A massive new study by Abernathy-Daley covering nearly 58,000 corporate 401(k) plans delivered a simple—but startling—message: virtually every plan suffers from overpriced, underperforming funds. In fact, 99% of plans have at least one fund with a cheaper, better-performing alternative over three, five, and ten-year spans, and 85% of plans have at least five such alternatives. Put simply: plan sponsors and advisors are systematically letting participants pay too much for too little.
Why Fiduciaries Are Facing Legal and Ethical Heat
This isn’t just bad investment advice—it’s a liability. Abernathy-Daley pulls no punches: the industry suffers from misaligned interests, inertia, and opaque revenue sharing that keeps inferior funds on shelves. These problems are well established—the freakshow litigations at Southwest Airlines and UnitedHealth earlier this year underscore the legal risk of inaction.
What Fiduciaries Should Do Right Now
1. Benchmark Your Plan Annually
If you’re not comparing your lineup against peer medians every year—including returns and fees—you’re asleep at the wheel. Plans with persistent underperformers need to be pruned, fast.
2. Fix the Lineup
Plan advisors must be held accountable. If there are cheaper alternatives in the same fund category performing better, swap them out. Don’t let conflicts of interest justify inertia.
3. Boost Participant Education
The Bottom Line
Relying on participants to audit their own plan is fantasy. Instead, sponsor-led education must include easily digestible summaries of fee impact and fund replacement rationale.
This isn’t theoretical. It’s empirical: you’re almost guaranteed to find overpriced, lagging funds if you audit your 401(k) lineup. That’s a fiduciary failure—not an investment oversight.
If you’re serious about your duty as a fiduciary—if you’re serious about participants’ retirement outcomes—you’ve got to stop treating fund selection as a “set-it-and-forget-it” routine. Benchmarks, accountability, and education are not optional. They’re the difference between good faith compliance and systemic breach.
