It's minor kickbacks and a lot of information asymmetry.
The big kickbacks come from the "benefits consulting" companies that "help" small to midsize businesses figure out what vehicles to use to offer benefits for their employees. (This sometimes includes health insurance but we're not talking about that) Their main source of income is commissions to their company for funneling their clients' employees money into the funds themselves. Unsurprisingly, the funds with higher fees pay higher commissions.
The kickbacks to the companies themselves take the form of offloading HR functions onto the "broker" aka benefits consultant. They will do things like print all the materials, give lunch and learns to the employees about the plans, fulfill all the regulatory functions, etc. They also tend to take the HR decision makers out to fancy lunches and things of that sort. So mostly the HR departments are being bribed to look the other way in order for their jobs being easier.
I've pointed out suboptimal fund offerings at multiple small companies and been ignored/rebuffed every time. Every large company I've worked for had really good fund offerings.
It's amazing how simple human laziness and willful ignorance leads to literally millions in wealth being siphoned off of hard working employees into the pockets of benefits consultants and mutual fund companies. The HR departments of many of these companies literally don't care.