Your 401(k) could be costing you in obscure fees. One former Texas grocery supervisor sued over it — and now warns others what to watch for

Schultz, who holds an MBA and has a talent for explaining financial topics, tried to help. But as the New York Times reported recently, the deeper she dug, the more uneasy she became.

Schultz said the plan’s matching formula was so complicated that many workers couldn’t figure out how generous it actually was. The mutual funds had unusually high fees. And even though Spanish was the first language for many of the workers, there were limited Spanish educational materials.

Nothing she saw was illegal, but that wasn’t the problem. The problem was that most of the employees had no idea.

When a 401(k) isn’t a good fit

There doesn’t need to be any fraud or intentional wrongdoing in order for a 401(k) to fail its plan holders. The default asset mix could be a bad fit for their needs, or the particulars of the plan could be poorly communicated.

Employers choose the investment lineup. Workers are often expected to navigate it without much help, and they tend to assume someone more knowledgeable has already taken care of it.

Schultz raised her concerns but got little traction. Eventually, she left H-E-B because of the long retail hours and lingering 401(k) frustration.

A few years later, she heard about a class-action lawsuit against the company, alleging that its 401(k) plan had unnecessarily high fees and unusual investment options.

She joined it. According to Schultz, some H-E-B workers were earning around $30,000 a year and eating Lunchables because fresh produce was just too expensive. For them, even a $5,000 settlement would be life-changing.

The lawsuit, filed in 2019, is still moving through federal courts. H-E-B released a statement saying it is “committed to doing the right thing,” offers “best-in-class benefits,” and plans to fight off “unfounded claims.” The case hinges on whether the company met its fiduciary duty, which is the legal requirement that plan sponsors act in workers’ best interests (1).

Whatever the outcome, the broader lesson goes beyond one grocery store in Texas.

Roughly 67% of U.S. private industry employees have access to a defined-contribution plan like a 401(k), and about 49% participate overall, according to the Bureau of Labor Statistics (2).

Federal rules require employers to disclose fees and investment options in 401(k)s — but disclosure doesn’t equal understanding. A 2021 report from the U.S. The Government Accountability Office found that 40% of workers don’t fully understand fee information and 41% don’t even know that they pay fees (3).

Employers that sponsor 401(k) plans have fiduciary responsibility. That means they must act “prudently” in the interest of participants and beneficiaries, and should avoid conflicts of interest, offer reasonable options, and monitor costs (4). But they aren’t personal financial advisors to individual employees.

The result? Workers bear full responsibility for their retirement outcomes, but when it comes to understanding the system, they’re mostly on their own.

Schultz eventually became a Certified Financial Planner and launched her own advice practice, charging $400 an hour. In this role, she is a fiduciary, meaning she must give advice based on clients’ best interest. She does not take commissions or a percentage of clients’ assets, as many financial advisors do (1). She also shares her insights about personal finance (especially for women) as a social media creator under the handle @her.personal.finance.

When it comes to retirement, even small misunderstandings can become costly mistakes, and when a system works best for people who already understand it, where does that leave everyone else?

What workers can do now

A 401(k) doesn’t have to be a blind leap of faith. For workers who have one, understanding a few fundamentals can make a big difference:

Know what you’re paying. Look up your plan’s fees, including expense ratios and any administrative costs. A fund that charges 1% instead of 0.1% may not sound dramatic, but over a 30- or 40-year career, that gap can mean missing out on tens of thousands of dollars from a retirement balance (5).

Understand the default. Many workers are auto-enrolled into their 401(k) plans and never make an active effort to understand what they contain. It's worth knowing whether you’re in a target-date fund — meaning the risk profile automatically adjusts as you age and get closer to retirement — a stable-value fund, or something riskier than you realized.