The Rosenbaum Law Firm P.C. Blog

Lincoln Financial Retirement Plan Services recently reported that average retirement plan account balances increased by approximately 8.6 percent in 2025, rising from roughly $113,700 at the end of the prior year to about $123,500. On its face, that kind of headline sounds like unqualified good news. Higher balances suggest progress, stability, and maybe even a sense that the system is working.

But numbers like these deserve context, especially from a fiduciary perspective.

Balance growth does not automatically reflect good plan design or strong participant outcomes. Markets rise and fall. Contributions accumulate. Automatic enrollment and escalation continue to do what they were designed to do. All of that can push averages upward without saying much about whether the plan is actually helping participants make better decisions or retire more securely.

Average balances also hide as much as they reveal. An increase across the plan can coexist with significant disparities between long-tenured, highly compensated employees and newer or lower-paid workers who remain under-saved. Fiduciary responsibility does not end at the average. It requires an understanding of who is benefiting and who may still be falling behind.

The real risk is complacency. When sponsors see positive metrics, the instinct is to exhale. Committees assume that growth means validation. But fiduciary prudence is not measured by last year’s results. It is measured by process, oversight, and whether decisions are being made deliberately and documented appropriately.

Rising balances are encouraging. They are also backward-looking. A prudent fiduciary uses good news as a prompt to ask better questions, not as permission to stop asking them. Markets may cooperate, but governance still matters. And in the end, governance—not headlines—is what protects plan sponsors when optimism fades.

I’ve been doing this long enough to know that the biggest threat to a 401(k) plan isn’t the Department of Labor, trial lawyers, or even bad investments. It’s a spreadsheet that someone created in 2017 and has been copying ever since. That spreadsheet has formulas nobody understands, tabs nobody checks, and assumptions that died during the Obama administration. Yet it quietly runs the plan like an unelected dictator.

Every correction project starts the same way. A sponsor swears the census is perfect because “it comes straight from payroll.” Then you open the file and discover three different definitions of compensation, hire dates that change from column to column, and a column labeled “Notes—Don’t Touch” that everyone has been touching for five years. The spreadsheet becomes the truth, and the plan document becomes a suggestion.

The problem isn’t technology. The problem is faith. People believe numbers because they look confident. A spreadsheet never hesitates, never admits it’s confused, and never says, “I might be wrong.” Human beings, on the other hand, are messy, so we trust the neat rows instead of the messy reality. That’s how you get late deposit calculations based on the wrong pay frequency or eligibility lists that still include employees who retired during the Bush presidency.

Plan providers spend half their careers arguing with files. We ask simple questions like, “Where did this column come from?” and the answer is usually, “The old bookkeeper created it.” The old bookkeeper has been gone longer than some participants have been alive, but the column remains, immortal and incorrect.

If you want to improve a plan, don’t start with investments or fees. Start with the spreadsheet that feeds everything else. Treat it like a suspect, not a witness. Until you do, the plan will be governed by a piece of software with no fiduciary duty and no fear of litigation—and that is a terrifying plan administrator.

Plan providers are therapists who also happen to do census testing. Nobody puts that in a job description, but it’s the truth. When people think about our work, they imagine compliance calendars, investment menus, and spreadsheets with more tabs than a Broadway musical. What they don’t see is the hour spent on the phone with a business owner who is worried about a partner stealing employees, or the payroll manager who insists the numbers are right even though the ADP test says otherwise. Half of the job is technical, and the other half is listening to human beings who are nervous about money, responsibility, and looking foolish.

A 401(k) plan is never just a document. It’s a collection of emotions wearing a trust agreement. The late deposit isn’t only a prohibited transaction; it’s usually a symptom of an overwhelmed staff or a company that grew faster than its back office. The failed nondiscrimination test isn’t just math; it’s office politics expressed through compensation. Before we can fix the plan, we have to understand the people who broke it, and that requires patience more than brilliance.

Providers love to jump to solutions because solutions feel productive. We quote regulations, propose amendments, and build checklists. But most sponsors need to be heard before they can be helped. When a client says the plan is a mess, what they really mean is that they feel embarrassed or scared. If we answer fear with code sections, we sound smart and accomplish nothing.

Technical skills get you hired, but emotional skills keep you hired. Sponsors rarely fire the provider who makes them feel calmer about their duties. They fire the one who makes them feel small. After enough years, every plan provider earns an invisible degree in business psychology. We still run tests and draft notices, but what we really do is guide ordinary people through complicated financial adulthood—and then, when the session ends, we upload the census file.

The Long, Quiet Goodbye Most plan providers don’t wake up one morning and get fired. It’s not a dramatic breakup with yelling, lawyers, and a new recordkeeper waiting in the lobby. It’s quieter than that. Clients leave the way a houseplant dies—one missed watering at a time. An email sits unanswered for three days. A census comes back with the same errors as last year. The annual review becomes a reading of slides no one understands. Nobody gets angry, but nobody feels taken care of either.

Service Isn’t a Department Providers love to talk about their service model like it’s a secret sauce locked in a recipe book. The truth is simpler. Service is just doing what you said you would do when you said you would do it. When a sponsor has to send the same question twice, trust starts leaking out of the plan like air from an old tire. Clients don’t compare you to other TPAs—they compare you to the last good experience they had with anyone.

The Myth of the “Sticky” Client We tell ourselves that relationships are sticky, that changing providers is too hard, that inertia protects us. Inertia works until it doesn’t. All it takes is one sharp advisor, one payroll conversion, or one audit scare for a sponsor to realize moving isn’t impossible—it’s just paperwork.

Attention Is a Fiduciary Act Returning calls, explaining notices in English, admitting mistakes before the client finds them—these are not soft skills. They’re risk management. Sponsors judge competence emotionally long before they judge it technically. If they feel ignored, your beautiful compliance calendar doesn’t matter.

The Fix Is Boring There is no technology that replaces caring. The cure for client abandonment is embarrassingly ordinary: answer faster, write clearer, own problems, and remember that a 401(k) plan is someone’s life savings, not another account number on your dashboard.

For many plan sponsors, the story is the same. The plan was set up years ago. Employees participated. Contributions flowed. Nobody complained. From the sponsor’s perspective, the 401(k) worked exactly as intended. And for a long time, that was true.

The problem is that “working” and “holding up under scrutiny” are not the same thing.

A plan that functioned smoothly in 2004 can quietly become misaligned in 2026. Fees that once seemed reasonable drift out of range. Investment lineups stop reflecting best practices. Participant demographics change, but the plan design does not. The workforce gets younger, more mobile, and more skeptical—while the plan remains frozen in time.

What often triggers concern isn’t a slow decline. It’s an event. A key employee leaves and asks uncomfortable questions. A new CFO wants benchmarking data. A merger forces a review. Or a lawsuit headline makes its way into the boardroom. Suddenly, decisions that went unquestioned for decades are being examined through a fiduciary lens.

The dangerous assumption is that longevity equals prudence. ERISA does not reward consistency for its own sake. It rewards a prudent process, applied continuously. A plan sponsor who hasn’t revisited provider relationships, fees, or governance in years may feel loyal—but loyalty is not a fiduciary defense.

Plans don’t usually fail because they were neglected once. They fail because they were never revisited. The longer a plan goes without a meaningful review, the more expensive that first real look tends to be.

When a plan sponsor hears the words “late deposit,” they react like they’ve been accused of shoplifting. Faces turn red, voices get defensive, and someone inevitably says, “We would never steal from employees.” The truth is less dramatic and more uncomfortable. Most late deposits aren’t acts of greed. They’re acts of disorganization wearing a moral disguise.

Payroll departments are busy places. People get sick, systems crash, and someone new is asked to do a job with instructions that begin with, “Just do what Karen used to do.” Karen retired in 2019, and her process left with her. The result is a well-intentioned company making deposits whenever someone remembers instead of when the law requires. Intentions are lovely things, but the Department of Labor accepts them the way airlines accept expired boarding passes.

Sponsors imagine that a late deposit is a single event, like missing a train. In reality, it’s usually a habit. If the company takes ten days this month, it probably took nine days last month and eleven days the month before. The plan document and the regulations don’t care about averages. They care about the earliest date the money could have been separated from company assets, a concept that makes perfect sense to lawyers and almost no sense to normal humans.

The good news is that late deposits are fixable. The bad news is that the fix requires humility. You have to admit the process is broken before you can repair it. That means calendars, written procedures, and someone with actual authority checking the work. It means treating payroll like surgery instead of improv comedy.

Sponsors shouldn’t feel like criminals when this happens, but they should feel like mechanics staring at an engine that needs maintenance. The solution isn’t shame; it’s structure. Build a process that a tired human can follow on a bad day, and the moral crisis of late deposits quietly turns back into what it always was—a scheduling problem with a legal accent.

If you’ve been watching the headlines, you’ve probably heard about the new Trump Accounts—a savings vehicle created by federal law that lets kids start building tax-advantaged investment accounts early in life and gives eligible children a federal seed contribution. Employers can even contribute to the Trump Accounts of employees or their dependents starting next summer. So here’s the question sponsors should be asking: will this be a real employee benefit, or just another shiny bullet point on a benefits brochure that never actually gets used in practice?

For all the talk about financial inclusion and giving the next generation a head start, the reality is that adoption won’t happen by accident. Employers who want to put muscle behind this idea have to do more than announce that they could contribute. They have to design a written contribution program, communicate it clearly to employees with children under 18, coordinate with trustees and payroll, and navigate nondiscrimination requirements that aren’t yet fully defined. And that’s before we even get to the questions about whether older employees without children feel like second-class participants in the benefits hierarchy.

Those operational hurdles are real. Sponsors don’t need another plan that sits on a shelf because nobody understands how to use it. If a Trump account contribution program isn’t administered correctly, employers could face compliance headaches that look a lot like late deposits and failed testing: invisible until someone audits them.

That said, some large firms are already signaling interest and even pledging matching contributions. That’s promising, but it doesn’t guarantee widespread adoption. For sponsors thinking about whether to add this to their benefits lineup, the starting point isn’t marketing copy—it’s careful planning. Employers who treat Trump Accounts as a thoughtful part of the overall financial well-being strategy, rather than a gimmick, will be the ones that actually deliver value to their workforce.

If you thought your rollover notice obligations were settled a few years ago, think again. The IRS has released two new model rollover notices—one for Roth distributions and one for non-Roth distributions—and they are effective immediately. That means every plan sponsor who issues distribution paperwork now has one more item on the compliance to-do list.

Sponsors didn’t ask for a new notice, but the law changed. Laws change all the time; plans usually don’t. That gap between updated regulations and everyday operations is where most compliance problems are born. Until your forms and procedures reflect the current requirements, you are relying on yesterday’s rules to run today’s plan.

These revised notices incorporate the many changes made by SECURE 2.0 and other recent legislation. The IRS didn’t simply polish the old language. The new versions address updated early-withdrawal exceptions, revised required minimum distribution rules, and other details that affect how participants experience a distribution. In other words, this isn’t cosmetic—it’s substantive.

The requirement to provide a proper 402(f) safe harbor explanation has never been optional. If a participant is eligible for a rollover, the plan must deliver a notice that is accurate, understandable, and provided at the right time. Sending an outdated form because “that’s what we’ve always used” is not a compliance strategy. It’s a future audit finding waiting to happen.

For some sponsors, this update will be a simple replacement of one document with another. For others, it will reveal bigger questions: Who is responsible for issuing the notices? Are they being sent before the distribution request is processed? Does the recordkeeper know you’re still using old language? Those operational details matter far more than the font size on the form.

This isn’t a technicality. It’s a reminder that retirement plans live in a moving legal world. Updating the rollover notices now is easier than explaining later why you didn’t.

The Internal Revenue Service (IRS) and Department of the Treasury issued Notice 2026-13 on January 15, 2026 — a key update for retirement plan sponsors and administrators responsible for communicating rollover distribution options to participants. This guidance revises the safe harbor explanations previously provided and aligns them with recent legislative and regulatory changes.

Under Internal Revenue Code Section 402(f), plan administrators must provide participants with written explanations of their eligible rollover distribution options and the associated tax consequences before distributions occur. Notice 2026-13 updates the model safe harbor explanations, giving administrators two versions to choose from: one for distributions from non-Roth accounts and another for Roth accounts. If a participant is eligible for both, administrators should provide both explanations.

So what changed? The updated safe harbor language reflects tax law developments since 2020, including provisions of the SECURE 2.0 Act of 2022 and policy recommendations from a Government Accountability Office (GAO) report aimed at improving participant understanding of distribution choices. The revisions address:

· New and expanded exceptions to the 10% early-withdrawal penalty, such as those covering emergency expenses and terminal illness;

· Revisions to required minimum distribution (RMD) rules, including later RMD ages and rules for surviving spouses;

· Elimination of RMDs for designated Roth accounts in employer plans; and

· Structural updates like a table of contents to make notices easier to navigate.

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Plan administrators may customize the safe harbor explanations to reflect specific plan features (for example, omitting sections that don’t apply). Using these updated explanations helps satisfy ERISA and IRS disclosure requirements while reducing fiduciary and compliance risk.

As retirement law continues to evolve, Notice 2026-13 represents an important step toward clearer, more accurate communication with participants facing rollover decisions. (IRS)

Big headlines in retirement plan litigation don’t just hit household names; they’re a reminder that fiduciary duty doesn’t come with automatic immunity for size or reputation. Last week, a $70 million ERISA class action lawsuit was filed against the Bloomberg L.P. 401(k) Plan on behalf of more than 20,000 current and former participants.

According to the complaint, plan fiduciaries allegedly failed to act prudently by retaining two investment options that underperformed their benchmarks for over a decade. Specifically, the Harbor Capital Appreciation Fund and the Parnassus Core Equity Fund stayed on the plan menu despite long-term lagging performance compared with relevant indices and peer groups. Plaintiffs say that this failure to remove imprudent investment options cost participants tens of millions of dollars in retirement savings.

This isn’t an isolated phenomenon. ERISA litigation against 401(k) plans has continued to increase, with plaintiffs’ firms seeking to hold fiduciaries accountable for underperforming funds, excessive fees, and poor governance generally.

For plan sponsors and fiduciaries, the Bloomberg case highlights several key points:

· Performance alone isn’t enough — it’s the process you follow when evaluating and removing options that matters in an ERISA challenge.

· Documentation is defense — recordkeeping of investment reviews, benchmarks, and committee deliberations isn’t optional; it’s a core part of prudence.

· Long-term lag isn’t academic — persistent underperformance relative to objective comparators can be used as evidence of imprudence.

At the end of the day, most sponsors don’t want litigation. But they do want to protect participants and their own organization. A disciplined, documented investment monitoring process isn’t just best practice — in today’s environment, it may be your best defense.