What You Can Do About a Lousy 401(k)

Spread across an entire plan, that represents a lot of money lining the pockets of investment professionals rather than the retirement accounts of workers.

Why would an employer pick share classes that are obviously to the detriment of their workers? In many cases, they wouldn't; they simply don't know how the financial industry works. "The plan sponsor is not the one choosing the share class.… Usually, the adviser or plan provider is helping select those," says Jones.

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Bad Investments

Unfortunately, plan sponsors may be nudged in the direction of adding investments that could benefit the investment provider more than plan participants.

"The revenue sharing they can build in is the most important to them," says Morningstar.

Revenue sharing occurs when plan providers get payments from investment fund companies for selecting particular mutual funds for 401(k) plans. Plan sponsors are often unaware that these conflicts of interest exist. "Many sponsors, particularly of smaller plans, do not understand whether or not providers to the plan are fiduciaries, nor are they aware that the provider's compensation may vary based on the investment options selected. Such conflicts could lead to higher costs for the plan, which are typically borne by participants," according to a 2011 report from the Government Accountability Office.

This work is the opinion of the columnist and in no way reflects the opinion of ABC News.

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