By Chris Tobe | The CommonSense 401k Project | September 24, 2026
The Epstein files have entered Texas’s U.S. Senate race. James Talarico has stood with survivors and challenged Ken Paxton, the sitting attorney general and his Republican opponent, over the release of records. But voters should look beyond the Senate campaign. The governor’s race concerns the public money flowing into data centers and private capital. And the comptroller’s race features an extraordinary fact: the family of Don Huffines, Texas’s newly appointed comptroller and Republican nominee for a full term, owns Jeffrey Epstein’s former Zorro Ranch.
At September’s Epstein files exhibit in Dallas, Democrat Talarico challenged Paxton to meet with survivors and press for full disclosure. Democratic gubernatorial nominee Gina Hinojosa also appeared with survivors, according to reporting on the event. Paxton should explain what his office has done, what jurisdiction it believes it has, and what steps he would support in the Senate to release records while protecting survivors’ privacy. Talarico should publish his own concrete federal plan. The public deserves documents and action, not another election season of gestures.
Governor: Follow the Electricity, the Donors and the Pension Capital
As I documented in August, Greg Abbott promoted Texas’s data-center expansion before moving to police its effects on the grid. Hinojosa has challenged his donor relationships and the impact of data centers on household costs. Her campaign’s aggregate claim about data-center-linked contributions deserves an independently reproducible accounting; the underlying issue is real even without treating every dollar in that total as proved.
The financial circuit is worth investigating. Texas teachers’ pension money goes to private-market managers. Those managers can finance data centers, power plants and the infrastructure connecting them. The state can offer tax advantages and shape electricity policy. Major figures in energy, real estate and technology also contribute to campaigns. That sequence does not establish a quid pro quo, or show that a particular pension partnership financed a particular Texas data center. It tells voters exactly which records to demand.
Abbott welcomed Apollo Global Management’s Austin hub. Texas TRS has invested with Apollo, including a reported $400 million commitment to one Apollo fund. Apollo co-founder Leon Black paid Epstein more than $150 million for purported financial advice, including after Epstein’s conviction; Black is currently under Contempt of Congress for refusing to answer questions.
The Texas Tribune reported that the Huffines family bought Zorro Ranch in 2023, four years after Epstein died. The campaign said it was purchased at a public auction whose proceeds benefited Epstein’s victims and that the family had never visited before it was listed. Abbott appointed Huffines comptroller after he won the Republican nomination; he took office August 1 and now faces Democratic state Sen. Sarah Eckhardt in November.
In March, New Mexico’s Department of Justice searched the ranch. Its statement is explicit: the investigation concerns alleged activity before Epstein died in 2019, and the department thanked the current owners for granting access. Ownership in 2023 does not establish a relationship with Epstein, knowledge of his crimes, or interference with investigators. An allegation in released files about possible burials is unverified; it cannot be presented as a discovery of remains or as evidence against the buyers.
Eckhardt has nevertheless made the purchase a campaign issue. Her campaign’s news page describes Huffines as the owner of Epstein’s former ranch, and she personally raised it with a reporter visiting the Dallas Epstein files exhibit. More pointedly, at a September campaign stop she criticized what she said were the removal of experienced comptroller staff who could investigate corporate tax avoidance and questionable contracts. She also used a metaphor about “burying the truth” at the ranch. Read her reported remarks here.
There is a separate, documentable story about how Huffines has begun to govern. The Texas Tribune found that numerous veteran staff members left or were pushed out. Huffines made Noah Betz—whose consulting firm received nearly $2.7 million from Huffines’s political operation since 2022, according to campaign filings—his top deputy at a salary of $306,000. Betz had graduated in 2023 and appeared to have no prior government or public-finance job. Huffines’s office defended its staffing decisions and said the team was improving the agency.
Before November, Take a Stance on Divestment – Open the Books
Paxton and Talarico: Take a stance on divestment from Epstein linked Apollo for taxpayer funded pensions.State the specific federal records each would seek, which disclosures should protect survivors, and what authority a Texas attorney general has in the underlying investigations.
Abbott and Hinojosa: Take a stance on divestment from Epstein linked Apollo for taxpayer funded pensions. Publish data-center subsidies, beneficial ownership, grid-cost allocation and major donors’ overlapping business interests. Have TRS report Apollo exposures and net returns after all fees, plus material look-through exposure to Texas data centers and power projects.
Huffines and Eckhardt: Take a stance on divestment from Epstein linked Apollo for taxpayer funded pensions. Publish a dated account of senior comptroller departures, replacement qualifications, potential conflicts, corporate-tax enforcement and reviews of incentives. Huffines should describe the terms of access granted to New Mexico investigators; New Mexico has already publicly thanked the current owners for their cooperation.
Survivors deserve investigation and truth. Teachers deserve a pension system that shows them what it owns and what it pays. Households deserve to know who benefits when the grid bends toward data centers. Texas voters should demand all three before choosing their senator, governor and comptroller.
The Associated Press has put Leslie Wexner’s political money and Jeffrey Epstein at the center of Ohio’s U.S. Senate race. Good. But Ohioans should ask a larger question before they vote for senator and governor: Who gets rich from the state’s pension funds, public subsidies and electric grid, and who has the power to make them show their books? While Jeffrey Epstein is dead many key members of his network what many call the Epstein Class are still active. How do the leading candidates for Senate and Governor feel about divestment from Epstein linked Apollo in Ohio taxpayer funded pensions?
AP reports that Wexner contributed about $116,000 toward Jon Husted from 2001 through 2025, mostly during Husted’s state political career. That includes a $3,500 contribution to his Senate campaign in July 2025. Husted later joined Republicans who blocked a Democratic attempt to compel release of Epstein records; in November, he supported the stand-alone disclosure bill. Wexner testified that he never asked Husted to block disclosure.
Husted’s campaign has responded by pointing to donors to Sherrod Brown whose names appear in Epstein records, including Abigail Wexner and Larry Summers. There are thousands of wealthy Americans and celebrities named in the Epstein files, Brown probably has far less Epstein linked donors than most US Senators. This is a false flag.
Wexner says Epstein deceived him and denies knowledge of, or participation in, Epstein’s crimes. Survivors’ demands for answers deserve far more serious treatment than dueling campaign ads. AP recounts Maria Farmer’s allegation of a 1996 assault in New Albany, where Epstein had a house while working for Wexner. That is part of why this story matters in Ohio beyond television spots.
The pension trail AP’s election story leaves open
For decades, Wexner was a powerful Ohio political donor and Epstein’s major financial patron. A later, separate money relationship points to Apollo co-founder Leon Black, who paid Epstein more than $150 million for purported tax and estate services, including after Epstein’s 2008 conviction. Black has been held in contempt of congress for refusing to answer questions. These are the two major funders of Epstein as after Wexner slowed his financial support Black stepped up.
But Ohio has an obligation to examine the public money in the second relationship. As I have documented, Ohio retirement systems have invested with Apollo-managed vehicles. My examination of Ohio’s Epstein blind spot and the STRS teacher-pension debate ask for a fund-by-fund accounting. Black is Apollo largest shareholder and stepped down from the CEO role in 2021 after disclosure of his millions paid to Epstein.
How much did Ohio teachers, public employees and taxpayers pay Apollo-managed funds, by year and vehicle? What returns did each investment deliver after all fees? What exposure remains, and what would exiting an illiquid partnership cost? What due diligence was performed after the Black-Epstein payments became public and after the AFT and AAUP sought an SEC investigation in 2026?
The governor’s race is where these questions turn into decisions
Ohio’s governor appoints members of state pension boards and influences economic-development, utility and regulatory appointments. The choice between Vivek Ramaswamy and Amy Acton therefore matters to pension beneficiaries and households facing data-center electricity costs.
Ramaswamy brings particular disclosure questions. I previously examined his crypto holdings, Strive stake and the proposed Ohio cryptocurrency-reserve legislation. His interests and donors warrant careful conflict review whenever pension policy or state investment rules touch digital assets. Many of his donors are clearly in what people describe as in the Epstein class. Acton should face the same public-money test: name the trustees she would appoint, explain her standard for private-market fees and disclose how she would handle data-center subsidies and grid costs.
Four disclosures voters should demand before November
Campaign money: Husted and Brown should publish a reconciled list of contributions they attribute to people in the Epstein files, stating each person’s actual documented relationship rather than using the word “associate” as a verdict. Ramaswamy and Acton should disclose major donors with financial interests in Ohio pension management, cryptocurrency, data centers, power generation and utilities.
Pension money: STRS, OPERS and the other state systems should disclose each Apollo-managed holding, commitment, current value, net return and total fees, including carried interest where available. Trustees should release the dates and conclusions of any updated manager review, with lawful redactions narrowly explained.
Data-center money: Publish the beneficial owners of projects receiving state tax benefits; estimated forgone tax revenue; promised jobs; electricity and water demand; and the allocation of grid costs among developers and ordinary customers. Identify any material pension exposure to the project, its financing or its owners when records permit.
Power over the money: Both gubernatorial candidates should commit to pension-board appointees who will demand these records and to clear recusal and disclosure rules for financial interests that overlap with state decisions. Senate candidates should state which federal transparency and investor-protection measures they will support.
Ohio has spent months debating who took a check from whom. The victims deserve justice, and voters deserve honest facts. The next question is larger: When the check comes out of teachers’ pensions, taxpayers’ subsidies or families’ electric bills, who follows it all the way to the recipient?
Editor’s sourcing note: The AP donation and voting account is linked above. The pension and data-center connections are subjects of my previously published investigations; the requested transaction-level fee and ownership disclosures remain unanswered. No inference of criminal participation follows from a donation, a mention in Epstein documents, a pension investment or a shared investment sector.
Private-sector employees in a competently run 401(k) can receive a low-cost, diversified synthetic stable-value fund: a transparent portfolio of bonds owned for participants, protected by contracts from several independent banks and insurers. No single insurer holds all the money. The portfolio, fees, market-to-book ratio, crediting rate and wrap providers can be disclosed and monitored.
Millions of state and local government workers get something very different.
Their 457 plan may put the entire “safe” option behind one insurance company. The insurer owns and invests the assets, sets the credited rate and keeps the undisclosed spread between what its portfolio earns and what workers receive. Participants generally cannot see the real investment-management charge because it is embedded in that spread. If the insurer is downgraded, becomes illiquid or loads its balance sheet with private credit, the worker owns an insurer’s promise—not the underlying bond portfolio.
Worst of all, governmental 457 plans are excluded from ERISA’s principal fiduciary and enforcement provisions. Public employees generally cannot bring the same ERISA prudence, loyalty, fee-disclosure and prohibited-transaction claims that private 401(k) participants can bring. State-law, contract and administrative remedies may exist, but they are fragmented and normally much weaker.
This creates two Americas of public retirement savings: government workers whose plans adopted modern, diversified stable value—and everyone left holding an opaque insurer IOU.
The 457 Plans That Got Stable Value Right
The following significant governmental plans have offered a custom or pooled diversified stable-value structure, rather than relying solely on one insurer’s general account. Precise structures and providers can change, so each plan should publish a current annual holdings-and-contract report.
Plan
Diversified stable-value structure identified
California Savings Plus
Large custom stable-value portfolio
Indiana Deferred Compensation Plan
Diversified stable value
Kentucky Public Employees’ Deferred Compensation Authority
Diversified stable value
Maryland Supplemental Retirement Plans
Diversified stable value
Minnesota State Deferred Compensation Plan
Diversified stable value
Montana Deferred Compensation Plan
Diversified stable value
Nebraska Public Employees Deferred Compensation Plan
Diversified stable value
New York State Deferred Compensation Plan
Stable Income Fund monitored by a stable-value structure manager
Ohio Deferred Compensation
Large custom stable-value portfolio
Pennsylvania State Employees’ Deferred Compensation Plan
Stable Value Fund
North Carolina 457 Plan
State custom stable-value fund managed by Galliard; combined with the NC 401(k) stable-value structure
Virginia Deferred Compensation Plan
Galliard-managed bond portfolio using book-value contracts
Oregon Savings Growth Plan
State of Oregon Stable Value Fund managed by Galliard
NJ Transit 457 Plan
Diversified stable value
City of Milwaukee Deferred Compensation Plan
Diversified stable value
City of Seattle Voluntary Deferred Compensation Plan
Participation in the Wells Fargo/Galliard diversified stable-value structure
These plans demonstrate the central point: a public 457 plan does not need to surrender participant assets to one insurer in order to provide principal preservation and a stable credited return.
Synthetic stable value separates the assets from the guarantee. The plan or collective trust owns a diversified bond portfolio. Several wrap providers can absorb book-value risk. Investment-management fees and wrap fees can be stated in basis points. A weak insurer can be replaced without liquidating the entire portfolio. That is a fundamentally different risk structure from lending every dollar to one insurance company.
The Single-Insurer and Disclosure Hall of Shame
Nevada: the clearest example
The Nevada Public Employees’ Deferred Compensation Program has openly described its capital-preservation option as the Voya Fixed Account—457/401 and, historically, as its “Stable Value/General Account” option. Nevada’s 2026 investment materials still discuss special terms for a five-year Voya Fixed Account contract.
That is not diversified synthetic stable value. It is concentrated exposure to Voya Retirement Insurance and Annuity Company. Voya controls the assets and the rate-setting machinery. Participants receive a declared rate while the insurer retains the spread. Nevada workers should be told the gross portfolio yield, the retained spread, asset composition, private-credit exposure, surrender restrictions and protections following a downgrade. A simple credited rate is not fee disclosure.
Colorado: an insurer-branded substitute
Colorado PERA’s published 457 lineup identifies a Great-West Stable Value Fund. Colorado should disclose whether participants own an independently managed bond portfolio, identify every wrap provider and publish the market-to-book ratio. If it cannot do that, it should stop allowing an insurer-branded product to be presented as equivalent to diversified synthetic stable value.
Florida: a vendor bazaar instead of one fiduciary standard
Florida’s Deferred Compensation Plan directs workers among multiple investment providers. That fragmented architecture makes it unusually difficult for a participant—or a taxpayer—to determine whether every provider’s “fixed,” “guaranteed” or “stable” option is a general account, a separate account or a diversified synthetic fund.
Florida should publish one statewide comparison showing, for every capital-preservation option: legal structure, asset owner, insurer, portfolio yield, participant rate, retained spread, expenses, surrender provisions, market-value adjustments, downgrade rights and guaranty-association status. Until it does, “exceptional investment options” is marketing, not disclosure.
Arizona, Texas, Georgia and Louisiana: prove it
Major public programs including Arizona Smart Save/ASRS supplemental plans, Texas Texa$aver, Georgia Peach State Reserves and the Louisiana Public Employees Deferred Compensation Plan do not provide the public with a simple, current document establishing that their capital-preservation option is a diversified synthetic fund with independently identified assets and multiple wrap providers.
That does not prove every one is a general-account annuity. It proves something nearly as troubling: workers cannot readily tell.
Each plan should answer seven elementary questions:
Who legally owns the underlying assets?
Is the option backed by one insurer or several independent wrap providers?
What securities are in the underlying portfolio?
What did that portfolio earn before the participant crediting rate was set?
How many basis points did the insurer, manager and recordkeeper retain?
What happens after an insurer downgrade?
Can the plan terminate at contract value without a multi-year surrender penalty or market-value adjustment?
If a plan cannot answer those questions on a public webpage, its “stable value” disclosure has failed.
No ERISA Safety Net
The injustice is sharper because governmental plans are excluded from Titles I and IV of ERISA. The familiar federal duties of prudence and loyalty, ERISA’s prohibited-transaction rules, its participant disclosure regime and its civil-enforcement machinery generally do not protect governmental 457 participants.
A state employee placed in a high-spread, single-insurer annuity therefore may not have the lawsuit that a private employee would have over the same conduct. There may be state fiduciary statutes, open-records laws, constitutional provisions, contract claims or administrative review, but there is no uniform federal substitute for ERISA.
That regulatory gap increases—not decreases—the obligation of governors, treasurers, boards and 457 administrators to demand transparency. Yet too many public plans use the absence of ERISA as freedom from scrutiny.
A Fixed Annuity’s Hidden Fee Is the Spread
An insurer can advertise “no explicit fee” while earning 150, 200, 300 or more basis points between its portfolio yield and the rate credited to participants. Economically, that spread is compensation. Calling it a crediting-rate formula does not make it free.
The conflict is built into the product:
The insurer selects the assets.
The insurer values many of those assets.
The insurer decides how much yield to pass through.
The insurer keeps the remainder.
The insurer may also serve as recordkeeper and control the participant disclosures.
Synthetic stable value is not costless, but its costs can be separated and reported: bond-management fee, wrap fee, custody fee and administration. A plan can compare those charges competitively. It can monitor market-to-book value, duration, credit quality and wrap capacity. It does not have to guess how much an insurer kept.
NAGDCA Should Publish the Number
The National Association of Government Defined Contribution Administrators maintains the Public Retirement Research Lab with data covering hundreds of public-sector defined-contribution plans and millions of participants. But its public reports combine 457(b), 401(a), 401(k), 403(b) and other plans and do not separate:
diversified synthetic stable value;
pooled synthetic stable value;
insurer separate accounts;
insurer general accounts; and
money-market or Treasury capital-preservation options.
That omission protects the weakest products from comparison.
NAGDCA should publish, plan by plan, the legal structure of every capital-preservation option, its assets, participant balances, credited rate, gross portfolio yield, explicit fees, estimated retained spread, wrap providers, market-to-book ratio and termination provisions. The information should be public—not confined to a member benchmarking portal.
Based on currently available disclosures, only a small minority of governmental 457 programs—perhaps roughly 10% of the broader market—can readily be identified as offering diversified synthetic stable value. At least 16 significant state and local programs appear to do so. That estimate is necessarily provisional because the industry refuses to publish the data needed for an exact count.
The Reform Is Simple
Every governmental 457 plan should be required to do three things:
Offer a low-cost diversified synthetic stable-value fund or explain publicly why it does not.
Disclose every explicit fee and retained insurer spread in dollars and basis points.
Adopt a contractual downgrade provision permitting an immediate contract-value exit when an insurer’s financial strength materially deteriorates.
Public employees should not receive weaker retirement protections merely because their employer is the government. If California, Ohio, New York, North Carolina, Virginia and Oregon can provide diversified stable value, Nevada and every opaque vendor-driven program can do it too.
The technology exists. The managers exist. The wrap capacity exists. What is missing is accountability.
Lincoln Financial’s new stable-value marketing piece for 401(k) and 403(b) plans is carefully constructed to reassure retirement-plan fiduciaries. It boasts that 96.8% of its general-account portfolio is “investment grade,” emphasizes “disciplined risk management,” and describes private credit as a source of attractive returns and diversification.
But Lincoln omits the market measure that is hardest to spin: the price investors demand to insure Lincoln National’s debt against default.
Lincoln’s CDS spread is roughly 62% higher than Prudential’s
On September 14, 2026, Lincoln National’s five-year credit-default-swap spread was approximately 130.5 basis points. Prudential Financial’s comparable five-year CDS was approximately 80.5 basis points on September 15.
Five-year CDS
Spread
Approximate annual protection cost on $10 million
Lincoln National
130.5 bps
$130,500
Prudential Financial
80.5 bps
$80,500
Lincoln premium over Prudential
50.0 bps
$50,000
Thus, the market was charging approximately 62% more to insure Lincoln National debt than Prudential debt.
That does not mean Lincoln is about to fail. It means sophisticated market participants continue to price Lincoln as a materially weaker credit than Prudential. For an ERISA fiduciary concentrating millions of dollars in a single Lincoln fixed-annuity promise, that relative risk is directly relevant.
Lincoln’s risk has not simply disappeared
Lincoln’s CDS has retreated from its 52-week high of approximately 164.5 basis points. But the September level of roughly 130 basis points remained:
Well above the 52-week low of approximately 91 basis points;
About one-third above the approximately 98-basis-point level quoted in September 2025; and
Far above Prudential’s approximately 80-basis-point spread.
Lincoln’s CDS also demonstrated how quickly market perceptions can change. In March 2023, its five-year CDS reportedly jumped to approximately 299 basis points, up from 185 basis points earlier that month.
That history matters because a fixed annuity is not a diversified bond fund. It is a concentrated contractual claim on one insurer. A fiduciary needs an exit mechanism before credit deterioration becomes a solvency event—not after.
“96.8% investment grade” does not answer the real questions
Lincoln’s headline sounds impressive, but it conceals several problems.
First, the percentage rests heavily on NAIC designations and private ratings. Lincoln’s own second-quarter disclosure says that private credit represents approximately 20% of its general account and that private-letter ratings cover approximately 6% of the general account. It also reports that 91% of the private-credit portfolio is “investment grade.”
That is not the same as saying these assets have observable market prices, active secondary markets or ratings from the major nationally recognized agencies. The label “investment grade” does not make a privately originated loan liquid.
Second, Lincoln’s marketing piece discloses substantial exposure to asset categories that can become difficult to value or sell during market stress:
Lincoln allocation
Percentage
Structured assets
17.7%
Mortgage loans
17.6%
Alternatives
3.3%
Those categories total 38.6%, although they overlap conceptually with Lincoln’s separately reported private-credit exposure and therefore should not simply be added to the 20% private-credit figure. The overlap itself illustrates the disclosure problem: Lincoln presents multiple classification systems without giving fiduciaries a clean asset-level reconciliation.
Third, Lincoln tells readers that private credit offers “attractive returns.” It does not explain who receives those returns. Participants receive the annuity’s declared crediting rate. Lincoln keeps the difference between what its general-account assets earn and what it credits to contract holders. Lincoln’s SEC filing expressly describes this spread as a source of profit.
Lincoln therefore promotes the higher yield of private credit while withholding the spread between that portfolio yield and the much lower rate paid to retirement participants.
Lincoln discusses industry credit spreads—but not its own
The marketing piece states that investment-grade corporate spreads tightened during the second quarter and returned to historically narrow levels. Yet it never provides:
Lincoln National’s own CDS spread;
Its CDS trend over one, three or five years;
A comparison with Prudential, MetLife, TIAA or MassMutual;
The market spreads on Lincoln’s holding-company debt;
Statutory surplus and unrealized-loss trends;
Private-credit defaults, amendments or payment-in-kind exposure;
The percentage of assets without observable market prices;
The amount that could be liquidated within 30, 90 or 180 days;
The contract’s actual withdrawal value; or
A meaningful downgrade-triggered exit provision.
That is the central sleight of hand. Lincoln discusses “credit spreads” as a favorable general-market development while declining to disclose the market price of Lincoln’s own credit risk.
A 420% RBC ratio is useful—but it is not the entire answer
Lincoln separately reports an estimated risk-based-capital ratio above 420%. It also reported improved holding-company liquidity during the second quarter. Those are legitimate positive factors and should be acknowledged.
But RBC is a regulatory capital calculation built partly upon regulatory asset classifications. It is not a real-time market price of default protection, and it does not eliminate:
Illiquid-asset valuation risk;
Private-rating risk;
Single-insurer concentration;
Holding-company and subsidiary interdependence;
Reinsurance counterparty risk;
Surrender and withdrawal restrictions; or
The risk that a plan cannot exit at book value after deterioration begins.
Lincoln’s own proposed reinsurance transaction was expected to consume approximately $200 million of statutory capital, or roughly ten RBC percentage points. That does not make the transaction imprudent, but it illustrates why fiduciaries must monitor movements beneath the headline ratio.
The important CDS qualification
Lincoln National’s quoted CDS generally references debt of the publicly traded holding company. The stable-value contracts are issued by insurance subsidiaries, including The Lincoln National Life Insurance Company. The CDS spread therefore is not a direct price for insurance-subsidiary policyholder claims.
But dismissing it for that reason would be equally misleading. Holding-company CDS incorporates the market’s assessment of the consolidated enterprise, including earnings capacity, capital flexibility, leverage, reserve risk and the ability to extract dividends from regulated subsidiaries. It is a forward-looking warning signal that can move much faster than insurer financial-strength ratings.
A prudent analysis uses both:
Insurance-subsidiary financial-strength ratings, statutory capital and policyholder priority; and
Holding-company CDS, bond spreads, equity performance and other market indicators.
The fiduciary question Lincoln’s brochure avoids
The issue is not whether Lincoln is presently insolvent. The issue is why a retirement plan should accept:
A concentrated promise from a comparatively weaker insurer;
A CDS spread materially wider than a major competitor’s;
A general account containing substantial private credit, structured assets and mortgages;
Limited transparency regarding asset valuation and liquidity;
A crediting rate set substantially at Lincoln’s discretion; and
No clearly disclosed right to escape at book value if Lincoln’s credit quality deteriorates.
Lincoln’s “96.8% investment-grade” headline does not answer that question. It merely repeats the regulatory labels assigned to the assets Lincoln owns.
The CDS market answers a different and more important question: What does the market charge to assume Lincoln’s credit risk?
In September 2026, the answer remained approximately 130 basis points—about 62% more than Prudential. Any fiduciary overseeing a large Lincoln fixed-annuity position should demand an explanation for that disparity, along with a written exit plan, before accepting Lincoln’s marketing assurances at face value.
Lincoln’s Single Entity Credit and Liquidity Risk in an ERISA Plan
When a Lincoln fixed annuity is offered as a standalone investment option in a 401(k), 403(b) or other participant-directed ERISA plan, participants are not buying a diversified portfolio of bonds. They are acquiring an interest in a contract whose value, liquidity and promised crediting rate depend substantially upon one insurance company.
That distinction is fundamental. The option may be labeled “stable value,” “fixed account” or “capital preservation,” but the label does not eliminate the concentrated counterparty risk underneath it.
The plan selected Lincoln before participants selected the option
Making the Lincoln annuity a voluntary, standalone option does not transfer responsibility for selecting and retaining it to participants.
ERISA fiduciaries decide:
Whether Lincoln belongs on the investment menu;
Which Lincoln contract and share class the plan receives;
Whether it is a general-account or separate-account contract;
The compensation and spread Lincoln may retain;
The contract’s withdrawal and termination provisions;
Whether competing capital-preservation options are restricted;
Whether the plan receives a downgrade-triggered exit right; and
Whether Lincoln remains prudent compared with available alternatives.
Participant choice occurs only after the fiduciaries make those decisions. Under Tibble v. Edison International and Hughes v. Northwestern University, fiduciaries have a continuing duty to monitor investment options and remove imprudent ones. The presence of other, better options on the menu does not excuse retaining an imprudent option.
ERISA Section 404(c) is not a safe harbor for the fiduciaries’ own selection and monitoring decisions. It may protect fiduciaries from certain losses caused by a participant’s exercise of control, but it does not transform an imprudently selected or inadequately monitored Lincoln contract into a prudent investment.
Participants can concentrate their entire accounts in one Lincoln promise
A plan-level menu may contain dozens of diversified mutual funds, but the relevant capital-preservation option can still contain essentially 100% exposure to Lincoln.
A participant who places $200,000 in a Lincoln general-account fixed annuity does not own $200,000 of the bonds, mortgages, private loans and structured assets displayed in Lincoln’s marketing materials. Lincoln owns those assets. The participant has an indirect claim based on the annuity contract and Lincoln’s claims-paying ability.
The participant therefore bears two layers of risk:
Asset risk: The credit, valuation and liquidity risk of the investments Lincoln selects for its general account.
Issuer risk: The risk that Lincoln cannot—or under contractual or regulatory conditions does not—perform its promise in full and on time.
Diversification inside Lincoln’s general account may reduce the first layer. It does not diversify the second. Regardless of how many loans or securities Lincoln owns, the participant remains exposed to a single contractual promise-maker.
Lincoln’s CDS spread places a market price on that single-entity risk
In September 2026, Lincoln National’s five-year CDS spread was approximately 130 basis points, compared with approximately 80 basis points for Prudential Financial. The market therefore charged roughly 62% more to protect Lincoln National debt against default than comparable Prudential debt.
CDS on Lincoln National Corporation’s holding-company debt is not identical to the credit risk of an annuity issued by The Lincoln National Life Insurance Company. Insurance subsidiaries are separately regulated, and policyholder claims may receive statutory priority unavailable to holding-company creditors.
Nevertheless, the CDS spread is highly relevant. It is a forward-looking market assessment of the consolidated enterprise’s leverage, earnings, reserves, asset quality and capital flexibility. It can identify changing risk much faster than financial-strength ratings.
The appropriate fiduciary response is not to treat CDS as proof that Lincoln will default. It is to ask why the market consistently prices Lincoln as a materially weaker credit than available insurers and whether participants receive enough additional return, contractual protection or liquidity to justify that additional risk.
A Lincoln option paying a lower crediting rate than a stronger insurer presents the most troubling combination: participants assume greater counterparty risk while receiving less compensation.
The fiduciary cannot conduct this analysis without determining the precise legal structure.
Most are Lincoln general account
With a general-account annuity:
Lincoln owns and controls the supporting assets;
The plan does not own a segregated portfolio of those assets;
Lincoln generally determines the crediting rate under the contract;
Lincoln retains the spread between portfolio earnings and the rate credited to participants;
The plan depends on Lincoln’s claims-paying ability; and
Plan-level liquidity depends on the withdrawal and termination provisions negotiated with Lincoln.
Lincoln acknowledges that it expects to earn a spread between returns on its general-account investments and amounts credited to general-account contract holders.
Lincoln’s portfolio disclosures do not eliminate the risk
Lincoln promotes a general account that it describes as approximately 97% investment grade. It also reports that private credit represents approximately 20% of the general account, with approximately 6% of the general account relying on private-letter ratings.
Those disclosures do not answer several material questions:
How much of the portfolio lacks observable market prices?
Which private ratings came from major agencies and which came from smaller rating firms?
How many borrowers received amendments, maturity extensions or payment-in-kind accommodations?
What portion could be sold within 30, 90 or 180 days without a material loss?
What unrealized losses would be recognized if assets had to be sold?
How much of the private-credit portfolio is subject to affiliated sourcing or management?
How would a downgrade affect capital requirements and liquidity?
What portion supports the particular insurance entity issuing the ERISA contract?
Calling an asset “investment grade” addresses expected credit loss under a particular rating methodology. It does not establish market liquidity, valuation reliability or the ability to sell the asset at carrying value during stress.
Credit and liquidity risk reinforce each other
Lincoln’s single-entity credit risk cannot be separated from the contract’s liquidity risk.
Under ordinary conditions, participants may be able to withdraw funds at book value for retirement, termination, hardship or transfers permitted by the contract. But participant-level benefit responsiveness is not the same as plan-level liquidity. If the fiduciaries decide to remove Lincoln entirely, the contract may impose:
A market-value adjustment;
A surrender charge;
A multi-year installment or “put” period;
Restrictions on transfers to competing funds;
Equity-wash provisions;
Delayed payment;
A reduction from book value to market value; or
A forfeiture of part of the accumulated value.
This creates an especially dangerous form of wrong-way risk. The time when the plan most needs to leave Lincoln—after a downgrade, a sharp CDS widening, deteriorating private-credit performance or regulatory intervention—may also be the time when an immediate exit is most costly or contractually difficult.
A fiduciary cannot prudently say, “We will leave if Lincoln becomes unsafe,” without first establishing that the contract permits the plan to leave at book value before the deterioration becomes severe.
A downgrade clause is essential
A properly drafted downgrade provision should permit the plan to terminate or transfer the contract without a surrender charge, market-value adjustment or extended payout period if specified credit events occur.
Possible triggers include:
A financial-strength downgrade below a stated rating;
Multiple downgrades within a specified period;
A material CDS-spread threshold;
Regulatory supervision or a capital-restoration event;
An RBC ratio falling below an agreed level;
A material adverse change in the issuing entity;
Transfer or reinsurance of obligations without fiduciary approval; or
A material change in investment guidelines or private-asset exposure.
CDS should normally serve as a monitoring or escalation trigger rather than the only automatic contractual trigger, because holding-company CDS can be volatile and may not precisely measure the issuing subsidiary. But a sharp or sustained widening should require a documented fiduciary review.
What a prudent Lincoln monitoring file should contain
At minimum, the committee should receive and document:
Monitoring item
Required analysis
Exact issuer
Identify the Lincoln legal entity responsible for the contract
Contract structure
General account, separate account or hybrid
Lincoln five-year CDS
Current level, trend, 12-month range and peer comparison
Financial-strength ratings
Rating and outlook for the actual issuing subsidiary
Statutory capital
RBC ratio, surplus and multi-year trends
Asset quality
Public credit, private credit, structured assets, mortgages and alternatives
Private ratings
Percentage, rating providers and methodology
Liquidity
Assets convertible to cash within defined periods
Participant withdrawals
Circumstances permitting book-value payment
Plan termination
Immediate value, market-value adjustment and installment alternatives
Downgrade protection
Trigger, notice requirements and exit rights
Crediting rate
Gross portfolio yield, net credited rate and Lincoln’s retained spread
Comparators
Rates, credit strength and liquidity from TIAA, MassMutual and other insurers
Reinsurance
Counterparties, collateral and any transfer of contract obligations
Lincoln reports an RBC ratio above 420%, which is a positive consideration. But a headline RBC ratio cannot replace this contract-specific inquiry.
Bottom line
A standalone Lincoln fixed annuity is not merely one more participant-selected fund. It is a plan-selected, concentrated exposure to one insurer, combined with contractual restrictions that may become most consequential precisely when Lincoln’s credit risk is deteriorating.
The fiduciary question is not whether Lincoln is presently insolvent. It is whether the committee:
Understood the option’s single-insurer structure;
Distinguished its general-account and separate-account risks;
Compared Lincoln’s credit strength and CDS spreads with stronger insurers;
Determined what participants received for assuming the additional risk;
Investigated Lincoln’s private-credit and illiquid-asset exposure;
Obtained a meaningful downgrade provision;
Confirmed the plan could exit at book value during developing stress; and
Repeated that analysis throughout the life of the contract.
Without that process, calling the product “stable value” merely describes the accounting experience Lincoln promises under normal conditions. It does not establish that the option is diversified, liquid or prudent under ERISA.
Public-pension executives have discovered a remarkably effective way to set their own pay: hire a consultant, define Wall Street as the labor market, select the best-paid investment organizations as “peers,” and then announce that millions of dollars in compensation are merely what the market requires. What results are government employees making double to triple of what they could make in the private sector.
Global Governance Advisors, or GGA, has become one of the consultants helping public pensions perform this ritual. GGA has advised CalPERS and the State Teachers Retirement System of Ohio, while listing OMERS Ventures—the venture-capital arm of the Ontario Municipal Employees Retirement System—among its clients.
These are not three systems with an obvious record of performance that justifies extraordinary compensation. They are three systems where executive or investment-staff pay has become controversial while participants have endured weak relative performance, benefit insecurity, lost purchasing power or all three.
The consultant does not technically cast the board’s vote. It supplies something nearly as valuable: the supposedly independent report that gives trustees permission to approve what management already wants.
CalPERS: Poor Results, Record Pay
CalPERS is the clearest example. GGA has served as its board compensation consultant since approximately 2020 and was selected again in 2026. Its work includes compensation benchmarking, incentive design and advice concerning executive and board pay.
During that relationship, CalPERS compensation has exploded. CEO Marcie Frost received approximately $1.7 million for fiscal 2024-25 and was subsequently reported as eligible for compensation approaching $2 million. The chief investment officer’s compensation has exceeded $2 million, while hundreds of CalPERS employees now receive compensation that would have been unthinkable at a public retirement system a generation ago. https://calmatters.org/economy/2026/09/calpers-ceo-record-bonus/
CalPERS attempts to justify this by comparing itself with private investment managers and other giant pension organizations. But CalPERS employees do not raise capital, risk their own money or face redemptions when performance disappoints. Their organization receives mandatory contributions from public employers and workers. Its liabilities are supported by taxpayers, and its executives enjoy public-sector job security and benefits. https://commonsense401kproject.com/2026/05/22/calpers-sets-its-own-excessive-pay-off-the-charts/
GGA’s benchmarking process helps convert failure into a salary increase. If CalPERS compares its executives with better-paid executives at larger or more successful investment organizations, the comparison produces a “market” case for higher pay regardless of CalPERS’ own results. Once CalPERS raises compensation, another pension consultant can place CalPERS in the next client’s peer group. The consultants manufacture a perpetual-motion machine for executive pay.
STRS Ohio: Bonuses While Teachers Lost Their COLA
The State Teachers Retirement System of Ohio hired GGA as its governance consultant in 2024. Even so-called reform trustees were cajoled into hiring GGA despite knowing of their excessive pay support at CALPERS.
STRS Ohio may be an even uglier example of the disconnect between staff rewards and participant outcomes. Ohio teachers endured years without a reliable cost-of-living adjustment. Inflation permanently eroded the value of their pensions. At the same time, investment employees received large performance bonuses based on benchmarks and methodologies that participants and reform trustees repeatedly challenged. A recent academic study has confirmed this twisted relationship. https://commonsense401kproject.com/2026/08/07/ohio-strs-responds-to-charges-it-gamed-its-own-bonuses-with-more-games/
The system’s answer was not to suspend the bonus machine until retirees were made whole. It hired more consultants, debated more governance procedures and defended the compensation structure.
GGA did not create every STRS Ohio compensation practice but GGA accepted a paid role inside a system already notorious for rewarding investment staff while retired teachers lost purchasing power. It is now part of the machinery that legitimizes how that system governs itself.
OMERS: High Pay and Historically Low Relative Returns
GGA also displays OMERS Ventures among the clients on its website. OMERS is one of Canada’s largest public pension organizations and operates substantial private-equity, infrastructure, real-estate and venture-capital businesses.
It has also been the subject of one of Canada’s strongest public-pension compensation critiques.
In 2022, CUPE Ontario released High Pay, Low Returns: Why Are OMERS Executives Paid So Much? The study found that OMERS paid some of the highest absolute executive compensation among major Canadian pension plans even though it was smaller than several of the funds used for comparison. On a per-billion-dollar basis, OMERS paid its top executives more than twice the peer-plan average. CUPE calculated that OMERS members paid approximately 68 percent more executive compensation for every percentage point of investment earnings. https://cupe.on.ca/high-pay-low-returns-why-are-omers-executives-paid-so-much-cupe-ontario-renews-call-for-review-at-omers-with-new-report/?utm_source=chatgpt.com
The underlying performance record made the pay especially difficult to defend. OMERS had underperformed the other major plans in CUPE’s comparison and failed to meet its own ten-year benchmarks. In 2020, it lost 2.7 percent while most other large Canadian public pension funds made money. Nevertheless, CUPE reported that the five highest-paid OMERS executives received roughly C$8 million in bonuses in the relevant year and more than C$32 million over two years.
CEO Blake Hutcheson’s compensation was approximately C$5.14 million in 2021 and C$5.16 million in 2022. Individual OMERS executives have received still larger amounts in particular years. A separate dispute exposed the scale of deferred compensation below the CEO headline: former OMERS Infrastructure chief Michael Rolland sued for approximately C$65 million in allegedly unpaid compensation after receiving a C$5 million payment in 2020.
The public record establishes that GGA claims OMERS Ventures as a client. It does not yet disclose the scope of that assignment or prove that GGA designed OMERS’ executive-pay program. That missing information is itself important. OMERS should disclose every GGA contract, invoice, peer group, compensation study and conflict statement, including work performed for OMERS Ventures, OMERS Private Equity, OMERS Infrastructure, Oxford Properties and the OMERS Administration Corporation.
The Private-Equity Pipeline Behind the “Independent” Consultant
GGA describes itself as independent and “conflict-free.” Its principals appear to own the consulting firm. That narrow legal description, however, does not tell the whole economic story.
GGA has a formal strategic partnership with People Corporation, a Canadian benefits, retirement and human-resources conglomerate serving more than 2.6 million plan members. GGA’s own website expressly acknowledges that People Corporation is financially backed by Goldman Sachs’ Merchant Banking Division.
That description understates the relationship. Goldman Sachs investment funds acquired People Corporation in 2021 for approximately C$1.13 billion and took it private. People Corporation is therefore not simply an unaffiliated vendor appearing next to GGA at an occasional conference. It is a private-equity-controlled strategic partner through which GGA offers clients group-benefit consulting, defined-contribution plans, group retirement services and pension advice. GGA even supplies a dedicated People Corporation contact using a GGA-branded email address.
The structure resembles the broader public-pension consulting model visible at firms such as Callan and Meketa. The consulting firm’s principals may technically own the advisory entity, permitting it to market itself as independent. But technical ownership is not the same thing as economic isolation. Outside financial power and private-market money can enter through strategic partnerships, joint marketing, referral relationships, research sponsorships, conferences and the broader ecosystem of investment managers seeking public-pension assets.
In GGA’s case, the private-equity connection is not conjecture. Its declared strategic partner is controlled by Goldman Sachs private-equity funds. GGA also openly says it serves private-equity clients while advising the boards of public pensions that allocate billions to private markets and set compensation for executives running those portfolios.
That does not prove that Goldman Sachs dictated a CalPERS salary recommendation or that People Corporation participated in the STRS Ohio engagement. It does destroy the usefulness of the simplistic label “conflict-free.” A consultant embedded in a commercial alliance with a private-equity-owned retirement conglomerate must disclose the entire economic relationship before a public board relies on its advice.
The Compensation Loop
The recurring pattern is straightforward:
A public pension produces mediocre or disputed results.
Executives say they cannot retain talent without competing with Wall Street.
A compensation consultant selects highly paid financial organizations as peers.
The consultant recommends higher salary opportunities and larger incentive ranges.
Trustees approve the increase and cite the consultant’s “independent” advice.
Other pensions then use the newly inflated compensation as a benchmark.
Participants absorb benefit reductions, missed COLAs, higher contributions and investment risk while staff compensation keeps rising.
The supposed market being measured is partly a market the consultants manufacture.
At CalPERS, poor long-term relative performance did not prevent record compensation. At STRS Ohio, lost retiree purchasing power did not stop investment bonuses. At OMERS, historically weak comparative returns coexisted with some of the highest executive pay in Canadian public pensions.
GGA’s presence across these organizations is not evidence of coincidence worth ignoring. It is evidence that trustees, participants and journalists should examine how a small network of consultants normalizes extraordinary compensation throughout the public-pension industry.
What Must Be Disclosed
Every public pension using GGA should disclose:
All GGA contracts, proposals, invoices and amendments;
Every compensation peer group and the criteria used to select it;
All communications concerning incentive design and performance benchmarks;
GGA’s complete list of public-pension and private-equity clients;
Every payment, referral arrangement or revenue-sharing agreement between GGA and People Corporation;
All services GGA or People Corporation provides to pension investment managers;
Any communication involving Goldman Sachs Asset Management, Goldman Sachs Alternatives or Goldman-controlled funds; and
Whether GGA considered funded status, benefit reductions, COLAs and transparent investable benchmarks before recommending higher compensation.
Boards should also prohibit compensation consultants from using private-sector asset managers as peers unless they quantify the enormous differences in capital risk, job security, fundraising responsibility, public benefits and institutional guarantees.
Public-pension executives are not entitled to Wall Street compensation merely because they manage Wall Street products. They manage workers’ deferred wages under a public trust. Their compensation should rise when beneficiaries become more secure and transparent, risk-adjusted performance improves—not simply when a consultant finds someone, somewhere, who is paid more.
GGA has helped public pension boards turn excessive compensation into a governance recommendation. Its partnership with a Goldman Sachs-controlled retirement company makes the need for full disclosure even more urgent.
The people whose money pays these consultants and bonuses deserve to know who is benchmarking whom—and who ultimately profits from the answer.
Creative Planning announced on September 15 that it plans to acquire RVK, one of the largest institutional investment consultants in the country. The press release calls this an expansion of Creative Planning’s institutional consulting capabilities. I call it another flashing warning light for public pension trustees.
RVK says its mission is to provide “unbiased investment advice.” It has also described itself as independent and employee-owned. That independence is now being sold to a financial conglomerate backed by two private-equity firms—TPG Capital and General Atlantic.
The ownership conflict itself is material, foreseeable and avoidable. Every RVK public-pension client should address it before the transaction closes.
$4.3 trillion of influence changes hands
According to the acquisition announcement, RVK advises just over 200 institutional clients with approximately $4.3 trillion in assets. Its clients include public and private retirement plans, endowments, foundations, insurers and health systems. The deal is expected to close in January, subject to regulatory approval, and its financial terms were not disclosed.
Those numbers require an important distinction. Assets under advisement are not the same as assets managed by RVK or Creative Planning. But that does not make the influence less important. Consultants often help pension boards set asset allocations, develop investment policy, select managers, conduct due diligence and measure performance. RVK’s own manager-research page identifies dedicated coverage of private equity, venture capital, infrastructure, private debt, opportunistic credit, hedge funds and real estate.
That is the gateway through which billions of dollars enter private funds.
Among RVK’s publicly identifiable clients are the Teachers’ Retirement System of Illinois, the Pennsylvania State Employees’ Retirement System, Los Angeles Fire and Police Pensions, the City of Jacksonville retirement system, and government retirement or benefit programs in Texas and Vermont. These are not wealthy families choosing an adviser with their own money. These are fiduciaries spending workers’ deferred compensation and taxpayer dollars.
RVK’s “independent” label no longer fits
Before this deal, RVK promoted itself as an independent, employee-owned consultant. After the closing, it will be owned by Creative Planning. Creative Planning, in turn, received a substantial minority investment from TPG Capital in 2024, while General Atlantic—another private-equity investor—retained its minority stake. Peter Mallouk remained Creative Planning’s majority owner. Reuters reported that TPG’s prospective investment was approximately $2 billion at a valuation above $15 billion; the final financial terms were not disclosed. (Reuters; TPG announcement)
Minority ownership is still ownership. TPG and General Atlantic did not invest billions and millions to preserve a museum exhibit called “independent consulting.” They invested for growth and profit.
Creative Planning has been assembling a retirement and consulting empire. It acquired Lockton Retirement Services in 2021 and Mesirow’s corporate retirement advisory business in 2023. In 2025 it agreed to acquire SageView. Before that SageView deal, Creative Planning said it already oversaw $202 billion in institutional retirement-plan assets. The combined SageView transaction was described as covering more than 11,800 plans and $640 billion in total client assets. (Creative Planning; PLANADVISER)
Now it is buying a consultant with $4.3 trillion under advisement.
This is not simply scale. It is vertical influence: private-equity capital helps finance the acquisition of the consultant that helps public pension boards decide how much to allocate to private equity, which managers get considered, which risks are emphasized, which benchmarks are used and whether disappointing results are presented as temporary “J-curve” effects rather than failure.
Creative Planning is already selling the private-markets story
Creative Planning openly markets access to “institutional-quality private markets and alternative investment strategies” to wealthy clients. Its January 2026 discussion of alternatives said private equity, private credit, infrastructure and real estate can diversify portfolios, reduce volatility and enhance returns—while also acknowledging less transparency, lighter regulation, complexity and illiquidity. (Creative Planning alternative-investments page; Creative Planning alternatives commentary)
RVK has the institutional research operation. Creative Planning has the expanding wealth, retirement and business-services platform. TPG and General Atlantic supply private-equity capital and have their own enormous economic interests in private markets.
Even if strict information barriers are erected, the incentives do not disappear. Does the new parent want pension clients to reduce expensive, illiquid alternatives and move into transparent public securities? Or does an expanding alternatives ecosystem produce more opportunities, relationships, data, referrals and enterprise value?
That is the conflict trustees must examine. A glossy disclosure stating that an affiliate “may” have an interest is not a cure.
Consultant capture has already cost pensions dearly
I have been warning that the large pension consultants have become the distribution arm for private equity. They do not have to receive a traditional sales commission to drive the system. Their capital-market assumptions can justify a larger alternatives allocation. Their databases and approved lists can determine which managers reach the boardroom. Their pacing studies can turn annual private-equity commitments into an automatic program. Their performance reports can lean on stale appraisals, custom benchmarks and IRRs that make private funds look steadier and better than they really are.
Academic evidence gives trustees no reason for blind faith. Research on pension consultants has found that their recommendations influence manager flows but do not reliably predict superior future performance. A study of specialized consultants found that pensions using them were more likely to enter oversubscribed private-equity funds, while consultant use did not improve performance. (Choosing Pension Fund Investment Consultants; Jenkinson, Jones and Martinez,The Journal of Finance)
The SEC recognized the problem more than twenty years ago. Its pension-consultant examination found that conflicts and business relationships could compromise the objectivity of advice and that pension fiduciaries must understand and monitor those conflicts. (SEC, “Conflicts of Interest in Pension Consulting”)
The labels and corporate structures have changed. The basic danger has not.
RVK also does not enter this transaction without history. It advised Kentucky Retirement Systems during the period when that severely underfunded system moved roughly $1.5 billion into complex hedge-fund strategies that later became the subject of years of litigation. The allegations are not the same as a judicial finding, and the Kentucky Supreme Court dismissed the beneficiaries’ case for lack of standing—not after a trial establishing that the investments or advice were prudent. That history is a reason for scrutiny, not a shortcut to a verdict.
Every RVK public client should demand answers now
Public pension boards should not accept “the RVK team will remain in place” as an answer. The people may remain, but their owner, incentives, reporting lines and potential conflicts will change.
Before consenting to any assignment or change of control, every public client should demand written answers to at least these questions:
Who will own RVK after closing? Disclose Creative Planning’s complete ownership and governance structure, including TPG, General Atlantic, management owners and any board, veto, information or consent rights.
Will RVK recommend or monitor any TPG, General Atlantic or affiliated fund? If so, identify every current exposure and prohibit the combined company from participating in its evaluation.
Will any employee’s compensation depend on Creative Planning’s growth, cross-selling, referrals, alternatives revenue or enterprise value? “No transaction-based compensation” is too narrow.
What information barriers will exist? Pension portfolio data, manager research, fee terms and planned searches are commercially valuable.
Will RVK remain free to recommend reducing private equity and private credit? Put that protection in the contract, along with a ban on retaliation against consultants who make such recommendations.
Are there new affiliate services or referral opportunities? Creative Planning spans wealth management, retirement plans, insurance-related services, tax, legal, trust, lending and business consulting. Each connection must be disclosed in dollars, not buried in boilerplate.
Does the acquisition trigger a termination, assignment or rebidding clause? A board that hired an independent, employee-owned RVK did not hire the same organization that will exist after closing.
At minimum, public plans should require a contractual ban on RVK recommending TPG, General Atlantic or their controlled affiliates; an independent annual conflict audit; disclosure of all direct and indirect economic relationships with every recommended manager; preservation of all investment-committee and manager-research records; and a termination right without penalty.
Boards should also disclose the full consultant contract, fees, change-of-control provisions and conflict plan to participants and taxpayers. If the safeguards cannot survive public disclosure, they are not safeguards.
The “independent consultant” is disappearing
The industry will portray this as good news: more resources, more research, broader capabilities and continuity of leadership. Those may be real benefits. They are also the standard language of consolidation.
What is disappearing is just as real. An employee-owned consultant whose brand was based on independence is becoming one component of a giant financial-services company backed by the very private-equity industry it helps pension clients evaluate.
The public-pension consultant is supposed to be the skeptical gatekeeper. It is supposed to challenge fee claims, valuation assumptions, liquidity promises and manager marketing. It cannot credibly perform that role when trustees do not know whose economic interests sit behind the gatekeeper.
The question is not whether Creative Planning, TPG, General Atlantic or RVK promises to behave ethically. The question is whether public pension boards will impose a structure that protects workers and taxpayers when corporate incentives pull in the other direction.
If they simply approve the assignment and continue business as usual, they will have converted a known conflict into a governance failure.
Senator Elizabeth Warren may be the only major figure in Washington asking the insurance industry the questions its state regulators have spent years avoiding.
Her September 10 letter to the National Association of Insurance Commissioners is ostensibly about billionaire Mark Walter, Delaware Life, Clear Spring Life and the growing entanglement between private-equity firms, private-credit managers and life insurers.
But Warren’s questions go far beyond Walter.
She is really asking whether America’s fragmented, industry-dominated state insurance regulatory system is capable of regulating modern life insurers at all.
The answer increasingly appears to be no.
Private-equity firms have discovered that insurance companies provide enormous pools of permanent capital. Annuity buyers and pension retirees supply the money. The insurer invests that money in private credit, affiliated assets, structured products, commercial real estate loans and offshore reinsurance arrangements. The asset manager collects fees and spreads. When something goes wrong, policyholders, other insurers and ultimately taxpayers are expected to absorb the damage.
Warren is one of the few people in Washington willing to challenge that machine.
The Mark Walter Scandal Is a Regulatory Autopsy
Warren’s letter focuses on reports that two insurers owned by Walter’s TWG Global—Delaware Life and Clear Spring Life and Annuity—may have misclassified approximately $21 billion of investments as independent even though the money allegedly flowed through intermediaries to businesses connected with Walter.
After the reporting was corrected, Delaware Life’s disclosed affiliated investments reportedly jumped from approximately 3 percent to 42 percent.
That is not a minor accounting disagreement.
Affiliate classifications go to the heart of whether regulators, policyholders and rating agencies can see an insurer’s concentration, conflicts of interest and liquidity risk. If an insurer can route money through an intermediary and make an affiliated exposure appear independent, statutory filings may provide only an illusion of transparency.
Warren therefore asks the NAIC exactly the questions that should have been asked before journalists and a whistleblower reportedly brought the situation to light:
What did regulators do after learning about the apparent misclassifications?
Are other insurers using similar structures?
Can insurers use the “filing-exempt” process to bypass meaningful NAIC review?
Has the NAIC identified other private firms making risky investments with policyholder premiums?
Does the NAIC believe insurer investment disclosures are adequate?
Are insurers owned by private-investment firms less transparent?
Can state guaranty funds withstand losses resulting from private-credit exposure?
Are federal guardrails now necessary?
These are devastating questions because the insurance industry cannot answer them honestly without exposing the weakness of the existing system.
Warren notes that life-insurer private-credit investments more than doubled—from approximately $386 billion in 2014 to $849 billion in 2024.
The state regulatory system did not double its sophistication, staffing, transparency or enforcement capability during that period.
Instead, insurers and asset managers created increasingly complicated networks of affiliated lenders, private funds, special-purpose vehicles, offshore reinsurers and privately rated securities. Assets that do not trade in public markets can be valued through models, manager estimates or ratings purchased from firms selected by the issuer.
That permits risk to remain hidden until somebody needs to sell the asset.
Insurance liabilities may be long-term, but they are not infinitely patient. Policyholders surrender contracts. Pension annuitants need monthly checks. Collateral calls arise. Federal Home Loan Bank advances can disappear. Reinsurance recoverables can become disputed. Ratings downgrades can force additional capital requirements precisely when capital and liquidity are hardest to obtain.
Private credit’s defenders repeatedly say that illiquidity does not matter because life insurers hold assets to maturity.
That is the same comforting argument Wall Street always makes before a liquidity crisis.
The NAIC Is Not a Regulator
The name “National Association of Insurance Commissioners” creates the impression of a national regulatory agency.
It is not.
The NAIC is a private standards-setting and coordinating organization. It develops models and facilitates cooperation, but it does not function like the SEC, FDIC, Federal Reserve or Consumer Financial Protection Bureau. It cannot provide uniform federal supervision of nationwide insurance complexes.
Actual authority remains scattered among state insurance departments with different laws, budgets, expertise and political cultures.
That fragmentation is extremely valuable to the insurance industry. A multibillion-dollar insurer can select a favorable domicile while selling products throughout the country. No single state regulator has the same incentive, resources or national responsibility that a genuine federal regulator would have.
Iowa, for example, has acquired an enormous national responsibility because so many annuity and private-equity-related insurance structures are domiciled there. Yet retirees and policyholders in every other state must depend on Iowa regulators to understand and police risks that could eventually reach them.
This is regulation by regulatory arbitrage.
State Guaranty Associations Are Not the FDIC or PBGC
The industry’s final defense is always the state guaranty-association system.
That defense is dangerously misleading.
State guaranty associations are not meaningfully prefunded national insurance. They generally operate by assessing surviving insurers after another insurer has failed. Assessment capacity is limited, coverage differs among states, and benefits are subject to statutory caps and exclusions.
Even worse, as Warren’s letter emphasizes, insurers may receive state premium-tax credits for the assessments they pay. That means the cost of an insurer failure can eventually be shifted to state taxpayers.
Private equity keeps the fees during the good years.
Policyholders, competing insurers and taxpayers inherit the losses during the bad years.
The system might be able to manage the isolated failure of a traditional insurer. It has never been tested against the failure of a giant, interconnected insurance complex loaded with private credit, affiliated assets, structured products and offshore reinsurance.
Nor has it been tested against multiple insurers suffering losses from the same private-credit downturn.
In that situation, the supposedly healthy insurers being assessed to finance the rescue may own similar assets and face the same liquidity pressure. The guaranty mechanism could become procyclical—demanding cash from the industry at the moment cash is most scarce.
As I have previously written, calling this system insurance is generous. It is principally a post-failure assessment mechanism dressed up to reassure annuity buyers.
Retirees Are Being Forced to Accept Risks They Cannot Escape
The regulatory failure becomes even more serious when an employer transfers pension obligations to an insurer.
In a pension-risk-transfer transaction, retirees can lose:
The plan sponsor’s continuing contribution obligation;
ERISA’s fiduciary and funding protections;
PBGC protection;
Diversification across pension-plan assets; and
The ability to hold fiduciaries accountable before an insurer actually defaults.
They are left with the promise of a single insurer.
They ordinarily cannot sell that promise, diversify it, return to the pension plan or demand a safer insurer when credit quality deteriorates. Most contracts appear to lack a meaningful downgrade provision that would require collateral, additional protection or transfer to a stronger company before insolvency.
Yet courts have ruled that retirees suffer no cognizable injury while the insurer continues mailing checks.
That is financially illiterate.
Risk has value. Diversification has value. Federal protection has value. A downgrade escape provision has value. Taking those protections away causes an injury when the transfer occurs—not merely years later when the insurer finally misses a payment.
Security Benefit Shows Why Walter Is Not an Isolated Case
Mark Walter is not the entire problem.
Security Benefit may present an even more important warning because its annuities are embedded throughout the retirement system, particularly in teacher 403(b) plans.
Its history involves private-equity ownership, complex affiliate relationships, reinsurance transactions, private assets and a state guaranty system that was never designed to manage the failure of a major insurer operating within a broader private-capital empire.
Principal is simultaneously constructing target-date and retirement products that can layer private equity, private debt, illiquid real estate and annuity guarantees inside state-regulated collective investment trusts.
Participants may think they own a diversified retirement fund. Economically, they may be accepting several layers of illiquidity, valuation discretion, insurer credit exposure and conflicts of interest.
That is why the Walter investigation cannot end with Delaware Life and Clear Spring. Regulators must examine the entire private-equity-insurance model.
The CFPB Model Is the Insurance Industry’s Worst Nightmare
CFPB—the Consumer Financial Protection Bureau.
Current federal law generally excludes the “business of insurance” from the CFPB’s jurisdiction. Warren’s letter does not expressly propose turning the CFPB into the national insurance regulator.
But it points directly toward the need for a CFPB-style federal insurance watchdog with the authority to:
Examine nationwide insurance groups and their affiliates;
Obtain transaction-level information about private assets;
Review affiliated investments and reinsurance arrangements;
Establish uniform disclosure requirements;
Receive and analyze policyholder complaints;
Require disclosure of annuity spreads, compensation and surrender restrictions;
Examine the financial capacity of state guaranty associations;
Require credible insurer resolution plans;
Impose meaningful penalties; and
Act before policyholders suffer an irreversible loss.
That is the insurance industry’s worst nightmare.
A real federal regulator would eliminate the ability to shop for the friendliest state domicile. It could compare the same practices across companies and states. It could follow assets through affiliated funds, intermediaries and offshore reinsurers. It could publish national data instead of forcing consumers to decipher fifty different regulatory systems.
Most importantly, it could treat annuity owners as financial consumers entitled to understandable disclosures and enforceable protections.
The industry’s political allies understand this threat. They have repeatedly promoted legislation to keep the CFPB away from insurance and to proclaim that state regulators alone are best positioned to protect consumers.
The Mark Walter scandal demonstrates why they are so desperate to preserve that arrangement.
Warren Is Asking What Regulators Should Have Asked Years Ago
Elizabeth Warren’s letter does not prove that Walter, Delaware Life, Clear Spring or any other company committed a crime. Those questions remain for regulators, investigators and courts.
But the letter exposes something broader: the state regulatory system appears to discover major insurance risks only after journalists, whistleblowers, academics or federal prosecutors identify them.
That is not proactive supervision.
It is regulatory cleanup.
I have warned repeatedly that private credit can turn supposedly safe annuities into opaque promises backed by assets that are illiquid, difficult to value and potentially riddled with affiliate conflicts. I have warned that state guaranty associations are not substitutes for the PBGC or FDIC. I have warned that insurers should be required to provide meaningful downgrade protection before retirement savers and pensioners are locked into decades-long contracts.
Warren is now forcing the NAIC to confront those same issues.
Her September 24 response deadline should not produce another polished defense of state regulation, another list of committees or another promise that model rules are “under development.”
Congress should demand the underlying data.
How many insurers have materially misclassified affiliated investments? How much supposedly independent private credit is connected to an insurer’s owner or asset manager? How much exposure has been moved offshore? What happens if several private-credit-heavy insurers require guaranty-association support simultaneously? Which regulators knew about the Walter-related classifications, and when did they know it?
If the NAIC cannot provide convincing answers, Congress should stop pretending that fifty-state regulation is adequate for trillion-dollar national and global insurance complexes.
Elizabeth Warren may currently be the insurance industry’s only serious watchdog in Washington.
The next step is giving a federal watchdog the teeth to do something before the time bomb explodes.
Kentucky’s three major pension plans remain national laggards. KERS Nonhazardous, less than 30% funded by Kentucky’s own measure, is either the worst or second-worst-funded public pension plan in America among plans with more than $10 billion in liabilities. Kentucky Teachers is only about 58%–60% funded, and CERS is only about 61% funded—placing both in or near the bottom quarter of major public plans and roughly twenty percentage points below the national average.
Illinois has the worst credit rating of any state at A. Kentucky, Pennsylvania, & New Jersey are tied for 2nd worst at A+. The other 46 states are AA. The threat to Kentucky’s credit rating to an Illinois or below, helped force the legislature to begin fully funding the KERS actuarially required contribution in fiscal year 2015. Nevertheless, accumulated underfunding, adverse experience and later reductions in actuarial assumptions caused KERS Nonhazardous to fall further, reaching its historic low of 12.9% funded in fiscal year 2018 the worst for any state plan in U.S. History. Kentucky then began contributing amounts above the ARC because the plan faced a genuine depletion or insolvency risk.
CERS has a deceptive, deliberate underfunding policy. The legislature’s 2018 12% rate collar allowed CERS to certify employer rates below the uncapped actuarially determined rate, pushing part of today’s pension bill onto future taxpayers.
CERS actuaries calculate an actuarially determined contribution rate. The CERS Board certifies a lower statutory rate when the 12% collar applies. Cities pay 100% of the lower certified rate. Nevertheless, the pension trust receives less than the uncapped actuarially determined contribution. That lets local financial statements claim there was no contribution “deficiency” because the city paid the entire legally certified amount—even though CERS did not receive the full actuarially calculated amount.
The CERS contribution cap allows cities and counties to defer part of the actuarially determined pension contribution. The state does not forgive or assume the deferred amount. It remains in CERS as additional unfunded liability that must be recovered from participating employers in later years. Economically, local governments are borrowing from their employees’ pension fund at approximately CERS’s 6.5% assumed rate of return.
BENEFITS CUT IN REAL TERMS
A KERS or CERS retiree receiving $2,900 a month has lost nearly $98,000 since Kentucky stopped granting pension COLAs in 2011, measured against Social Security’s COLAs. That estimate captures only the frozen pension check. It does not include the additional loss from reduced retiree-health subsidies, increased premiums, deductibles, copayments, Medicare-related changes, and other benefit shifting during the same period. Kentucky’s teachers continued receiving a 1.5% pension COLA, but that adjustment substantially lagged Social Security inflation protection. Moreover, a significant portion of the financing used to stabilize teachers’ retiree health benefits came from mandatory contributions taken from active teachers’ paychecks—effectively requiring teachers to help finance the solution through reduced take-home pay.
A Kentucky retiree whose pension was $2,900 per month after the last KERS/CERS COLA in July 2011 has lost approximately $97,800 through September 2026, compared with receiving Social Security’s annual COLAs.
September 2026 monthly benefit
Actual/estimated benefit
Shortfall vs. Social Security benchmark
Social Security COLA benchmark
$4,273.52
—
KTRS with annual 1.5% COLA
$3,625.67
$647.84/month
KERS/CERS with no COLA
$2,900.00
$1,373.52/month
Kentucky retirees experienced a double reduction in retirement security: pension income failed to keep pace with inflation, while the economic value of retiree health coverage also declined. For KERS and CERS retirees, the combined loss is therefore materially greater than the estimated $97,800 pension-only loss.
Chris Tobe, CFA, CAIA, is the author of Kentucky Fried Pensions, available on Amazon
That is waiting for the fire before admitting someone replaced the sprinkler system with a garden hose.
In Dow v. Lumen Technologies, Lumen transferred approximately $1.4 billion of pension obligations covering 22,600 retirees to Athene. Before the transaction, the retirees had a diversified pension portfolio, Lumen’s continuing contribution obligation, ERISA protections, and the federal Pension Benefit Guaranty Corporation.
Afterward, they depended primarily on one private-equity-controlled insurer—Athene—and the flimsy, post-failure state guaranty-association system.
U.S. District Judge Lewis Babcock nevertheless ruled that the retirees had not plausibly alleged an injury because Athene has made its payments since 2021.
By that logic, a fiduciary can exchange a federally protected pension for a materially riskier single-company promise and nobody is injured until the company actually defaults.
That is wrong.
Risk has value.
Federal protection has value.
Diversification has value.
A downgrade escape provision has value.
Losing those protections is an injury today.
Lumen Kept the Savings. Retirees Got Athene.
Lumen calls this a “pension risk transfer.”
For once, Wall Street chose an honest name.
The risk did not disappear. Lumen transferred it from itself to retirees.
Before the transaction, Lumen had to support its pension plan. If investments underperformed, Lumen generally had to contribute more. If the plan and sponsor failed, the PBGC provided a federal backstop.
After the transaction, Lumen escaped those obligations. It also stopped paying PBGC premiums for the transferred retirees.
The retirees received an Athene annuity.
Lumen allegedly saved money by choosing Athene instead of safer traditional insurers. It kept those savings while retirees absorbed the additional credit, liquidity, regulatory, affiliate, offshore-reinsurance, and recovery risks.
Lumen got cash savings.
Athene got $1.4 billion in pension obligations.
Retirees got the risk.
How is that not an injury?
This Was Not Just Any Insurance Company
The court discussed Athene as though it were simply another highly rated insurer that happened to submit a competitive bid.
That ignores the extraordinary scrutiny surrounding Athene and Apollo.
Athene is Apollo’s giant insurance balance sheet—the place where Apollo-originated private credit, mortgages, structured assets, affiliated investments, and other difficult-to-value obligations can be held against long-term annuity promises.
If the assets are overstated, illiquid, affiliated, or deteriorating, Athene’s annuity holders ultimately bear the risk.
Athene also has a concrete PRT regulatory history. In 2020, the New York Department of Financial Services imposed a $45 million penalty after finding that Athene had conducted 14 large pension-risk-transfer transactions involving thousands of New York policyholders through an unlicensed subsidiary.
That alone should have prevented the court from treating the complaint’s concerns as invented speculation.
Then Athene Appeared in the Epstein Files
The Athene story has now become even more troubling.
The released Epstein files include an April 2015 email in which Jeffrey Epstein claimed involvement in discussions concerning Athene, insurance regulation, capital, foreign structures, tax basis, discount rates, and what he described as a complex transaction involving approximately $2 billion in taxes.
The email referred to a “Rowan request re Athene,” an apparent reference to Apollo co-founder and current CEO Marc Rowan. Other disclosed material shows Rowan met Epstein at Epstein’s New York residence in January 2016. An SEC complaint submitted by the American Federation of Teachers and the American Association of University Professors has called for investigation of Apollo’s disclosures and specifically cited the Athene-related material.
Epstein’s claims are not independent proof that he created Athene’s tax structure or that any crime occurred. Apollo and the individuals involved should have the opportunity to respond fully.
But the documents are unquestionably relevant to transparency, governance, conflicts, and the history of Athene’s structure.
Epstein claimed that he had discussed Athene-related tax and regulatory matters involving the firm’s founders and senior leadership. Leon Black later paid Epstein approximately $158 million for tax and estate-planning services after Epstein’s 2008 conviction. Black has denied wrongdoing and has said the relationship concerned legitimate financial advice.
These are not internet rumors. They are subjects of congressional, regulatory, union, media, and investor scrutiny.
Yet retirees challenging the transfer of their federally protected pensions to Athene are being denied discovery because a judge has decided they suffered no injury.
That is backwards.
The extraordinary Athene-related disclosures are precisely why discovery is necessary.
The Credit Market Is Already Pricing Athene Risk
The judge focused on Athene’s insurance-company rating.
He apparently ignored the market.
Credit-default-swap prices measure what sophisticated investors charge to insure against a company’s default. Athene’s CDS protection has been extraordinarily expensive compared with several large traditional insurers.
CDS prices are not predictions that Athene will fail tomorrow. But they are observable market prices for credit risk.
When the market charges substantially more to protect Athene debt than Prudential, MetLife, or other traditional insurers, a court cannot honestly call the difference in risk purely hypothetical.
The market is saying that the obligations are not interchangeable.
This matters because PRT fiduciaries are supposed to choose the safest available annuity—not merely an insurer capable of obtaining an investment-grade rating.
The ratings agencies may assign a letter.
The CDS market attaches a price.
The price says Athene risk is real.
As I recently wrote, independent academic research has also found an “Apollo premium”. Apollo-controlled portfolio companies reportedly pay approximately 100 basis points more to borrow than otherwise comparable private-equity-controlled companies.
The researchers concluded that lenders appear to demand additional compensation because of Apollo’s reputation for aggressive treatment of creditors.
If sophisticated lenders price Apollo-related conduct risk, why should a federal judge pretend that retirees suffer no injury when their lifetime pensions are transferred to Apollo’s insurer?
The Judge Completely Ignored Downgrade Protection
The decision also exposes the courts’ continuing ignorance of downgrade provisions.
A meaningful downgrade clause could protect retirees before insolvency. It could require collateral, additional security, transfer to a stronger insurer, or another corrective action when the insurer falls below an agreed credit standard.
That is when protection is needed.
Not after the insurer has failed.
Not after rehabilitation begins.
Not after assets are frozen.
Not after policyholders hire lawyers.
Not after state guaranty limits become relevant.
I have repeatedly argued that a general-account annuity containing a strong downgrade provision can be safer than a supposedly protected separate-account annuity without one.
But most PRT annuities appear to give retirees no meaningful right to escape when the insurer deteriorates.
The Lumen retirees did not choose Athene.
They cannot sell their annuity.
They cannot diversify away from Athene.
They cannot move back into the pension plan.
They cannot demand that Lumen resume its guarantee.
They cannot purchase CDS protection on their individual benefits.
And apparently they cannot even obtain discovery unless they wait for Athene to miss a payment.
That is not protection.
That is captivity.
The State Guaranty Association Is Not a Cure
Judge Babcock reasoned that an Athene failure might not cause losses because state guaranty associations could provide protection.
That may be the worst part of the decision.
State guaranty associations are not the PBGC.
They are not the FDIC.
They are not meaningfully prefunded national insurance.
When an insurer fails, the surviving insurers are assessed. Those assessments are subject to annual limits. Coverage varies by state and is capped at the policyholder level.
NOLHGA reported only about $7.53 billion of nationwide annual assessment capacity for allocated annuities in 2023 and a shockingly small $73 million for unallocated annuities.
That is not cash sitting in a national rescue fund. It is principally the statutory capacity to assess surviving companies after failures occur.
Meanwhile, U.S. life-insurer general accounts hold trillions of dollars in assets.
The Chicago Federal Reserve has acknowledged that it is unclear how the guaranty system would handle the failure of a relatively large U.S. insurer.
The system has never been tested against simultaneous distress among today’s giant private-credit-heavy, offshore-reinsured insurance complexes.
Yet the judge used that untested system to conclude that the retirees’ risk was too speculative to enter a courtroom.
State Guaranty Associations Arrive After the Damage
A state guaranty association does not prevent a downgrade.
It does not restore ERISA protection.
It does not restore Lumen’s contribution obligation.
It does not restore PBGC coverage.
It does not give retirees diversification.
It does not prevent rehabilitation, payment restrictions, litigation, restructuring, delays, or losses above state limits.
The sequence is more like this:
First comes deteriorating credit.
Then a downgrade.
Then liquidity pressure.
Then rehabilitation.
Then payment and transaction restrictions.
Then litigation and valuation disputes.
Then possibly liquidation.
Only then does the guaranty association fully enter the picture.
Anything above the state limit may become a creditor claim against an insolvent estate.
That is not equivalent to keeping the pension inside ERISA.
Private Equity Has Made the Guaranty System More Dangerous
The state system was built for isolated insurer failures.
It was not designed for insurers that hold similar portfolios of private credit, CLOs, real estate loans, structured securities, affiliated assets, and offshore-reinsurance recoverables.
If one insurer fails, the surviving insurers must help fund the guaranty response.
But those surviving insurers may own the same types of assets and be suffering the same market losses.
The system then demands more cash from insurers precisely when industry liquidity and capital are already under pressure.
One insurer fails.
Other insurers are assessed.
Those insurers are already exposed to the same private-credit downturn.
Their liquidity weakens.
The guaranty system becomes another source of financial stress.
That is a procyclical rescue mechanism—not a federal guarantee.
No Missed Check Does Not Mean No Injury
Suppose a fiduciary replaces a diversified AA bond portfolio with one BBB obligation paying the same coupon.
Has the investor suffered no injury until the BBB issuer defaults?
Of course not.
The new obligation is worth less because it contains more risk.
The same principle applies here.
Before Lumen’s PRT, retirees had:
Diversified pension assets;
Lumen’s contribution obligation;
ERISA funding requirements;
Federal fiduciary protections; and
PBGC insurance.
Afterward, they had one Athene annuity, limited state guaranty protection, no apparent downgrade exit, and no ability to diversify.
That is a reduction in economic value even if this month’s payment arrived on time.
The court confused the ultimate loss with the present injury.
TholeIs Not a PRT Case
The Supreme Court’s Thole v. U.S. Bank decision involved retirees who remained in the same defined-benefit plan. Their sponsor, plan structure, ERISA protection, and PBGC backstop remained intact.
Lumen’s retirees were removed from that entire system.
Lumen changed:
The entity responsible for payment;
The assets supporting the obligation;
The applicable regulatory system;
The federal protections;
The insolvency process;
The retirees’ recovery rights; and
The party bearing the residual risk.
That is not merely investment mismanagement inside a continuing pension plan.
It is a permanent substitution of obligors and protections.
Even Thole recognized that a substantially increased risk of pension failure could support standing. The Lumen retirees specifically alleged increased risk and a present reduction in the value of their pension promises.
The judge acknowledged that Thole did not involve a PRT—and then essentially treated it as though it did.
Appeal This Decision
The Tenth Circuit should reverse and allow discovery.
The retirees should be permitted to learn:
Which insurers bid;
How much cheaper Athene was;
Whether safer insurers were available;
Whether the market price reflected Athene’s greater credit risk;
What Athene CDS spreads showed at the time;
Whether State Street examined Athene’s affiliates, private credit, offshore reinsurance, liquidity, and regulatory history;
Whether the fiduciaries investigated the Athene references in the Epstein material;
Whether the annuity contains any meaningful downgrade provision;
What happens if Athene is downgraded;
How many retirees have benefits exceeding state guaranty limits;
What Lumen saved in purchase price and PBGC premiums; and
Whether those savings represented risk transferred to retirees without compensation.
Lumen removed retirees from ERISA, eliminated PBGC protection, ended its own pension obligation, selected an insurer under extraordinary regulatory, credit-market, governance, and Epstein-related scrutiny, and apparently provided no meaningful downgrade escape.
The judge says there is no injury because Athene has not failed yet.
The law should not require retirees to wait for the time bomb to explode before they are allowed to examine who built it, who profited from it, and why their fiduciaries put it under their retirement.
Apollo has spent years presenting itself to public pension trustees as an elite investment manager whose higher returns come from superior sourcing, superior underwriting and superior skill. A new academic study now supplies a much uglier explanation for at least part of Apollo’s supposedly special return machine: the financial markets charge Apollo-owned companies a measurable penalty because lenders do not trust Apollo to treat them fairly.
The paper, “The Sponsor Premium,” by University of Chicago law professor Vincent Buccola and Drexel University finance professor Greg Nini, analyzes nearly 1,900 first-lien leveraged loans issued between 2016 and 2025. Its central result should be placed in front of every public pension trustee in America: Apollo portfolio companies paid approximately 13 percent more to borrow—about 100 basis points at the sample’s average yield—than otherwise comparable private-equity-owned companies. The Financial Times appropriately called it the “Apollo premium.”
This is not a small statistical curiosity. The authors say the Apollo premium is approximately equal to the normal yield difference between a B+ loan and a B− loan. Apollo’s reputation, in other words, can cost its portfolio companies roughly the equivalent of a two-notch credit-rating penalty.
And the usual Apollo defense does not work. The researchers controlled for credit ratings, market conditions, industry, loan purpose and sponsor size. Apollo borrowers actually carried substantially less first-lien leverage and accepted tighter, more lender-friendly loan documents. Yet they still paid approximately 100 basis points more. The study concludes that lenders appear to be pricing Apollo’s reputation for aggressive treatment of creditors, including its history of liability-management exercises that can transfer value away from existing lenders.
Wall Street has now put a price on Apollo’s conduct. The question is why public pension boards still refuse to do the same.
The Apollo Premium Is a Tax on Pension Returns
The new research directly strengthens the case for public-pension divestment because the extra borrowing cost is ultimately borne by Apollo’s limited partners—including teachers, firefighters, police officers, public employees and taxpayers.
Consider a portfolio company carrying debt equal to five times EBITDA. A one-percentage-point Apollo premium consumes approximately 5 percent of annual EBITDA. That is money unavailable for employees, capital investment, debt reduction, distributions or growth. It weakens refinancing capacity and can reduce the value of the company when Apollo eventually tries to sell it.
Apollo may call itself an operational genius, but its own reputation appears to impose a recurring financing tax on the companies it controls. Public pensions should demand to know how much this Apollo premium has reduced their private-equity returns and whether Apollo’s valuations, benchmarks and performance reports ever identified it.
This is especially important because private-equity performance is built on manager-controlled marks, delayed recognition of impairments and comparisons against unsuitable public-market or private-market benchmarks. My prior work has explained how private equity uses non-market valuations to manufacture diversification and smooth volatility. The new study adds an independent and observable fact: even the supposedly sophisticated leveraged-loan market sees an Apollo-specific risk that conventional ratings and loan characteristics fail to capture.
If lenders can see and price Apollo’s conduct risk, pension trustees and consultants cannot credibly pretend it does not exist.
Apollo Cannot Charge “Performance” Fees on Risk Apollo Created
The paper is equally damaging to Apollo’s private-credit story.
Apollo may point to higher loan yields as evidence of superior origination and investment alpha. But the academics have identified a different possible source of that yield: compensation demanded by lenders for Apollo’s own reputation for aggressive conduct. A higher coupon is not alpha when it compensates investors for a greater probability of being subordinated, trapped, restructured or otherwise disadvantaged in a liability-management exercise.
Public pensions should not pay Apollo an incentive fee for accepting an Apollo-created risk.
Every pension invested in Apollo credit should require Apollo to separate ordinary credit spread, illiquidity premium and genuine manager value from the premium associated with sponsor conduct and liability-management risk. That analysis must include subsequent restructurings, payment-in-kind income, amendments, write-downs, forced sales and realized recoveries. Counting a high contractual coupon as income while delaying recognition of the corresponding risk is not performance measurement. It is accounting theater.
The conflict becomes even worse when a public pension invests in both Apollo private equity and Apollo private credit. One Apollo vehicle can report higher interest income while another Apollo vehicle’s portfolio company pays the higher expense. Apollo can collect management and performance fees on both sides, while the pension receives two separate reports that conceal the consolidated economic result.
Public pension fiduciaries need a look-through accounting of every Apollo-controlled borrower, lender, fund, affiliate and fee. They need to determine whether Apollo’s claimed credit “outperformance” is merely the market price of dealing with Apollo—and whether pension capital is being moved among Apollo vehicles in ways that maximize Apollo’s fees rather than the pension’s net return.
Leon Black Is Now Suing Congress to Block Its Investigation
The financial evidence arrives as Apollo’s governance history becomes even more indefensible.
Leon Black, Apollo’s co-founder and former chief executive, remains its largest individual shareholder, reportedly owning roughly 7 percent of the company. Black paid Jeffrey Epstein approximately $158 million after Epstein’s 2008 conviction. Black also paid the U.S. Virgin Islands $62.5 million in 2023 in exchange for a broad release of potential Epstein-related claims. The settlement did not constitute an admission of liability, and Black has denied wrongdoing.
Now Black is fighting Congress.
After appearing voluntarily before the House Oversight Committee in June 2026, Black reportedly refused to answer questions concerning nondisclosure agreements and accusations by women. The committee then issued subpoenas for the agreements and for further sworn testimony. Black did not appear for the scheduled September deposition. Instead, he sued the House Oversight Committee and its chairman, James Comer, seeking to invalidate the subpoenas. Members of both parties have condemned his refusal to cooperate, and some have called for contempt proceedings.
Black says the investigation exceeds Congress’s authority and threatens the privacy of uninvolved women. Congress says it is examining how Epstein used powerful relationships to avoid accountability and is seeking information about agreements that may have silenced or restricted women. More than a dozen Epstein survivors urged Black to cooperate fully.
Let that sink in: Apollo’s largest individual shareholder is using his enormous resources to sue a bipartisan congressional committee rather than provide the transparency it demanded concerning Epstein-related matters and nondisclosure agreements.
Public pension trustees cannot separate that conduct from their continuing relationship with Apollo. Governance risk does not disappear because Black resigned as CEO in 2021. His approximately 7 percent ownership represents billions of dollars of continuing economic exposure to Apollo. His son, Joshua Black, also remains employed as an Apollo partner, according to Apollo’s 2026 proxy statement.
Public pensions are therefore not dealing with an ancient chapter that Apollo closed. They remain major investors in a company whose largest individual shareholder is actively litigating to stop congressional scrutiny of matters arising from the scandal that forced him out.
The Evidence Is Now Financial, Fiduciary and Moral
The case for divestment no longer rests on a single scandal.
My May investigation documented CalPERS’ decades-long and deeply conflicted relationship with Apollo: billions of dollars in commitments, secret no-bid contracts, placement-agent commissions, deficient transparency, Apollo’s connection to CalPERS’ longtime consultant Wilshire and pension performance that cannot be independently reconstructed from public records.
Senator Ron Wyden’s investigation added evidence concerning the banking and financial transactions surrounding Epstein, including Black’s enormous payments. The Guardian and other news organizations have continued exposing the scope of Black’s Epstein relationship and the legal machinery used against accusers and their lawyers. Black’s new suit against Congress shows that resistance to transparency is continuing in real time.
Now Buccola and Nini add the economic evidence. Apollo’s conduct is not merely offensive to outsiders. It is sufficiently notorious that sophisticated lenders appear to charge Apollo-controlled companies approximately 100 additional basis points.
These strands reinforce one another:
Governance risk: Epstein, Black, disputed disclosures, congressional subpoenas and continued resistance to transparency.
Conflict risk: pensions invested across Apollo private equity, private credit, insurance and affiliated structures while consultants and valuation processes remain opaque.
Performance risk: an Apollo-specific borrowing penalty that can reduce portfolio-company cash flow and equity value.
Fee risk: Apollo may characterize risk compensation as alpha and charge performance fees on both sides of affiliated economic relationships.
Valuation risk: manager-controlled private marks may not fully or promptly reflect the higher financing cost and reputational discount.
Fiduciary risk: trustees and staff now have independent academic evidence that Apollo’s identity contains material pricing information not captured by conventional ratings.
No prudent pension board can dismiss all of that as public relations noise.
What Public Pensions Should Do Now
Every public pension invested with Apollo should immediately:
Freeze new Apollo commitments, amendments, co-investments and mandate expansions.
Commission a genuinely independent review of all Apollo private-equity, credit, real-estate, insurance and affiliated exposures.
Recalculate Apollo performance using independent valuations and benchmarks adjusted for leverage, illiquidity, sponsor-conduct risk and all fees.
Identify every situation in which one Apollo-managed or Apollo-controlled entity transacted with another using pension capital.
Calculate the portfolio-company cost of the Apollo premium and its effect on pension returns.
Disclose all Apollo limited-partnership agreements, side letters, fee arrangements, valuation policies, related-party transactions and consultant conflicts.
Develop and execute an orderly divestment plan that protects beneficiaries rather than Apollo’s fundraising interests.
CalPERS should lead this process because it helped legitimize Apollo across the public-pension world. Instead, CalPERS has repeatedly protected private-equity secrecy while participants and California taxpayers bear the costs. Its refusal to confront Apollo after each new disclosure has become a governance failure of its own.
Public pension officials will undoubtedly say divestment is complicated, secondary-market sales can be costly and trustees must focus only on financial considerations. The new study answers that excuse. Apollo’s conduct already has a financial price. The market is charging it today.
Trustees do not have to predict whether the next Apollo controversy will involve Epstein disclosures, creditor treatment, an affiliated transaction, a private-credit loss or an Athene insurance problem. Their fiduciary responsibility is to respond to the extraordinary body of evidence already in front of them.
The market has concluded that Apollo’s reputation deserves a 100-basis-point penalty. Public pensions should stop pretending Apollo deserves another commitment.
It is time to divest.
List of Plans with Apollo Funds
Alaska Permanent Fund Apollo PE funds
Arizona PSPRS Apollo PE funds
California Public Employees’ Retirement System (CalPERS) Apollo Investment Fund VI and related vehicles
California State Teachers’ Retirement System (CalSTRS) Apollo Investment Funds VI, VII, IX, X; Hybrid Value II
Chicago Teachers Pension Fund 2024 performance confirms Apollo PE/PC as manager
Colorado PERA Apollo Investment Funds III,IV,V,VI, VII, Distresssed DIF
Colorado School Apollo Credit Opp III & DIF
Connecticut Retirement Plans & Trust Funds Apollo Investment Fund VIII
Florida State Board of Administration Apollo PE funds IV, V PC Accord V and VI
Georgia Teachers Retirement System
Idaho PERSI Apollo PE funds
Illinois Teachers Retirement System Apollo PE funds X
Illinois Municipal Apollo Credit Wilshire
Indiana Public Retirement System (INPRS) Apollo Origination Partnership
Iowa Public Employees Retirement System Apollo PE funds Wilshire
Kansas Public Employees Retirement System Apollo PE funds VIII,IX
Kentucky Teachers Apollo REIT & Apollo Stock
Los Angeles City Employees’ Retirement System (LACERS) Apollo PE funds VI
Los Angeles (CA) Water and Power has PE fund X
Louisiana Teachers’ Retirement System of Louisiana (TRSL), Apollo Credit, Natural Resources
Maryland State Retirement & Pension System ?PE funs
Massachusetts PRIM Apollo PE funds
Michigan RS Apollo Investment fund VIII, IX Hybrid Value Funds, Credit/ Opportunistic Credit
Minnesota State Board of Investment Apollo/Athene Dedicated Investment Program II
Mississippi PRS Apollo VIII IX Private Equity funds
Montana Board of Investments Stock holdings?
Nebraska Investment Council India Property Fund II LLC.
New Hampshire Retirement System Apollo PE funds
New Jersey Division of Investment: Stock holdings?
New Mexico State Investment Council Apollo PE VII, VIII PC
New York City Teachers’ Retirement System Apollo PE funds
New York City (NY) ERS PE $500mm 2013
New York City (NY) Police PE fund VI
New York State Apollo PE VIII
North Carolina Retirement Systems Apollo PE funds VI, VII
Ohio Highway Patrol SHPRS: Apollo PE funds
Ohio SERS: “Core Farmland Fund, LP Wilshire
Ohio State Teachers Retirement (STRS) PE Apollo S3 Equity Hybrid Solutions
Ohio Public OPERS Apollo PE funds, Oregon Public Employees Retirement Fund (OPERF), Apollo PE VI, VII, VIII, IX.
Oregon PER recently comitted $300mm to Apollo distressed debt fund as well as earlier funds like Apollo PE IX
Pennsylvania PSERS Apollo PE funds IV $620mm
Pennsylvania SERS Apollo PE funds VI- VIII
Rhode Island Retirement System Apollo PE VIII, IX
San Diego City Employees Retirement System Apollo PE funds
San Francisco (SFERS) San Francisco Employees’ Retirement System Apollo PE funds Wilshire
South Carolina RS $750mm
South Dakota Retirement System Apollo PE funds
Texas County & District PE fund X
Texas ERS Apollo Credit Strategies
Texas Municipal Fund VIII
Texas TRS Teachers’ Retirement Apollo PE funds
Tennessee Consolidated Retirement System Stock holdings?
San Francisco Employees’ Retirement System Apollo PE funds
San Diego City Employees’ Retirement System Apollo PE funds
University of Calfiornia PE VII, VIII Principal Wilshire
Virginia Retirement System Apollo PE funds
Washington State Investment Board (WSIB) Apollo S3 Equity & Hybrid
Australian Super Funds with Apollo – Hostplus, Care Super, Catholic Super-Equip Super. Micheal West/Cliona O’Dowd
