The Law Firm That Designs 401(k) Plans Couldn't Fix Its Own

The 401(k) system sometimes reveals just how far it operates from anything resembling a functioning market. Consider the retirement plan sponsored by Nisen & Elliott, a Chicago law firm with a broad range of practice areas, including an employee compensation and benefits practice focused on the design and implementation of 401(k) and other employee benefit plans.

The plan grew from roughly $9 million in assets in 2008 to $22.8 million in 2024. Over the same period, participants declined from 55 with balances to 25 active participants. According to the plan's Form 5500 filings, the amounts reported for Administrative service providers (line 8f)—which include commissions—show the following, along with one year of other expenses (line 8g):

2010: $9,653
2011: $13,254
2012: $13,615
2013: $13,450
2014: $1,400
2015: $1,600
2016: $5,785
2017: $20,983
2018: $3,947
2019: $56,962
2020: $6,342 (other expenses, line 8g)
2021: $55,522
2022: $59,694
2023: $60,207
2024: $89,685

During this period the plan sponsor and design remained unchanged while assets grew to more than $22 million, supported by substantial annual contributions from both employer and employees.

Because these expenses appear on the Form 5500 as plan expenses, they come directly out of participant retirement accounts. Since partners likely hold the largest balances, they are likely absorbing the largest share of these costs. Those fees are not tax deductible to the individual participants. The same costs paid at the firm level would be fully deductible business expenses. Plan fees should reflect the work performed — not the total assets in the plan. If anything, fees should have decreased as participants dropped from 55 to 25. Instead they went the other direction.

Every dollar removed from a tax-advantaged account in fees is a dollar that stops compounding. Over this period, roughly $398,000 left participant accounts in fees. Had those dollars remained invested in the S&P 500, participant accounts would be approximately $750,000 larger today. Instead, participants absorbed every dollar with no deduction — and lost the compounding on top of it.

The core fiduciary duty under ERISA is straightforward: plan fees must be reasonable relative to the services provided. When a firm with an employee compensation and benefits practice structures its own plan this way, it highlights something deeper about the system.

The issue is not a lack of expertise, but rather that the 401(k) system often removes the market pressures that force prices to become reasonable in the first place. And when even the experts operate inside that structure without challenging it, the result should give the system pause.