A little more than 25 years ago, the IRS approved the first 401(k) plans. According to recent statistics, 47 million Americans participate in defined contribution (DC) plans -- the fancy term for 401(k)s -- compared with only 21 million participating in traditional defined benefit (DB) plans.

In the span of one generation, the majority of Americans must now shoulder the daunting task of becoming accomplished investors to ensure a secure retirement. While noble in theory, this shift from DB to DC plans has been an unprecedented boon for financial middlemen in reality.

For our mobile society, with ever-fewer people spending their entire career in the same job, DC plans are better than DB plans. But many mutual fund companies use 401(k) platforms as gigantic distribution systems that lock participants into plans with high annual fees, both disclosed and hidden. To add insult to injury, participants are often saddled with mediocre investment options. Most participants don't have options with expense ratios of less than 1%. In contrast, Vanguard's Total Stock Market ETF (AMEX:VTI) has an expense ratio of 0.07%.

According to William Bernstein, author of The Four Pillars of Investing and The Intelligent Asset Allocator, the industry is not completely to blame. He notes that the average 401(k) participant "is a long-term investor the way Tony Soprano is a Catholic." Investor cluelessness, combined with industry greed, yields "defined chaos," according to Bernstein.

Despite the critics, the government has done a few things right. For example, the federal Thrift Savings Plan (TSP) funds, offering participants low-cost index funds and lifecycle funds, could be a model for the private sector. The Florida Retirement System's investment plan also provides low-cost index funds as options.

This Fool would like to see new legislation that opens 401(k) plans to competition. The current 401(k) system is bloated, inefficient, and often doesn't work in a participant's best interest. Let's hope the 401(k) won't celebrate too many more birthdays before that situation changes.

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Fool contributor Buz Livingston, CFP, is a Florida resident. He believes most people will benefit from professional advice and appreciates your feedback. He does not own the ETF listed, and he knows that the TSP and FRS retirement plans are superior to private industry plans. The Fool's disclosure policy has an unbeatable expense ratio of 0.00%.