ERISA is supposed to be simple.
The retirement plan exists for the exclusive benefit of participants.
Not for the employer’s investment bankers. Not for the CFO’s lenders. Not for the consultant’s business partners. Not for private-equity firms that finance the corporation.
And certainly not for Wall Street firms looking for another distribution channel for expensive products that would have a much harder time getting into an SEC-regulated mutual fund.
Yet I believe this basic principle explains one of the biggest remaining problems in America’s retirement system: too many retirement-plan investment decisions may still be influenced by corporate and Wall Street relationships that have little or nothing to do with what is best for participants.
Thole Exposed the Strange Economics of Defined-Benefit Plans
The Supreme Court’s 2020 decision in Thole v. U.S. Bank illustrates an important distinction.
In a traditional defined-benefit pension, participants generally receive the pension benefit they were promised regardless of whether the plan invests cheaply in index funds or pays enormous fees to hedge funds and alternative managers—assuming, of course, the employer ultimately remains capable of funding the benefit.
That means excessive investment costs can economically fall primarily on the corporate sponsor, rather than immediately reducing an individual participant’s account.
The Supreme Court consequently held that the Thole plaintiffs lacked Article III standing because they had received all of their monthly pension benefits and would receive the same benefits regardless of the lawsuit’s outcome.
Whatever one thinks of the standing decision, it highlights something important:
A DB pension and a 401(k) are fundamentally different economic animals.
In a 401(k), participants own the consequences.
If the investment earns less because of excessive fees, participants lose.
If an alternative investment is overvalued, participants lose.
If a private-equity fund charges layers of management fees, carried interest and portfolio-company expenses, participants lose.
If an annuity provider retains an excessive insurance spread, participants lose.
There is no corporate balance sheet automatically making the participant whole.
Intel: Running a DC Plan Like a DB Plan
That is why the Intel litigation is so important.
As I have previously argued, Intel appears to have imported the institutional-pension model into a defined-contribution plan, using private equity and other alternatives through structures whose underlying economics can be extraordinarily difficult for ordinary participants—and sometimes even sophisticated fiduciaries—to evaluate.
That might make conceptual sense in a $50 billion pension plan staffed with investment professionals.
It is much harder to justify when the ultimate investor is an employee whose retirement account bears the investment results.
The central question should therefore be:
Why expose a 401(k) participant to opacity, valuation discretion, illiquidity, leverage and multiple layers of fees unless the fiduciary can demonstrate that participants are actually being compensated for taking those risks?
“Institutions invest this way” isn’t an answer.
A 401(k) isn’t a corporate pension. https://commonsense401kproject.com/2026/01/17/the-supreme-courts-intel-case-is-about-secrecy-fake-benchmarks-and-fiduciary-illusions/
The 401(k) System Has Actually Improved—Because of Litigation
There are roughly 8,000 large 401(k) and ERISA-covered 403(b) plans with more than $100 million in assets.
My rough estimate from years of examining plans is that perhaps half—around 4,000—are now reasonably well run.
That is dramatically better than a decade ago.
I would estimate that the number of well-run large plans has increased roughly fourfold.
And I don’t credit Washington for most of it.
I credit ERISA litigation.
Fee lawsuits forced fiduciaries to examine recordkeeping costs.
Litigation pushed plans toward institutional share classes.
It exposed revenue sharing.
It challenged proprietary funds.
It forced committees to document their processes.
It made consultants explain themselves.
It made corporate boards recognize that the 401(k) plan wasn’t simply an employee-benefits department backwater.
Democratic administrations have talked about protecting retirement investors, but in my view the Department of Labor has done far too little to confront these structural conflicts. Republican policymakers have increasingly pushed in the opposite direction—toward expanding access to private equity, private credit, annuities and other complicated Wall Street products.
The plaintiffs’ bar may have done more to improve America’s large 401(k) plans than either political party.
But the Easy Problems Were Fixed First
The first generation of ERISA litigation went after problems that could be seen relatively easily.
A mutual fund charged 100 basis points when an otherwise identical institutional share class charged 40.
A recordkeeper received $150 per participant when comparable services cost $40.
A plan stuffed its lineup with the sponsor’s proprietary funds.
Those cases mattered.
But today’s conflicts can be much harder to see.
They increasingly occur outside the transparent world of SEC-registered mutual funds.
Private equity.
Private credit.
Collective investment trusts.
Insurance-company general and separate accounts.
Lifetime-income products.
Custom target-date funds.
Alternative-investment vehicles.
This is precisely where ERISA standards should become higher, not lower.
Instead, we seem determined to move retirement assets into structures with less transparency.
Follow the Corporate Relationships
Suppose a corporation’s 401(k) committee selects a large Wall Street firm.
The traditional fiduciary analysis asks:
Was the investment prudent?
Were the fees reasonable?
Was performance properly benchmarked?
Those are necessary questions.
But they may no longer be sufficient.
We should also ask:
What other business does this Wall Street firm do with the corporation and its executives?
Consider the possibilities.
The company’s CFO may have banking relationships with the same institution providing retirement-plan products.
The corporation may borrow money from that bank.
It may use the bank for investment banking, treasury management, derivatives, acquisitions or bond offerings.
The corporation may borrow from a private-credit fund affiliated with Apollo, Blackstone, JPMorgan or another enormous financial organization.
Executives may have personal wealth-management relationships.
A consultant may have relationships with investment managers that extend well beyond the consulting contract.
These relationships don’t prove an ERISA violation.
But pretending they don’t matter is equally unreasonable.
I Saw This Problem Thirty Years Ago
This isn’t theoretical to me.
In the 1990s, I worked on defined-contribution plans for a bank.
We lost one piece of retirement-plan business to another bank.
Why?
As I understood it, the competing bank offered the corporate client a better deal on its commercial lending relationship.
Think about what that means.
The decision supposedly concerned the employees’ retirement plan.
But another corporate banking relationship could influence who received the retirement business.
That experience permanently changed how I look at retirement-plan conflicts.
Whenever someone tells me that a sophisticated corporate retirement committee selected a financial company solely because it was best for participants, my next question is:
What other business was going on between the two companies?
Now Add Private Equity and Private Credit
The potential conflict becomes even more significant as Apollo, Blackstone and other alternative-asset managers expand across corporate finance.
These aren’t simply “investment managers” anymore.
They can be lenders.
Private-credit providers.
Insurers.
Asset managers.
Real-estate financiers.
Buyout sponsors.
Retirement-product manufacturers.
Owners of companies doing business with plan sponsors.
And increasingly, they want access to defined-contribution retirement assets.
Imagine a corporation borrowing hundreds of millions of dollars from a private-credit platform while its retirement committee is simultaneously considering products affiliated with that same financial organization.
Does that automatically mean the retirement investment is imprudent?
Of course not.
But ERISA’s exclusive-benefit rule should require fiduciaries to ask whether the relationship affected the decision. https://commonsense401kproject.com/2026/08/03/more-academics-oppose-private-equity-in-401k-clayton-and-de-fontenay/
Participants shouldn’t become bargaining chips in a larger corporate relationship.
Consultants Can Be the Missing Link
The consultant is supposed to protect the committee from precisely these conflicts.
But what happens when the consultant has conflicts of its own?
I have previously written about the relationships between major pension consultants and private-equity firms, and why consultants should receive much greater scrutiny in ERISA litigation.
Consultants can occupy an extraordinarily powerful position.
They decide which managers get presented.
They construct peer groups.
They recommend benchmarks.
They evaluate fees.
They prepare committee materials.
And when something goes wrong, corporate fiduciaries frequently point to the consultant and say:
“We relied on our expert.”
That defense becomes considerably less reassuring if the supposedly independent expert has undisclosed financial, ownership, marketing, conference, insurance, referral or other relationships with the financial firms being recommended.
The consultant should be the firewall.
A conflicted consultant can instead become the distribution system.
And Don’t Ignore Personal Relationships
Discovery should go further.
Who introduced the consultant?
Who introduced the investment manager?
Was the consultant already working with the CEO, CFO or board members?
Were there family relationships?
Friendships?
Prior employers?
Banking relationships?
Insurance relationships?
Executive-benefit arrangements?
Private-wealth relationships?
Commercial loans?
Investment-banking mandates?
Private-credit loans?
These aren’t accusations that every relationship is corrupt.
They are questions that sophisticated fiduciary oversight should already be asking.
ERISA demands loyalty.
You cannot intelligently evaluate loyalty while deliberately ignoring relationships capable of creating divided loyalties.
Mutual Funds Put Some Guardrails Around This Problem
This is another reason I continue to argue that ERISA investment standards should be higher than SEC mutual-fund standards—not lower. https://commonsense401kproject.com/2026/07/27/erisa-investment-standards-should-be-higher-than-mutual-fund-standards-not-lower/
Public mutual funds aren’t perfect.
But they operate inside a highly developed federal securities framework involving standardized disclosures, audited financial statements, pricing requirements, liquidity rules, custody requirements and extensive public reporting.
Most importantly, investors can usually determine what they own and what it costs.
Now compare that with the direction Wall Street wants retirement plans to travel:
Private equity inside a CIT.
Private credit inside another pooled vehicle.
An annuity embedded inside a target-date fund.
Alternative assets buried several layers beneath a participant’s investment election.
Each additional layer can make conflicts, compensation and valuation harder to see.
Opacity isn’t an unfortunate side effect. It can have enormous economic value to Wall Street.
The Next Generation of ERISA Litigation Should Follow the Money Outside the Plan
For years, ERISA cases have examined the money flowing out of the retirement plan.
That remains important.
But perhaps the next generation of cases needs to examine money flowing around the retirement plan.
Who lends money to the employer?
Who handles its investment banking?
Who manages executive wealth?
Who sells its insurance?
Who finances its acquisitions?
Who owns its consultant?
Who pays the consultant?
Who finances the consultant?
Who owns the recommended manager?
What business does the employer conduct with the manager’s affiliates?
And what relationships exist among the executives, consultants, recordkeepers, insurers and investment managers?
The most important conflict may never appear on the Form 5500.
The Common Sense Test
Strip away the acronyms and fiduciary jargon.
A worker puts $100 into a 401(k).
Every person involved in deciding what happens to that $100 should be trying to make that worker’s retirement better.
Period.
If an investment is selected because it helps the employer’s banking relationship, something is wrong.
If it helps obtain corporate financing, something is wrong.
If it helps the consultant’s business relationships, something is wrong.
If it puts a CEO’s friend in the door, something is wrong.
If it gives a private-equity manager another captive pool of assets while providing no demonstrable benefit to participants, something is wrong.
And if nobody can determine whether any of those things happened because the investment has been buried inside opaque private funds, CITs, annuity contracts and custom target-date structures, that opacity is itself a fiduciary warning sign.
ERISA doesn’t say:
Put Wall Street first unless participants can prove exactly how the deal was made.
It says fiduciaries must act for the exclusive purpose of providing benefits to participants and beneficiaries. We will see soon if the Supreme Court will uphold this in Intel.
After fifty years of ERISA, that shouldn’t be a revolutionary concept.
Yet in far too many retirement plans, it apparently still is.
The CommonSense 401k Project 