I feel like this is just a gap in ERISA. The actual problem here is that Intel included a massive private equity component
in its target date funds, which are sold and widely understood to be cautious vehicles for maximizing the chance of a comfortable retirement at the target date. But ERISA was written at a time when there was no such thing as a target date fund (even index funds barely existed), and few retail investors had the financial literacy to form meaningful opinions about their allocation between investment classes. So the plaintiffs are forced to have a proxy argument about "prudence" in the abstract, rather than the actual problem that they were misled about the contents of the funds.
It feels like what this really wants to be is a standalone "private fund" in the 401k plan, which employees can allocate or not allocate their contributions to an X% cap. But I'm not sure you can actually do that under the rules as they exist today.