Many employer-sponsored retirement plans are failing the workers who rely on them, with experts saying a vast majority of 401(k) accounts are underperforming, overpriced or both. At the same time, consulting research found that a large share of corporate plans carry fee problems or compliance violations that can drain savings over time.
Ted Benna, who is widely credited as the father of the 401(k), said the entire mutual fund industry has made enormous profits from the plans. He said that over the life of an investment, the hit to savers is “gigantic.” That warning lands hard now because retirement contributions are supposed to be compounding for decades, not being eaten away by costs and weak oversight.
Abernathy-Daley estimated that almost 8 in 10 corporate retirement plans with at least 100 employees are overpaying on 401(k) fees. The firm said any company paying more than 0.3% is probably overpaying. The U.S. Department of Labor has said that even a 1% increase in fees could cut savings by 28% for participants who set money aside for 35 years or more.
The same research also found broader compliance trouble. Abernathy-Daley estimated that 43% of U.S. 401(k) plans have at least one severe violation, including fraud or dishonesty, insufficient fidelity bonds or a failure to offer qualified default investment alternatives. It said 76% have at least one less serious violation, such as failing to issue corrective distributions of excess contributions or failing to disburse payments on time.
That gap matters because the problems are not just about higher fees. They also raise the risk of fines or penalties for companies, while workers can see their nest eggs weakened by costs they often never notice until years later. For people trying to retire with enough money to last, the real surprise is how much of the damage happens quietly, long before the final account statement arrives.
