I claim no ability to fully explain what the two legal scholars are trying to shed light on. It is a legal issue and, as one well-versed in finance and investing, I am no more equipped to comment on legal matters than legal scholars are to comment on finance and investing matters. Nonetheless, here goes:

Apparently, the courts have, in the past, given plan sponsors a fiduciary pass when they offered “high” cost funds as long as their plan’s menu included sufficient “low” cost funds. Thinks of this as an application of the Prudent Man Rule – a fiduciary will not be held liable for a small percentage of “risky” investments in any portfolio as long as the overall “risk” of that portfolio remains in the best interests of the beneficiary.

Now, there’s a difference between managing a portfolio for a single person and offering a menu of mutual fund options for a company full of employees. The menu is not the same as a portfolio. The “risk” of a handful of options is not spread out because employees get no value out of owning these options since, presumably, there are better alternatives with similar investment objectives available. This is precisely the point of Quinn and Ayres. Rather than allowing this to occur, the two authors believe the courts should hold plan sponsors liable for a fiduciary breach based on the specific investment options. They don’t want the courts to look at the menu as a whole.

Again, while I make no pretense to know anything about case law or court proceedings, as a legal layman, this strikes me as a common sense notion.

I just wish they could have said it more directly.