertSelect Program”

In this document, Morningstar openly states:

“We selected the menu of investment options available in the MetLife ExpertSelect Program from the universe of investments that MetLife is authorized to offer.”

They go further:  “We do not review the annuity products in connection with the Program.”

Read that again.  Morningstar — the supposed fiduciary expert — builds the menu but does not review the annuity products.

They also state: “The lineups we build are limited to a universe of mutual funds and other investment vehicles, such as CITs and guaranteed retirement income products such as annuities.”

So Morningstar’s job here is:   Make insurance menus look like diversified retirement lineups.

---

The Target Date Angle Nobody Talks About

Morningstar also offers:

“Personal Target Date Fund Services”  “Custom Model Portfolios”  “3(21) and 3(38) fiduciary services”

But those services are constrained to:  “the investment options available in the plan lineup.”

And those lineups, in insurance platforms, are:

• CITs
• Stable value
• Separate accounts
• Annuity sleeves
• Proprietary trust wrappers

This is exactly the structure now showing up in TIAA, Lincoln, MetLife, and other insurance-based target date designs where:

The participant thinks they are in mutual funds,   But they are inside insurance contracts.

Morningstar is often the firm paid to “monitor” and “approve” these lineups.

---

And Morningstar Gets Paid Very Well For This

Their fee schedules show:

• 2–15 basis points for institutional asset management
• 3–8 bps for fiduciary services
• Minimums of $100,000 to $450,000
• Special target-date and managed account fees

This is a huge revenue business tied directly to insurer retirement platforms.

They even disclose: “We receive direct or indirect cash payments from unaffiliated third parties for referring their services to other advisory firms or investors.”

And:  “We provide compensation to Institutional Clients to provide marketing or educational support…”

This is not a passive ratings agency.    This is an active participant in the insurance retirement ecosystem.

---

Why Their Articles Read the Way They Do

When Morningstar writes articles like:

• “The hidden trend changing 401(k) plans”
• “Target date fund trends”

They present the rise of CITs and insurance-based structures as innovation.

They never mention:

• Prohibited transaction risk
• Party-in-interest issues
• Share class access problems
• Insurance wrapper conflicts
• Hidden spread compensation
• Fiduciary benchmarking problems

Because this is the ecosystem they are paid to support.

https://www.morningstar.com/funds/hidden-trend-is-changing-401k-plans-heres-what-it-means-investors

https://401kspecialistmag.com/target-date-fund-trends-morningstar/

---

The Fiduciary Illusion

Plan sponsors believe:

“Morningstar is monitoring our funds.”

What Morningstar is actually doing in many insurance platforms is:

Monitoring the funds inside the insurance cage.

They are not asking:

Why are we in the cage at all?

---

---

The Real Question Fiduciaries Should Ask

When Morningstar is hired in a Lincoln, MetLife, TIAA, or similar platform, the right question is:

Are they acting as an independent fiduciary reviewer?

Or  Are they being paid to make an insurance menu look prudent?

Because their own ADV says the latter.

---

The Bottom Line

Morningstar is no longer just the referee of the mutual fund world.

They are now a key architect of insurance-based retirement plan menus where:

• CITs replace mutual funds
• Annuities hide inside target dates
• Proprietary wrappers block institutional pricing
• Fiduciary conflicts multiply

And they disclose it all — if you read the fine print.

Most fiduciaries never do.

Appendix: Morningstar’s Dual Role — Ratings Provider and Insurance Scorekeeper

While the main article above documented how Morningstar serves as a referee, scorer, and evaluator for the insurance industry — especially in distributing and marketing annuity products — there is a parallel role that is even more consequential for pension risk transfers and fiduciary decision-making: Morningstar’s participation on the credit-rating side of private insurance-backed securities.

1. Morningstar Is Now a Major Player in Privately Rated Securities

Life insurers have shifted a growing share of their portfolio into privately placed debt, direct lending, and private credit — assets that are not traded publicly and for which there is no market price discovery. To make these assets look “investment grade,” insurers increasingly rely on private letter ratings (PLRs) — credit opinions issued by small, non-S&P/Moody’s rating firms.

Among the few firms active in this market is Morningstar DBRS — the credit rating arm of Morningstar that issues private ratings on securities typically held by insurance companies or structured finance vehicles.

According to industry data, as of year-end 2023, approximately 86% of U.S. insurers’ privately rated securities were rated by small CRPs including Morningstar DBRS. The result is that a large portion of the so-called “investment grade” portfolio backing life annuities is not rated by the major public agencies at all, but by niche providers whose methodologies and transparency are not subject to broad market scrutiny.

---

2. The Conflicted Incentives of Private Letter Ratings

Private letter ratings are fundamentally different from public credit ratings:

• They are paid for by the issuer or sponsor, not by market subscribers.
• They apply to securities that have no public trading market.
• Their output cannot be independently verified by investors or fiduciaries.
• Their methodology disclosures are limited or proprietary.

When Morningstar DBRS assigns an investment-grade letter to a privately placed life-insurer bond or private credit tranche, that rating becomes part of the narrative insurers use to declare that “over 90% of our portfolio is investment grade.” In other words, Morningstar’s rating opinion gets rolled up into insurer marketing and fiduciary disclosures, even though the underlying assets may be opaque, illiquid, and of uncertain credit quality.

This raises an obvious question:
Should a ratings arm of a firm that also earns fees from insurers for scoring insurance products be treated as independent when it privately rates securities sold to those same insurers?

---

3. Egan-Jones, SEC Scrutiny, and Why It Matters Here

The financial press has reported that the SEC is investigating Egan-Jones for its rating practices, raising concerns about whether private CRPs are applying appropriate standards or simply rubber-stamping risk. (See: “Egan-Jones Probed by SEC Over Its Credit Ratings Practices,” Financial Advisor Magazine.)

Morningstar’s credit arm has not been the subject of the same public regulatory scrutiny — but the structural problem is the same:

A firm with revenue streams tied to the insurance ecosystem is issuing “investment grade” opinions on assets that lack public market validation.

That is neither transparent nor consistent with the way public credit ratings are expected to function in capital markets.

---

4. PLRs Populate Annuity Backing Portfolios With Unknown Risk

Even if regulators decide to restrict or ban private letter ratings going forward, that would only affect new ratings. It would not address the estimated $1.6–$1.8 trillion of private credit already on U.S. life insurers’ balance sheets — much of it rated privately by firms such as Morningstar DBRS.

Because these assets:

• Are illiquid,
• Are not publicly traded,
• Do not have transparent pricing, and
• Are often backed by non-bankruptcy-remote structures or reinsurance vehicles,

their credit quality cannot be independently confirmed. The only basis for believing they are investment grade is the letter assigned by a small CRP.

That dynamic helps explain why widely followed market indicators such as credit default swap (CDS) spreads for large life insurers often show persistent credit risk that does not align with the high investment-grade ratings insurers tout. (See your October 29 article on annuity risk as measured by CDS.)

---

5. Morningstar’s Dual Roles Create a Perverse Incentive Loop

Morningstar:

1. Scores insurance products (e.g., annuities) for platforms and distributors,
2. Rates peripheral securities held by insurance companies, and
3. Participates in data and analytics ecosystems that insurers and fiduciaries use for decision-making.

This combination raises two systemic concerns:

A. Conflicts of Interest — When an insurance-industry scoring provider also issues credit ratings for instruments used to back those same products, there is a risk that independence is compromised — or at least perceived to be.

B. Lack of Market Discipline — Because private letter ratings are not subject to public market verification, they allow insurers to present opaque risk as “safe,” undermining the ability of fiduciaries to evaluate risk meaningfully.

---

Conclusion: Ratings Matter — Especially When They Don’t Match Reality

Your main article argues that Morningstar helps design the insurance playbook. This appendix shows a darker side of how that playbook is supported: by obscuring underlying asset risk with opaque ratings.

In a world where:

• General account assets are increasingly private credit,
• CDS spreads suggest elevated insurer risk,
• PBGC backstops are disappearing after PRTs,
• And fiduciaries are told to rely on “investment grade” labels,

it is no longer acceptable to treat privately rated credit as equivalent to S&P/Moody’s investment grade.

ERISA fiduciaries, regulators, and courts need to recognize that:

A rating is only as good as the transparency, independence, and accountability behind it.

If the referee is also the designer of the playbook, and also rates the teams, then the game is not being called fairly — and retirees are the ones on the field with no protection.

https://www.fa-mag.com/news/egan-jones-probed-by-sec-over-its-credit-ratings-practices-84762.html

 https://www.insurancejournal.com/news/international/2026/01/23/855368.htm.     https://commonsense401kproject.com/2025/10/29/annuity-risk-measured-by-credit-default-swaps-cds/

Offshore Private Credit creates ERISA Prohibited Transaction Risks for Life Insurance Products: New Evidence from BIS

TIAA’s Target Date Funds Are Built on a Risk Illusion – other firms copying

Wall Street Journal Exposes Target Date CIT Corruption — Opens up Fiduciary Litigation

State-Regulated Collective Investment Trusts (CITs) as Vehicles for ERISA Prohibited Transactions

There is a common thread running through what we are seeing in:

• The media — where reporters struggle to explain why private equity results never quite match the story being told (see the NYT H-E-B piece you dissected),
• The courts — where judges are beginning to realize that fake benchmarks and opaque reporting create fiduciary illusions (see your Intel analysis),
• State governments — where pension reports in Kentucky, Chicago, North Carolina, Rhode Island and California show performance standards that would never be tolerated in public markets,
• And now Vermont — where Tim McGlinn, CFA/CAIA, documents how the state is effectively misrepresenting private equity performance to the public.

This is not coincidence.
It is not incompetence.
It is a system.

A system in which private equity performance is engineered, narrated, benchmarked, and reported in ways that would be considered securities fraud if done in public markets.

And everyone involved gets paid to look the other way.

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Vermont: The “Brave Little Lie”

Tim McGlinn’s recent piece on Vermont is one of the clearest examples yet of what is happening nationwide.   https://thealtview.substack.com/p/vermont-repeat-irr-juicing-offender

Vermont reports private equity performance using:

• Internal Rate of Return (IRR) without proper context,
• Non-investable benchmarks,
• Valuations that lag markets by months,
• Performance presentations that omit what would have happened in a simple passive alternative.

What McGlinn shows is devastating:

Vermont is not measuring performance relative to anything a fiduciary could actually invest in.

That is not a technical mistake.
That is performance engineering.

The same engineering documented in multiple states
The same engineering Richard Ennis quantified nationally.
The same engineering hidden behind GIPS non-compliance https://www.amazon.com/Kentucky-Fried-Pensions-Cover-up-Corruption/dp/1483964752

Different state. Same playbook.

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The Wall Street Journal Said the Quiet Part Out Loud

The WSJ piece — “When Your Private Fund Turns $1 into 60 Cents” — exposed what happens when the cash reality of private equity finally collides with the reported narrative. https://www.wsj.com/finance/investing/when-your-private-fund-turns-1-into-60-cents-445d63c2

When funds need liquidity, when secondaries clear at discounts, when distributions don’t come, the math that “worked” on paper falls apart.

Because the performance was never market performance.
It was accounting performance.     This was a rare piece in the WSJ by the great Jason Zweig most articles are much more friendly to Private Equity https://commonsense401kproject.com/2026/01/21/the-ny-times-missed-the-real-h-e-b-401k-story/

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The GIPS Problem Nobody Wants to Talk About

There are no performance standards in Private Equity they basically make up their own standards so they can make up their own performance:

• Almost all stock and bond managers comply with CFA GIPS.
• Almost no private equity or hedge fund managers do.
• There are detailed GIPS standards for alternatives that require full fee and valuation transparency.
• They refuse to adopt them.

As the CFA GIPS staffer said:

“I would be concerned why a manager would not be compliant.”

Public pensions have adopted CFA ethics codes.
They cite CFA standards.
They do not require GIPS from the very managers charging the highest fees.

Why?

Because if they did, the performance story would collapse.

You can’t hide fee layering, recycled expenses, subscription line distortions, and appraisal-based smoothing inside a GIPS composite.

So pensions simply don’t ask.

This is the Madoff rule McGlinn alludes to:

If you ask too many questions, you don’t get access to the “top quartile” fund.

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Benchmark Engineering: The Silent Fraud Mechanism

Private equity is benchmarked against:

• Public indices plus arbitrary spreads,
• Benchmarks lagged by a quarter,
• CPI-based targets instead of market returns,
• Internal composites that evolve over time.

This guarantees:

• Losses are delayed,
• Volatility is suppressed,
• Illiquidity is rewarded whether earned or not,
• “Alpha” appears every year.

Richard Ennis showed nationally that funds underperform passive benchmarks by ~1.4% annually while claiming +0.3% policy outperformance.  https://finance.yahoo.com/news/17-trillion-illusion-why-one-154227184.html?

That 1.7% gap is the fingerprint of this system.

---

The Courts Are Starting to See It

Some of the lower courts have fallen for the deceptive Wall Street Private Equity attorneys “Meaningful Benchmarks” ploy to block transparency of illegal and high fee Private Equity contracts. https://commonsense401kproject.com/2026/01/20/why-the-meaningful-benchmark-standard-is-a-judicial-illusion-built-for-wall-street/

However, the Supreme Court taking on Intel is a hopeful sign that Courts are beginning to recognize that fake benchmarks create fiduciary illusions.

The Supreme Court’s Intel Case is About Secrecy, Fake Benchmarks, and Fiduciary Illusions

When performance is measured against something that cannot be owned, “outperformance” is meaningless.   This does not hold up under careful application of ERISA fiduciary standards.

This is not just bad measurement.
It is misleading disclosure.

---

Why This Is Systematic — Not Accidental

Look at who benefits:

Actor	Benefit from the deception
Private equity managers	Hide fees, control valuations, claim alpha
Pension consultants	Justify complexity, look sophisticated
Pension staff	Earn bonuses versus slow benchmarks
Politicians	Point to “outperformance” in reports
Media	Repeat the narrative without understanding mechanics

Everyone in the chain has incentives aligned to not look too closely. https://commonsense401kproject.com/2025/12/11/how-americas-largest-pension-consultants-became-the-distribution-arm-for-private-equity/

Exactly what the Mark Higgins CFA piece warned
“Incentives are dangerously aligned in private markets.”

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:

---

This Would Be Fraud in Public Markets

Imagine a mutual fund that:

• Set its own benchmark,
• Delayed marking losses,
• Refused GIPS,
• Hid fee layers,
• Reported outperformance versus something investors couldn’t buy,
• Paid managers bonuses based on it.

The SEC would shut it down.

Pensions do this every year.

---

People Are Paid to Look the Other Way

Your prohibited-transaction thesis nails the moral core of this: https://commonsense401kproject.com/2025/10/27/private-equity-as-an-erisa-prohibited-transaction/  

These structures survive because fiduciaries, consultants, and staff are compensated inside the system that benefits from the opacity. The deception is not loud.
It is polite. Technical. Professional. Credentialed.

It is benchmark math, valuation timing, performance standards, and narrative framing.

Which makes it far more effective.

---

The Bottom Line

Tim McGlinn showed it in Vermont.
The WSJ showed it when liquidity hit.
Richard Ennis showed it nationally.
CFA warned about it.
Courts are starting to see it.

Private equity performance, as reported by pensions, is not a reflection of economic reality.

It is the product of:

• Benchmark engineering,
• Valuation lag,
• Performance Standards (GIPS) avoidance,
• Fee opacity,
• Governance capture,
• And incentives aligned to preserve the illusion.

This is not bad investing.

This is systematic performance deception.

And until pensions are forced to measure private equity against investable public benchmarks, full fee transparency, and GIPS-level standards, the numbers they report should be treated as marketing, not measurement.

While the trade press, lobbyists, and Congress argue endlessly about putting lifetime income annuities into retirement plans, they are ignoring the much bigger, much quieter, and much more dangerous reality:
Fixed annuities are already everywhere in 401(k) and 403(b) plans.
Not income annuities.  Not fancy new products.
Plain vanilla, insurance company general account fixed annuities.
And they have been sitting there for 20 years, largely unnoticed, unexamined, and almost never litigated.
They are the dirty secret of defined contribution plans.    By talking endlessly about Lifetime Income Annuities which barely register at under 1%,  which sound good, they hope to hide these fixed annuities.

The scale no one talks about
Using the RxTrima ERISA database: 774,172 ERISA plans
725,689 are defined contribution plans (mostly 401(k)s, some ERISA 403(b)s)
The litigation universe (plans > $100 million): 9,010 plans
Of roughly 9,000 plans over $100 million reviewed: 3,579 plans hold fixed annuities
$207 BILLION in plan assets Let that sink in.

While journalists obsess over whether a handful of plans might add lifetime income, thousands of plans already hold hundreds of billions inside insurance company balance sheets.

Breakdown:

Plan Size # of Plans with Fixed Annuities

Over $1B 17

$500M–$1B 27

$300M–$500M 57

$100M–$300M 320

$50M–$100M 482

$30M–$50M 532

$10M–$20M 1,260

Under $10M 700
This is not a niche issue. This is systemic.

Who the major players are
These are not fringe insurers.

Insurer # Plans $Assets

Empower 930 $51.8B

TIAA 392 $58.3B

Principal 612 $20.1B

MassMutual 253 $13.1B

NY Life 300 $11.8B

MetLife 196 $11.2B

Lincoln 194 $8.7B

Transamerica 215 $6.7B

Voya 157 $5.2B

VALIC 93 $3.8B

This is dangerous under ERISA
These are primarily general account contracts. That means:
Plan assets become liabilities of the insurer’s balance sheet.
They are not mutual funds.
They are not CITs.
They are not segregated.
They are loans to the insurance company.

And under ERISA §406:
That is a transfer of plan assets to a party in interest.

Annuities are a prohibited transaction
a https://commonsense401kproject.com/2025/11/01/annuities-are-a-prohibited-transaction-dol-exemptions-do-not-work/
Downgrade provisions
https://commonsense401kproject.com/2026/01/09/retirement-plans-must-demand-downgrade-provisions-for-any-annuity/
TIAA target date illusion, hiding general account annuities
https://commonsense401kproject.com/2026/01/15/tiaas-target-date-funds-are-built-on-a-risk-illusion/
These products violate the basic structure ERISA was designed to prevent.

Why Fixed Annuity Contracts are mostly Secret
Because they hide under different names like:
“Stable value”
“Capital preservation”
“Fixed account”
“Guaranteed account”
“General account GIC”
“Group annuity contract”
And they sit quietly for years paying 2–3% while the insurer earns 5–7% on the same money.
That spread is never disclosed.
Never benchmarked.
And just starting to be litigated.

The industries where this is concentrated
From your notes:
Education (ERISA 403(b)s) —345 plans dominated by TIAA
Medical / hospitals —780 plans heavy Lincoln and others
Financial firms —206 plans led by Principal, Empower
Unions/nonprofits — 274 plans led by Empower, MassMutual
These are exactly the plans plaintiff firms usually ignore because they don’t look like fee cases. Many are 403(b)s
But they are prohibited transaction cases, not fee cases.     

The legal environment just changed
Section 783 of the Restatement (Third) of Trusts and the expanding
“knew or should have known” standard in the era of AI means:
Plan fiduciaries can no longer claim they didn’t understand how these products work.
The information is public.
The 5500 shows it.
Schedule A shows it.
The insurance NAIC filings show it.
Ignorance is no longer a defense.
https://fiduciaryinvestsense.com/2025/10/26/implications-of-section-783-of-the-restatement-third-of-trusts-and-the-expanding-knew-or-should-have-known-liability-standard-in-the-era-of-ai/
 

The real irony
While Congress pushes bills to allow annuities into plans…
There are already 3,500+ plans with $207 billion sitting in annuities that likely never complied with ERISA in the first place.
This is not a future problem.
This is a 20-year-old problem hiding in plain sight.

 
The punchline
The retirement industry wants you to debate whether lifetime income annuities should be allowed into 401(k)s.
They do not want you to notice that Fixed Annuities are already there, and are a litigation bomb ready to go off.
 

When a Plan’s Alternatives Echo the Same Secrecy and Conflicts Now Before the Supreme Court

The New York Times recently published a sympathetic profile about one H-E-B employee’s retirement savings, celebrating the virtues of long-term compounding and disciplined contributions. It’s a feel-good human narrative — but it carefully avoids the structural questions that truly matter to millions of participants.

https://www.nytimes.com/2026/01/11/business/401k-heb-eryn-schultz-personal-finances.html a version outside the paywall is at https://dnyuz.com/2026/01/11/how-a-puzzling-401k-plan-changed-one-womans-life/

Let’s cut through the noise.

The Hard Numbers: H-E-B’s 401(k) Is Sitting on $330+ Million of Alternatives

If you look at H-E-B’s 2024 Form 5500 — not the glossy participant site but the actual audited schedules — you find:

• Limited partnerships (private equity): $481,112,684
• Other alternate investments (hedge funds, private credit, opportunistic funds): $128,585,560

This is over $609 million in private and alternative assets — a striking allocation in what is supposed to be a daily-valued 401(k) designed for retail savers. Even holding a conservative interpretation of categories, the plan still lists well over $300 million in hard-to-value, illiquid positions.

HEB

That kind of exposure isn’t a minor footnote. It’s a strategic investment decision with big consequences.

Stale Valuations and “Daily Liquidity” — A Problem Wrapped in Language

H-E-B discloses in its 5500 that these alternative positions are:

• Valued using “good faith estimates.”
• Using manager valuations that may lag by 4–15 weeks
• Used to price daily participant transactions
• Participants assume the risk that true values may differ materially when actual trades settle later

HEB

Translated: the plan’s “daily valuation” window is an illusion. The values that participants see when they rebalance or change allocations, can be stale, and updated only after the fact — meaning participants make real decisions based on outdated information.

This too closely resembles the valuation and benchmark games at issue in the Intel Supreme Court case — where opaque pricing, bespoke benchmarks, and frozen valuations shield fiduciaries from accountability.

Private Equity in a 401(k)? Yes — But the Problem Is Bigger Than ‘Illiquidity’

Private equity (“PE”) isn’t illegal in 401(k) plans per se. But as argued in my Commonsense401kProject.com piece, PE exacerbates core ERISA concerns around conflicts, valuation opacity, and compensation structures:  https://commonsense401kproject.com/2025/10/27/private-equity-as-an-erisa-prohibited-transaction/

1) Soft-Dollar and Hidden Compensation

Many PE vehicles embed fees and compensation that don’t become transparent until years later — carried interest that accrues in ways participants don’t see, placement agent fees shared with plan service providers, and revenue sharing that goes unseen. The plan’s total recordkeeping cost picture becomes distorted.

These hidden economic interests resemble the sort of related-party and soft-dollar conflicts that ERISA’s prohibited transaction rules were designed to prevent.

2) Manager-Controlled Valuation + Lack of Objective Benchmark

PE and other alternative asset managers often control monthly or quarterly NAV establishment. That’s fine for an endowment — not fine when:

• A participant’s daily balance changes based on stale data
• Benchmarks are proprietary or ill-defined
• Participants cannot evaluate performance reasonably

ERISA’s prudence and disclosure duties assume auditable, observable benchmarks and valuations — things private markets resist.

3) Liquidity Mismatch

Daily-tradable 401(k) interests priced on stale alternative valuations simply don’t behave like truly liquid vehicles. When participants rebalance, they get a price that may not reflect actual realized market value — transferring valuation risk to participants without their informed consent.

The Supreme Court Intel Case Isn’t About Pleading Rules — It’s About Secrecy

The conventional reporting treats the Intel case as a narrow statute-of-limitations fight. That’s the superficial framing.

What’s really at stake is:

• Do fiduciaries have to disclose compensation, conflicts, and valuation mechanics transparently?
• Or can they bury this information in opaque structures, stale assumptions, and “trust us” language?
• Can participants ever compare plan performance to meaningful benchmarks — or does the “fiduciary illusion” shield fiduciary failures?

The same structural defense that shields H-E-B’s alternative allocation — “it’s complicated, trust us, these valuations are estimates, and we reserve the right to adjust later” — is the defense being tested in Intel.  https://commonsense401kproject.com/2026/01/17/the-supreme-courts-intel-case-is-about-secrecy-fake-benchmarks-and-fiduciary-illusions/

The Real Questions the NYT Should Have Asked

Not:

“How did this one woman save?”

But:

• Why is a large plan diverting hundreds of millions into assets participants cannot evaluate?
• Why are valuations lagged by weeks in a daily liquidity vehicle?
• What benchmarks exist against which participants can measure performance?
• What hidden compensation flows to advisers tied to these alternative allocations?
• Is this consistent with ERISA’s core duties of loyalty, prudence, and disclosure?

These aren’t abstract academic questions. They go to the heart of whether retirement plans serve participants or structural economic interests tied to private markets and product fees.

The Convergence: H-E-B and Intel

If the Supreme Court allows fiduciaries to hide behind complexity and stale valuation benchmarks, then:

• H-E-B’s allocation structure becomes a safer defensive line
• More plans will emulate similar private market exposure without meaningful transparency
• Participants will have no clear benchmark or valuation certainty for key portions of their retirement wealth

But if the Court affirms:

• Meaningful disclosure duties
• Real benchmarks (not proprietary or opaque targets)
• A requirement that valuations reflect current participant realities

Then H-E-B’s structures — and those of countless other plans — are suddenly exposed to real fiduciary scrutiny.

The Bottom Line

Counting retirement balances is easy.
Understanding what participants own, at what price, and with what conflicts is hard.

That is the structural issue the NY Times missed — and the Supreme Court must confront.