Is Your Retirement Plan Working Against You? Examples from Northwestern Universities 401(k)

Is Your Retirement Plan Working Against You?
By Kit Lancaster, CFP® | Sterling Edge Financial

Let me ask you a tough question: When was the last time you checked who your employer’s retirement plan is truly designed to protect?

You might assume that the 401(k) or 403(b) offered by your workplace-especially at a respected institution-is optimized for your financial future. But recent lawsuits against Northwestern University’s retirement plans reveal a harsh truth: Even the most prestigious organizations can fail you.

“But It’s managed by a Fiduciary… Right?”

Northwestern’s case is a wake-up call. Their employees alleged the university:

• Paid 4–5x more in record keeping fees than comparable plans.

• Offered 400+ confusing investment options (yes, you read that right).

• Kept high-cost funds that siphoned millions from participants’ savings.

And here’s the kicker: Northwestern won awards for its benefits program while this was happening.

This isn’t about malice-it’s about misaligned incentives. Employer plans are managed in a fiduciary capacity to the organization, not you. Their duty is to avoid legal liability, not maximize your returns.

Three Questions to Ask About Your Plan

1. “Are we paying Walmart prices for Gucci record keeping?”
   Northwestern paid $4–5 million annually for basic admin services-a cost passed to employees. Your plan’s fees should be below 0.30% for large employers.

2. “Why am I offered 10 versions of the same fund?”
   Complexity breeds confusion. If your menu has dozens of overlapping options, it’s not for your benefit-it’s often to appease multiple vendors.

3. “Who’s actually watching the watchmen?”
   Northwestern’s fiduciaries allegedly didn’t benchmark fees or remove underperforming funds for years. Ask: When did our plan last conduct a competitive bid?

The Real Cost of “Good Enough”

Northwestern’s participants lost millions to excessive fees and poor fund choices. But this isn’t unique. 1 in 4 workplace plans face similar lawsuits. Why?

• Institutional inertia: Plans rarely renegotiate contracts unless forced.

• Revenue-sharing kickbacks: Hidden fees that prioritize vendor profits over your savings.

• Participant complacency: We’re trained to “set it and forget it,” but silence isn’t safety.

How to Protect Yourself

1. Audit your statement: Look for “record keeping” or “admin” fees. If they exceed 0.40%, ask why.

2. Simplify: Understand your plan options.  Make sure your investments in your 401(k) or 403b are coordinated with other investments outside your 401(k).  

3. Demand transparency: Ask HR for the plan’s 408(b)(2) fee disclosure. If they balk, that’s a red flag.

4. No Advice - No Personalization - Consider rolling over old accounts from previous employers into an Individual Retirement Account (IRA). Engaging with a personal financial advisor can provide access to a broader range of investment options compared to leaving your funds unmanaged in an employer's retirement plan.  With Sterling Edge Financial this means you get personalized advice from a fiduciary relationship specific to your financial plan.  You also receive, fee transparency and investment ideas not bound to the lowest denominator.  

Final Thought: You’re the CEO of Your Retirement

Your employer’s plan is a tool, not a strategy. At Sterling Edge, we’ve helped clients understand how to make the most of their employer plans and how to evaluate options outside of their plans.  

Don’t assume someone else is optimizing your retirement. Let’s run a free plan review together. Because if Northwestern’s employees, could get blindsided, anyone can.

Stay vigilant,
Kit Lancaster, CFP®

P.S. Forward this to a colleague who’s “too busy” to check their 401(k). They’ll thank you later.