If a small employer goes to someone like Vanguard, Vanguard will almost certainly charge the employer some amount of money to set up and administer the 401k. It might not be a ton, but it will be something.
However, other high cost 401ks will tell the small business that they will run the 401k FOR FREE. No cost to the employer. This, of course, looks fantastic to the employer. They can tell prospective employees that they have a 401K program, and it doesn't cost them anything.
Of course, because they make it "free" to the employer, they have to (Mod Note: See below) the employees with outrageous fees.
Happens all the time. My current small company has a high cost 401k that costs the company nothing, but the employees are (Mod Note: See below) It's so bad that I've considered not even participating, despite the many advantages of a 401K. I'm quite sure this is common for most small, and even some larger companies.
Mode Note:
Forum Rule #6: "Use good taste." There's nothing wrong with using good, solid, hyperbole and exaggeration in a metaphor, but we expect our members to refrain from tasteless comparisons that are completely of proportion. As an example, it not appropriate to compare rape, domestic assault, or genocide to unfair business practices that result in being overcharged for a service.