President Trump’s recent Executive Order promoting the inclusion of private equity, crypto, and annuities in 401(k) plans has been widely interpreted in the retirement industry as a green light for sponsors to load plans with opaque, high-risk, or high-fee products. But as fiduciary attorney Jim Watkins makes clear in his August 11 article, the Executive Order does not erase the fundamental duties under ERISA. Plan sponsors still bear the highest obligation of loyalty and prudence. Courts have consistently ruled that failure to independently investigate and evaluate investments constitutes a breach of fiduciary duty.

The Legal Precedent: Independent Investigation Required

Federal courts have long reinforced this principle, and it is nearly impossible to do an independent investigation of Private Equity, Crypto, or Annuities.  Tip to Jim Watkins on cites

• Liss v. Smith, 991 F. Supp. 278, 297 (S.D.N.Y. 1989), citing In re Unisys Savings Plan Litigation, 74 F.3d 420, 435 (3d Cir. 1996), and Whitfield v. Cohen, 682 F. Supp. 188, 195 (S.D.N.Y. 1988), emphasized that “the failure to make any independent investigation and evaluation of a potential plan investment” is itself a fiduciary breach.
• In In re Citigroup ERISA Litigation, 112 F. Supp. 3d 156 (S.D.N.Y. 2015), aff’d 2017, the court underscored that fiduciaries must independently and thoroughly evaluate each investment option offered in a 401(k) plan.

The message is clear: no Executive Order can override statutory fiduciary standards established by ERISA and reinforced by decades of case law.

Application to Fixed Annuities in Today’s 401(k) Plans

The most immediate application of these rulings is to fixed annuities offered in 401(k) plans—especially those marketed by insurers and recordkeepers:

• Conflicted Providers: Fixed annuities are often offered by the plan’s recordkeeper, a “party in interest” under ERISA (Cunningham v. Cornell). This creates an inherent conflict when the recordkeeper profits from spreads or commissions embedded in the product.
• Undisclosed Spreads: Unlike mutual funds, fixed annuities lack transparent expense ratios. Insurers earn investment returns on their general account portfolios—often 6–7%—but credit participants only 2–3%. The undisclosed spread, sometimes exceeding 400 basis points, is pure profit to the insurer and impossible for a plan sponsor to evaluate without disclosure.
• Hidden Commissions: Many consultants and brokers recommending fixed annuities receive undisclosed insurance commissions, further tainting the fiduciary process.
• Opaque Contracts: Few plan sponsors, and even fewer consultants, actually read or understand the dense insurance contracts that govern these products.
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Transparency Failures = Fiduciary Breaches

Because fixed annuity spreads are concealed, plan fiduciaries cannot meet their duty of prudence to “independently investigate and evaluate” the investment option. As the courts in Liss, Unisys, Whitfield, and Citigroup ruled, the absence of such an investigation is itself a breach—regardless of whether the investment later performs well or poorly.

Trump’s Executive Order does not insulate plan sponsors from liability when they rubber-stamp insurer products without rigorous due diligence. Fiduciaries who rely on conflicted recordkeepers or consultants, accept opaque annuity contracts at face value, or fail to benchmark spreads against transparent stable value alternatives are exposing themselves—and their participants—to enormous risks.

Conclusion

The lesson for plan sponsors is straightforward: ERISA’s fiduciary duty of prudence cannot be waived by presidential decree. Courts have already provided the roadmap: every investment option, especially opaque fixed annuities, must be independently investigated and evaluated. Failure to do so is a fiduciary breach.

In today’s environment, the real danger is that plan sponsors misinterpret political signals as permission to ignore their duties. The law says otherwise.