A recent analysis by Abernathy Daley 401k Consultants revealed a troubling trend: the vast majority of corporate 401(k) plans have consistently underperformed cheaper, more effective alternatives over the past decade. And unless structural changes are made, that underperformance is expected to continue.

According to the study, which reviewed over 58,000 U.S. defined-contribution plans from 2015 to 2025, more than 99% of plans included at least one fund where better, lower-cost options were available in the public market. Even more concerning, over 70% of plans held funds that trailed behind at least 10 peer funds—all of which had stronger returns and lower fees over both three- and five-year periods.

The problem, the report states, is systemic. As Steven Abernathy, CEO of the firm, explains, the retirement plan industry is “plagued by a direct misalignment between the interests of plan participants and those managing the plans.” The findings paint a clear picture of what he calls a “national retirement plan crisis.”

Why does this happen?

The report suggests a mix of fiduciary complacency, outdated fund choices, and—perhaps most troubling—conflicts of interest stemming from revenue-sharing arrangements between plan administrators, recordkeepers, and advisors. In many cases, plan decision-makers are financially incentivized to keep underperforming, high-fee funds in place.

This issue is already leading to legal consequences. One high-profile example is a January 2025 class-action lawsuit against Southwest Airlines, alleging that the airline failed to remove a chronically underperforming fund that lagged its benchmark by more than 25% over nine years, all while charging 64 times more in fees than a comparable index.

So what can be done?

The report recommends:

• Eliminating revenue-sharing agreements to align advisor incentives with participant outcomes

• Capping expense ratios on 401(k) investment options

• Defaulting to low-cost index funds unless employees opt-out

• Mandating annual reviews and timely replacement of underperforming funds

Know Where Every Dollar Is—and Take Back Control

Here's where this matters for our families: most investors assume their 401(k) is “set it and forget it.” But what if that assumption is quietly draining your future retirement income?

Even in some of the largest, most widely used corporate retirement plans, you may have the option to self-direct a portion of your 401(k) through what's called a Self-Directed Brokerage Window. It’s a feature often buried in the fine print, but with the proper guidance, it can unlock access to higher-quality investment choices, free from the conflicts of interest that plague many default options.

If you’re serious about aligning your investments with your long-term vision and purpose, you can’t afford to ignore where your retirement dollars are parked. A 401(k) shouldn’t be a trap—it should be a powerful tool. However, it requires proactive planning, review, and sometimes some maneuvering to make it work for you.

At the very least, make sure your 401(k) is on your radar, not on autopilot. You may have more control than you think—and in this case, a little oversight can go a long way toward a stronger, more secure retirement.