The reality is that many retirement planning decisions already require participants to evaluate concepts they may not fully understand. That reality raises an important question. Should a plan exclude a potentially beneficial option simply because some participants may find it difficult to understand?
Tag "liability"
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That is the line committees cannot afford to miss. They cannot interfere, but they also cannot ignore. Those two verbs define the narrow lane that fiduciaries must stay in if they want delegation to work as intended.
Fiduciaries can follow every step of a prudent process and still end up with outcomes they did not anticipate. That’s not how fiduciary risk is supposed to work. Or at least, not how it used to work.
Private equity inside a daily-valued, participant-directed plan introduces structural tension. Illiquid assets must coexist with participant liquidity expectations. Valuations must be estimated where markets do not exist. And governance must bridge that gap without introducing bias or delay.
Cunningham v. Cornell is testing whether traditional 401k fiduciary compliance truly protects plan sponsors. Courts and regulators are probing governance gaps, personal liability, and participant harm more aggressively than ever.
In many small employer 401k plans, those pressures combine with poor vendor selection, weak oversight, and minimal participant education to create environments where employees pay more and get less.
The broader plan-design conversation, including “Beyond Auto-Mania,” shows a shift from simple auto-features to guided, retirement-readiness approaches. That trajectory supports treating embedded income as part of a holistic, user-friendly design rather than a fringe option.
Risk capacity anchors 401k advice in hard data—income stability, net worth, liquidity, and retirement timeline. Unlike tolerance, which shifts with market moods, capacity reflects what participants can afford to lose, aligning with ERISA’s fiduciary duties.
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