The Rosenbaum Law Firm P.C. Blog

One of the biggest misconceptions in retirement plan administration is believing that a small mistake will stay small.

It rarely does.

A payroll employee accidentally misses one participant’s salary deferral. Someone figures they’ll catch it next pay period.

Six months later, the mistake has affected dozens of payrolls, employer matching contributions, earnings calculations, and participant notices. What could have been fixed in a few minutes has become an EPCRS correction project.

I’ve seen eligibility dates entered incorrectly. Loan repayments coded to the wrong participant. Automatic enrollment accidentally turned off after a payroll conversion. None of those errors looked significant on day one.

They became significant because nobody noticed them.

That’s one reason I encourage plan sponsors to perform periodic operational reviews instead of assuming everything is working correctly.

Retirement plans are built on thousands of transactions each year. Even if your providers do an outstanding job, mistakes happen. The question isn’t whether an error is possible. The question is how quickly it’s discovered.

Time is rarely your friend when it comes to operational failures.

The longer an error continues, the more participants it affects, the more calculations become necessary, and the more expensive the correction becomes.

I’ve learned that successful plan sponsors don’t ignore small issues because they’re small.

They investigate them precisely because they understand what experience has taught them.

Small mistakes have a way of growing.

The good news is that the opposite is also true.

Small habits—reviewing payroll reports, asking questions, documenting decisions, and conducting periodic compliance reviews—also grow over time. They become a culture of compliance that protects both the plan and its participants.

Experience has taught me many lessons over the years.

Perhaps the most important is this: don’t underestimate the little things. In retirement plans, they rarely stay little.

After nearly three decades working with retirement plans, I’ve noticed something.

The plan sponsors who sleep best at night aren’t necessarily the ones with the biggest companies, the most sophisticated plans, or the highest-paid advisors. They’re the ones who consistently do a handful of simple things well.

First, they ask questions. They don’t pretend to know every ERISA rule, and they aren’t embarrassed to admit when they need help. Good fiduciaries understand that asking a question before making a decision is much cheaper than fixing a mistake afterward.

Second, they document everything. Committee meetings, provider reviews, investment decisions, and operational changes all find their way into written records. Memory fades. Documentation doesn’t.

Third, they review their providers every year. They don’t automatically replace them, but they also don’t assume everything is running smoothly simply because nobody has complained. Good providers welcome those conversations.

Fourth, they pay attention to payroll. Most operational failures begin with payroll. Missed deferrals, incorrect matching contributions, and eligibility errors often trace back to one payroll mistake that went unnoticed for months.

Finally, they don’t wait until something goes wrong to call their ERISA attorney or TPA. The best clients ask for advice before implementing changes, not after they’ve already created a correction project.

None of these habits are complicated. None require expensive software or a large HR department.

They simply require discipline.

I’ve seen clients with thousands of participants run exceptionally clean plans because they built good habits. I’ve also seen much smaller employers spend thousands of dollars correcting problems that could have been prevented with one phone call or one checklist.

The clients who sleep best at night aren’t lucky.

They’ve built processes that reduce surprises.

In the retirement plan world, peace of mind isn’t an accident. It’s usually the result of consistently doing the little things right.

Sometimes the best career lessons don’t come from a mentor.

They come from someone you promise yourself you’ll never become.

Early in my career, I worked for a retirement plan firm where employee turnover was so frequent that I joked we should install a revolving door at the front entrance.

The reason wasn’t difficult to identify.

The COO viewed talented employees as threats instead of assets.

People with new ideas were ignored. Employees who solved problems weren’t rewarded—they were viewed with suspicion. Instead of building a stronger organization, management seemed more interested in protecting titles and egos.

The result was predictable.

One by one, good people left.

Some started their own firms. Others joined competitors. Many became successful because they were finally allowed to do what they were good at.

Watching that unfold taught me far more than any management seminar ever could.

Leadership isn’t about making sure you’re the smartest person in the room.

It’s about hiring smart people and giving them every opportunity to succeed.

If you’re afraid someone will outshine you, you’ve already failed as a leader.

The strongest organizations I’ve encountered aren’t built around one indispensable executive. They’re built around teams where people trust one another, share ideas, and celebrate each other’s success.

Ironically, the COO who tried so hard to protect his position ended up teaching me one of the most valuable business lessons of my career.

Leadership isn’t measured by how many people work for you.

It’s measured by how many talented people choose to stay.

There’s bipartisan legislation making its way through Congress that would move the Form 5500 deadline for calendar-year plans from July 31 to October 15, while also eliminating the need for most plans to file Form 5558 extensions and allowing electronic signatures. On paper, it sounds like a simplification effort.

I understand the reasoning.

What I don’t understand is why so many people think this solves the real problem.

In my opinion, it simply kicks the can down the road.

Today, many providers operate as though the deadline is October 15 anyway because they routinely file extensions. If October 15 becomes the statutory deadline, what incentive is there to finish returns in July, August, or even September?

There isn’t one.

Instead, we’re likely to create an even bigger bottleneck.

Right now, providers have two target dates. Some returns are completed by July 31, while others are extended and completed by October 15. Spread that work over two deadlines, and at least there’s some separation.

Make October 15 the only deadline, and you’ve just concentrated an enormous amount of work into one filing season. Auditors, TPAs, accountants, recordkeepers, and plan sponsors will all be chasing the same date.

I’ve spent enough years in this business to know how deadlines work.

People don’t finish work because they have extra time.

They finish work because the deadline forces them to.

That’s human nature.

The legislation also includes electronic signatures, which I think is long overdue. That modernization makes sense and should reduce unnecessary administrative headaches.

But moving the filing deadline? I’m skeptical.

If Congress really wants to improve the Form 5500 process, I’d rather see initiatives that encourage earlier completion, improve data sharing among providers, and reduce the amount of back-and-forth needed to prepare an accurate return.

Changing the calendar doesn’t necessarily improve the process.

Sometimes all it does is change the day everyone starts panicking.

And if you’ve worked through enough October 15 filing seasons, you know exactly what I’m talking about.

I’ve spent nearly three decades working with retirement plans, and one thing has become painfully obvious.

Almost every operational failure starts with one word:

Assume.

Someone assumed payroll was withholding correctly.

Someone assumed another employee sent the notice.

Someone assumed the plan document allowed it.

Someone assumed HR handled the eligibility calculations.

Someone assumed accounting deposited the deferrals.

Nobody checked.

Retirement plan administration isn’t difficult because the rules are impossible to understand. It’s difficult because people convince themselves someone else has already handled it.

That’s how missed deferrals happen.

That’s how incorrect employer contributions get allocated.

That’s how participants get left out of the plan.

Every correction I’ve ever worked on started with an assumption that turned out to be wrong.

Successful plan providers build systems that don’t rely on assumptions. They use checklists. They document procedures. They require a second review. They ask questions even when they think they know the answer.

Experience helps, but experience without verification is just confidence.

I’ve learned that “trust but verify” isn’t just good advice. It’s an operational philosophy.

The providers that consistently avoid expensive mistakes aren’t necessarily smarter than everyone else.

They’re simply less willing to assume.

Before every filing, every payroll, every amendment, and every compliance project, someone should ask one simple question:

“How do we know that’s correct?”

That question has probably prevented more operational failures than any software program ever will.

Every plan provider has heard it.

“Your fees are too high.”

Maybe they are. Maybe they aren’t. But when a prospect immediately focuses on price, it’s often because nobody has explained the real cost of making a bad decision.

The cheapest TPA isn’t the cheapest if they miss eligibility, botch a plan merger, fail ADP testing, or disappear when the DOL comes calling. The lowest recordkeeping fee means little if participant service is terrible and payroll integration creates headaches every pay period.

Plan sponsors don’t lose sleep over paying an extra few basis points. They lose sleep wondering whether they’re going to receive an IRS letter, fail an audit, or learn that employee deferrals weren’t deposited on time.

That’s where plan providers need to change the conversation.

Don’t lead with fees. Lead with risk reduction.

Explain how your procedures catch mistakes before they become corrections. Explain your quality control process. Explain how often you review plan documents. Explain why cybersecurity, fiduciary governance, and operational consistency matter.

The value isn’t in preparing a Form 5500. The value is making sure the information is right before it’s filed.

Anyone can claim they’re less expensive. That’s not much of a competitive advantage because someone will always come along willing to charge less.

Very few providers can explain how they help clients avoid costly mistakes.

That’s the sales pitch.

Price gets attention. Trust wins clients.

When sponsors understand that your job is to reduce risk, not just process paperwork, the discussion changes. Instead of asking, “Why do you cost more?” they begin asking, “What happens if we don’t have someone like you?”

That’s a much better conversation to have.

Ask most retirement plan providers why they lost a client and you’ll often hear the same answer: “We were undercut on fees.” While price certainly plays a role, I don’t think it’s the reason most relationships end. More often than not, clients leave because they were surprised.

No plan sponsor enjoys finding out about a missed compliance deadline after the fact. They don’t want to discover an operational failure when the auditor does. They certainly don’t appreciate learning that an employee wasn’t enrolled properly six months after payroll made the mistake. The surprise isn’t just the error itself—it’s realizing that no one warned them before it became a bigger problem.

Good providers understand that difficult conversations are part of the job. If a plan sponsor is headed toward trouble, tell them early. If a payroll process is creating unnecessary risk, explain it. If a correction is going to be expensive, don’t sugarcoat it. Clients may not like the news, but they will appreciate the honesty.

Transparency builds trust. Surprises destroy it.

I’ve seen providers keep quiet because they hoped an issue would resolve itself or because they didn’t want to have an uncomfortable conversation. That’s almost always a mistake. Small issues have a way of becoming large ones, and by the time they’re discovered, the client is no longer upset about the error—they’re upset that no one told them.

The providers who retain clients for years aren’t necessarily the cheapest. They’re the ones who communicate consistently, explain problems before they become crises, and never leave a client wondering what’s happening.

Clients can budget for higher fees. It’s much harder to budget for unexpected problems that could have been avoided with a simple phone call.

Plan sponsors spend a surprising amount of time preparing participant communications. Notices are drafted, emails are reviewed, attachments are added, and everything is sent on schedule.

Then… nothing.

Employees delete the email without opening it, promise themselves they’ll read it later, or assume it doesn’t apply to them.

Can you blame them?

Think about the average workday. Employees are flooded with emails about projects, meetings, deadlines, software updates, mandatory training, and company announcements. Somewhere in the middle is another message about the 401(k). It’s easy to understand why it gets overlooked.

The problem is that many benefits emails read like legal documents instead of conversations. They explain what participants are required to receive but rarely explain why they should care.

Instead of leading with regulations, lead with relevance.

Don’t tell employees they’re receiving an annual notice. Tell them how increasing their deferral by one percent could make a meaningful difference over time. Don’t simply announce enrollment dates. Explain what happens if they miss them. Give participants a reason to keep reading.

Communication also shouldn’t be limited to email. Short videos, webinars, payroll reminders, manager talking points, and in-person meetings all reinforce the message. People learn differently, and repetition increases the chances they’ll actually pay attention.

ERISA requires many notices, but compliance should be the floor—not the ceiling.

The goal isn’t merely proving that an email was sent. The goal is helping employees understand and appreciate one of the most valuable benefits their employer provides.

If your benefits communication strategy is measured only by whether the email went out, you’re measuring the wrong thing.

Success isn’t hitting “Send.”

Success is when employees actually open the email, understand the message, and take action.

One of the biggest misconceptions among plan sponsors is that hiring a recordkeeper means someone else is now responsible for everything.

It doesn’t work that way.

A recordkeeper can process payroll files, maintain participant accounts, generate notices, and provide reports. What a recordkeeper cannot do is guess what you meant to do.

They don’t know you hired a new employee unless someone tells them. They don’t know an employee was rehired. They don’t know compensation was coded incorrectly in payroll. They don’t know ownership changed, a payroll vendor was replaced, or an acquisition brought in dozens of new employees.

Garbage in, garbage out still applies.

I’ve seen sponsors blame recordkeepers for operational failures that started with missing or inaccurate information. In reality, the recordkeeper processed exactly what it received.

That’s why communication matters.

Whenever something significant changes—payroll systems, eligibility rules, ownership, acquisitions, compensation practices, even office locations—your retirement plan providers should know about it. What seems unrelated to the business can have enormous retirement plan implications.

The best relationships between plan sponsors and recordkeepers aren’t transactional. They’re collaborative. Sponsors share information early, and providers ask questions before small issues become expensive corrections.

Don’t assume your providers know what’s happening inside your company. They don’t attend management meetings. They aren’t copied on HR emails. They aren’t sitting in payroll discussions.

They’re relying on you.

Think of your recordkeeper as a GPS. It can get you where you’re going, but only if you enter the correct destination.

The more complete and timely the information you provide, the more effective your providers can be. Communication isn’t just good customer service—it’s an essential part of keeping your retirement plan compliant.

Because no matter how sophisticated the technology becomes, your recordkeeper still can’t read your mind.

One of the first lessons I learned practicing ERISA law is that memories fade, people leave, and years later everyone swears something happened—until they’re asked to prove it.

That’s when documentation becomes priceless.

I’ve heard plan sponsors tell me they reviewed investments every quarter, approved fee disclosures, discussed cybersecurity, and monitored their service providers. My next question is always the same: “Do you have meeting minutes?”

Silence.

Under ERISA, good fiduciary decisions matter. But being able to demonstrate the process behind those decisions matters just as much. If the Department of Labor comes calling three years from now, they’re not going to rely on someone’s recollection of a meeting. They’re going to ask for documentation.

Minutes don’t have to read like a Supreme Court opinion. They simply need to reflect who attended, what was discussed, what information was reviewed, and what decisions were made. A concise, accurate record is far better than no record at all.

The same goes for committee charters, investment reviews, fee benchmarking, cybersecurity discussions, and service provider evaluations. These aren’t documents you prepare because you expect litigation. You prepare them because they’re evidence that the fiduciaries took their responsibilities seriously.

Documentation also protects against turnover. Committee members retire. HR directors move on. CFOs change jobs. Institutional knowledge walks out the door every day. Written records ensure the next group understands what decisions were made and why.

Good fiduciaries don’t just make prudent decisions. They create a record showing how those decisions were reached.

When I tell clients, “If it isn’t documented, it didn’t happen,” I’m not suggesting their work has no value. I’m reminding them that in the ERISA world, good intentions aren’t evidence.

A few pages of meeting minutes today can save thousands of dollars—and countless headaches—years from now.