What level of fees should an investor (including a pension fund) pay?

I got an update about my retirement account yesterday from TIAA-CREF.   It was good news - apparently the fees are going down on an equity index fund and also on a bond fund.

Here's a snapshot of the statement.  My fees are now 0.06% and 0.07% for two index products.   Now that is what I call cheap!

It got me wondering, how much would the NC Pension Fund pay at these rates?

Assuming that the NC Pension Fund is about $90 Billion in assets, a 0.07% expense ratio would be about $63 million in fees.

Which raises the question: Why does the NC Pension Fund pay $500 million in fees?  It appears that the fund is overpaying by about $437 Million annually.