The Rosenbaum Law Firm P.C. Blog

Working on an IRS audit is hard enough. But what’s even harder? When you discover the plan sponsor disposed of—or claims to have disposed of, the very records the IRS is demanding.

Let’s not kid ourselves: that’s a hostage to fortune. You can’t defend what you can’t prove. And you can’t explain away a missing spreadsheet from 2015 just because “we thought we didn’t need it anymore.” That’s not a defense, it’s an admission of negligence.

Here’s the cold, simple truth:

1. Plan sponsors have to keep the records. The IRS, under the retirement plan rules, requires you to furnish complete, accurate records — in paper or electronic form — when asked.

2. Some records must live forever (or close to it). ERISA doesn’t just say “six years and toss the rest.” Under § 209, you must keep whatever records are necessary to determine a participant’s benefit—because benefits last a lifetime.

3. You can’t rely on your service provider to fix your mess. Even if you’re using a great TPA or administrator, the legal obligation rests squarely on you (the sponsor). If they purge or misplace records, you’re still on the hook.

4. “We destroyed it” won’t cut it. If you destroyed records you were legally required to preserve, that invites the IRS (or DOL) to assume the worst. For missing records, the burden often shifts to you, prove a negative.

5. The remedy is always: don’t let this happen in the first place. A written records-retention policy. Regular backups. Migrations when switching providers. Indexing. Document control. All that boring but essential stuff.

Bottom line (no fluff): If you’re a plan sponsor and you have been lax about recordkeeping — and now you’re facing an IRS audit, you’re already behind. The only hope is that you have partial records, internal logs, or corroborating evidence. But don’t count on miracles.

If your plan is still relatively clean, double down now. Clean up your document retention policy. Audit your backups. Make sure nothing gets tossed unless you can legally toss it. Because in an audit, the IRS doesn’t want excuses. They want proof.

2025 has already been a roller coaster for plan sponsors—regulatory change, cybersecurity threats, shifting fiduciary standards. But—brace yourselves—2026 is going to test all the work you thought you had under control.

Here’s how I see it, and what your checklist should look like if you want to survive (or better yet, thrive).

Why 2026 Will Be a Pressure Cooker

Let’s call it what it is: a confluence of evolving risk factors, new rules dragging behind them, and expectations from participants that are growing by the day.

· Alternative assets in 401(k)s Private markets are starting to creep into 401(k) menus. That sounds exciting—diversified returns, innovative options—until you factor in the administrative mess. Valuation challenges, liquidity issues, communication demands, and oversight obligations make this a fiduciary minefield.

· SECURE 2.0’s creeping obligations The law continues to phase in. In 2026, catch-up contributions for certain high earners must default to Roth (after-tax) treatment. That’s a fundamental change. And tax rules, notices, and disclosures will be even tighter.

· Fiduciary litigation and forfeiture scrutiny Lawsuits targeting how plan sponsors use forfeitures or handle fees are on the rise. Courts and plaintiffs are asking hard questions: Are you applying forfeitures properly? Are your fees justified and documented? You’ll need your process, your benchmarking, and your records airtight.

· Cyber risk meets ERISA AI-powered phishing and cyberattacks aren’t the future—they’re now. And regulators are watching. A breach that impacts plan assets or personal data can become a fiduciary liability. You’ll be judged not just on whether you had security, but whether it was adequate, tested, and maintained.

· Regulatory and oversight intensity Expect enforcement activity to ramp up. Reporting and disclosures will be revisited, interpretations challenged, and compliance gaps exposed.

Your 2026 Preparedness Checklist (Ary Rosenbaum Style)

Because “winging it” is no longer an option. Here’s how to brace for the turbulence:

1. Inventory what must change List all SECURE 2.0 provisions coming online next year—catch-up defaults, Roth conversions, employer match rules. Mark deadlines. Assign responsibility.

2. Review your investment menu If you’re considering alternative or private funds, get due diligence documents, valuation

methodologies, liquidity terms, and suitability analysis. Don’t treat these as accessories—they’re central.

3. Benchmark and document your fees Establish your fee benchmarking process now. Engage independent reviews. Record why you selected each provider. Document comparisons and decisions. Lawyers and plaintiffs love missing memos.

4. Sharpen cybersecurity and tech oversight Security can’t be a checkbox. You need continuous, demonstrable vigilance—third-party audits, penetration testing, staff training, and vendor oversight. And make sure you have cyber and fiduciary liability insurance in place.

5. Update fiduciary processes and governance Are your committee minutes current? Are consultant recommendations documented? Are fiduciary decisions memorialized? If not, fix it now. Compliance is as much about process as it is about numbers.

6. Strengthen participant communication Changes to investments, Roth defaults, or fees need to be clearly explained. Don’t let notices drown in legalese. Participants will remember confusion more than compliance.

7. Run scenario audits Ask “what if” questions: What if valuations are late? What if a vendor fails? What if there’s a data breach? If you can’t show mitigation steps, you’re vulnerable.

8. Lock down insurance coverage The ERISA bond is required, but fiduciary and cyber liability coverage are essential. Review policy limits and exclusions before 2026 hits.

9. Engage your entire team This isn’t just HR’s problem. Involve finance, IT, and legal. Cross-functional communication and accountability matter more than ever.

10. Document every change Keep a log of every update—policies, vendors, disclosures, or processes. Future auditors or plaintiffs will want that paper trail.

Final Thought: Don’t Be Surprised by Tomorrow’s Fire

In Full Circle, I talked about how life teaches you the lessons nobody hands you. This is one of those lessons for plan sponsors: no matter how good things look today, the environment never stays still.

2026 will test your resilience, your foresight, and your willingness to invest in guardrails—not just for compliance, but for trust. The sponsors that survive and thrive won’t be those who cut corners; they’ll be the ones who leaned in early, documented everything, and treated fiduciary responsibility as a mission, not a burden.

It’s not enough to react. You have to anticipate. So take your checklist, tighten your processes, build your defenses, and make sure that when the heat comes, you’re not caught flat-footed.

Because if there’s one guarantee about 2026, it’s this: change is coming—and it will punish those who weren’t ready.

Well, here’s a headline you didn’t see coming… or maybe you did, because this is exactly the kind of thing government loves to roll out quietly until everyone’s scrambling. New York is launching a mandatory state-retirement savings program this fall.

Yes, “mandatory.” That means certain employers in New York that don’t already provide a qualified retirement plan will be forced to register in this “Secure Choice” program, upload employee data, and begin payroll deductions. Enrollments will start automatically (3% of gross pay, unless workers opt out).

So what’s the real deal here?

· Many small businesses in New York will suddenly have a new compliance headache. They’ll need to juggle registration deadlines and set up systems to handle deductions they’ve never handled before.

· Existing TPAs, advisors, and recordkeepers should see opportunity — or risk — depending on how they respond. This isn’t just regulation; it’s redistribution of who holds the relationship.

· Clients will want answers: “How does this affect my retirement-plan options?” “Is this better or worse than what I might do on my own?”

For those of you watching from outside New York: pay attention. These state programs are multiplying. What starts in one state often becomes the blueprint elsewhere.

If you’re a New York employer without a plan, skip the panic. But don’t skip the plan. This new regime doesn’t mean your only choice is a state plan. We still have tools, custom plans, and smarter ways to help your employees.

If you’re a service provider: think two steps ahead. Be ready to help clients navigate this mess, even those who didn’t ask for help, yet. Because invariably, they will.

If you ask me, the state is taking aim at the gap between workers who have access to retirement plans and those who don’t. But the risk for them is that a one-size fits all “state plan” will disappoint. And that disappointment will open the door for those of us still building trust, not mandates.

So, Creative Planning just bought SageView Advisory. Another week, another acquisition in the retirement plan world. At this point, consolidation is like the weather forecast, inevitable and rarely surprising.

Every few months, one big advisory firm swallows another, and the press releases always sound the same: “We’re thrilled to join forces to provide enhanced client value.” Translation: someone got a nice payday, and now everyone has to figure out how to merge two very different cultures.

Here’s the thing, bigger doesn’t always mean better. Clients don’t care about scale; they care about service. If a merger means their calls go to voicemail longer or their reports take an extra week, that “enhanced value” tagline gets old fast.

Still, I can’t fault either side. This is the business now, grow or get eaten. Just remember, for those of us still independent, this is where we can stand out: being personal, nimble, and actually answering the phone.

Because while big firms buy growth, the rest of us still earn it.

As we peer into the not-too-distant horizon of 2026, the forecasted changes to 401(k) contribution rules demand the attention of every plan sponsor, fiduciary, and serious saver. These aren’t cosmetic tweaks — they represent structural shifts. Ignore them at your peril.

The Big Move: A $1,000 Bump

According to industry projections, the standard employee elective deferral cap (the 402(g) limit) is expected to rise from $23,500 in 2025 to $24,500 in 2026. That’s not a radical jump, but in the world of retirement plan compliance, every dollar counts.

At the same time, catch-up contributions (for those age 50 or over) are likely to increase from $7,500 to $8,000. And for those in the 60–63 “super catch-up” bracket, we could see limits as high as $11,500 or even $12,000, depending on final inflation adjustments.

Combine those, and a 50+ participant may be able to contribute up to roughly $32,500, before employer matching or allocations come into play. Not bad, considering where we were just a few short years ago.

A Thornier Issue: The Roth Catch-Up Mandate for High Earners

Now, here’s where things get tricky. Beginning in 2026, catch-up contributions made by participants whose prior-year wages exceed $145,000 will be forced into Roth (after-tax) form — no more pre-tax deduction for those dollars. That’s a big deal for higher earners.

The change is a product of SECURE 2.0, meant to shift more retirement savings into after-tax, tax-free growth. The problem? Many plans still don’t have Roth 401(k) features in place. If your plan lacks a Roth option, high earners may be disqualified from making catch-up contributions entirely.

The threshold ($145,000) is indexed to inflation, so it may creep upward, but the reality remains: this rule will separate proactive plan sponsors from reactive ones.

What Plan Sponsors and Fiduciaries Must Do (Now)

1. Review and revise plan design. If your plan doesn’t already support Roth contributions, now is the time to enable it. Waiting until 2026 could create administrative chaos and angry participants.

2. Update communication and disclosure materials. Participants must understand that future catch-ups may be after-tax only. Surprises are for birthdays, not retirement deferrals.

3. Monitor compensation thresholds. $145,000 is the current cutoff, but it may change. Build flexibility into your payroll and recordkeeping processes.

4. Watch for IRS guidance. Expect final rules and clarifications later this year. The IRS may adjust definitions, timing, or implementation deadlines.

5. Document your process. Every fiduciary decision — including why you added or didn’t add Roth — should be documented. Litigation loves ambiguity.

6. Advise participants proactively. Those approaching 50 need to know how these changes impact them. Educate early and often — before the first paycheck of 2026.

Bottom Line

The projected 2026 limits may not be revolutionary, but the Roth catch-up shift for high earners is a game-changer. This isn’t just about a $1,000 bump — it’s about how plan sponsors manage communication, compliance, and participant trust.

As Lucille Bluth might say, “It’s going to be a hot mess.” The best fiduciaries will make sure it isn’t theirs.

The ERISA world never runs out of courtroom drama, and the latest episode comes courtesy of Seidman v. American Airlines. The court ruled that while the plaintiffs may have alleged fiduciary breaches tied to ESG (environmental, social, and governance) investment choices, there was no proof of monetary harm, and without financial loss, there would be no financial recovery.

That’s not a “get out of jail free” card. It’s more like a warning label. The court didn’t bless ESG investing as a fiduciary practice; it just said, “show me the money.”

Here’s what matters for plan sponsors and fiduciaries.

1. No Damages Doesn’t Mean No Risk

Just because the court didn’t order American Airlines to pay up doesn’t mean other sponsors are safe. The case underscores how process remains the bedrock of fiduciary duty. Whether your plan lineup includes ESG options or not, document everything. The “why” matters more than the “what.” A well-reasoned investment process beats a well-intentioned one every time.

2. ESG Still Isn’t a Free Pass

ESG investing isn’t the problem, using it as a marketing gimmick or political statement is. ERISA doesn’t prohibit ESG considerations, but it doesn’t let fiduciaries prioritize them above returns, either. If you’re picking funds based on social objectives rather than economic merit, you’re playing fiduciary roulette.

3. The “No Monetary Harm” Defense Is a Temporary Shield

In this case, the plaintiffs couldn’t prove that ESG choices cost participants money. That’s a technical victory, not a philosophical one. Another case with stronger data could easily go the other way. Courts aren’t rejecting ESG-related fiduciary claims—they’re rejecting poorly framed ones.

4. Optics Still Matter

Even if you win in court, you may lose in reputation. Plan participants don’t want to hear that their retirement savings are a testing ground for corporate virtue signaling. They want fiduciaries who make investment decisions with their financial future in mind, not their social media image.

5. The Takeaway for Plan Sponsors

Stay grounded. ESG can coexist with fiduciary duty—but only if it’s tied to risk management, long-term value, and documented prudence. Avoid letting ideology drive investment policy. Courts may forgive a lack of damages, but they won’t forgive sloppy process.

In the end, Seidman v. American Airlines reminds us that ERISA isn’t about buzzwords or moral crusades, it’s about loyalty, prudence, and measurable outcomes. “No monetary harm” might get you out of this case, but it won’t get you out of your fiduciary responsibilities.

And as I tell every plan sponsor: you can’t always predict what a court will decide, but you can control your process. That’s the real ESG, Every Step Governed.

Mergers are great when you’re talking about chocolate and peanut butter. But when you’re talking about merging 401(k) plan assets, it’s not always a smooth combination. Plan mergers, whether due to acquisitions, company restructuring, or TPA transitions, can create an administrative nightmare if the details aren’t handled with surgical precision. As a plan provider, you’ll quickly learn that merged assets and sloppy reconciliation are the kind of problems that turn your clean 5500 into a red flag for auditors and regulators.

The Merged Assets Time Bomb

When two or more plans merge, the assumption is simple: assets from Plan A roll into Plan B, participants and balances are consolidated, and life goes on. But ERISA doesn’t reward assumptions—it punishes sloppiness. If the assets don’t reconcile perfectly, if forfeiture accounts or outstanding loans don’t match, or if there are lingering “ghost” accounts that never transferred, the result is a mess that compounds every year until someone has to unwind it under pressure.

The problem often begins during the transfer process. Custodians send over assets that don’t line up with participant records. Old plan numbers get confused with new ones. Sometimes, participant-level data arrives incomplete or mislabeled, and no one realizes it until the next plan year’s audit. The financial data might look “close enough,” but close enough doesn’t satisfy auditors or the Department of Labor.

Reconciliation—The Lost Art

Reconciliation isn’t glamorous work, but it’s the backbone of clean plan accounting. Every dollar in the trust should have a name, and every transaction should make sense. After a merger, that means going line by line, making sure every asset transferred matches the participant balances and historical data from the predecessor plan.

Too often, reconciliation is left to chance or rushed because “we just need to get the plan live.” But the moment you cut corners, you inherit someone else’s problem—and that problem becomes yours once the audit comes around. When the auditor asks why the trust doesn’t reconcile to the participant ledger, or why the forfeiture balance ballooned from $12,000 to $48,000 with no explanation, “it came from the merger” isn’t an answer—it’s an indictment.

Form 5500—Garbage In, Garbage Out

If you’ve ever heard the phrase “garbage in, garbage out,” it applies perfectly to the 5500. When plan data isn’t reconciled before filing, you’re certifying inaccurate information under penalty of perjury. Think of it this way: the 5500 is the plan’s public face, and if it shows inconsistent participant counts, mismatched assets, or unexplained adjustments, it’s like showing up to court in a stained suit and flip-flops. The DOL notices, the IRS notices, and eventually, participants notice.

Merged plans with unclean data often lead to 5500s that don’t tell the full story. One plan might report prior-year assets that don’t match the carryforward from the predecessor plan. Or worse, the audit notes a “qualified opinion” because the records are incomplete. Once that happens, you’re on the DOL’s radar—and that’s a place no one wants to be.

Best Practices—Avoiding the Merged Asset Mayhem

1. Audit Before You Merge: Don’t just merge assets, review them. Reconcile old plan balances before a single dollar moves. Identify missing data, stale loans, or unallocated forfeitures.

2. Map Provisions Carefully: Make sure every plan feature (eligibility, match, vesting, loans) aligns correctly. A misalignment can lead to operational errors that spiral into disqualification issues.

3. Communicate Between Teams: HR, payroll, the recordkeeper, and the TPA all need to be on the same page. Merged plans fail when each group assumes someone else has “checked the math.”

4. Document the Process: Keep a written record of how the merger was handled—asset transfer confirmations, reconciliation notes, and communication logs. When the auditor asks, “How do you know these assets were correct?”, documentation saves the day.

5. Clean Up Before Filing: Never rush a 5500 just to meet the deadline. Extensions exist for a reason. A clean, accurate 5500 a few weeks late is better than a fast one that triggers a DOL letter.

The Takeaway

As an ERISA attorney, I’ve seen too many “merger disasters” where plan sponsors trusted that everything would just work out. Spoiler alert: it rarely does. Merged assets without proper reconciliation are like uncashed checks and forgotten passwords, they create confusion, liability, and unnecessary exposure.

The lesson? Don’t let the merged plan be your problem child. Get reconciliation right, make the 5500 reflect reality, and don’t rely on hope as a compliance strategy. Because in the ERISA world, merged assets that don’t add up eventually make everyone’s numbers look bad.

When you work as an ERISA attorney for TPAs for nearly a decade, you get a front-row seat to some of the most creative interpretations of the law imaginable. I don’t say that as an insult—I say it as someone who spent ten years putting out fires that never should have been lit in the first place. Let’s just say there were some plan administrators who could have benefitted from a crash course in ERISA basics, or maybe even a high school civics class.

There was one guy, God bless him, who didn’t know Puerto Rico was a U.S. Commonwealth. I wish I was making that up. To him, Puerto Rico might as well have been another country with its own ERISA rules and 5500 filing system. I tried explaining that Puerto Rico is as American as apple pie, but he didn’t quite buy it. Maybe he thought you needed a passport to approve a loan distribution.

Then there was the plan administrator who approved hardship distributions on 401(k) deferral earnings, twelve years after that practice was outlawed. He looked at me like I was speaking Klingon when I told him earnings weren’t eligible for hardship withdrawal anymore. I didn’t know whether to laugh, cry, or hand him a copy of the regulations with a highlighter.

And who could forget the guy using a seven-year graded vesting schedule five years after EGTRRA eliminated it? I guess he thought “EGTRRA” was some kind of dinosaur. Every participant who terminated that year got a benefit statement straight out of 1995. I remember explaining that EGTRRA had changed vesting rules years earlier, and his answer was something like, “Well, that’s how we’ve always done it.” Famous last words in the ERISA world.

But the one that will live in infamy for me was the plan administrator who proudly admitted—without a hint of shame, that he reconciled a daily valued plan quarterly. I actually paused, thinking maybe I misheard. Nope. He was reconciling a plan that changed every single market day four times a year. That’s not plan administration, that’s wishful thinking.

The moral of the story? If you’re a plan sponsor, make sure the people administering your 401(k) plan know what they’re doing. ERISA isn’t a “learn as you go” area of law, it’s a “get it right or pay for it later” business. A bad plan administrator doesn’t just make mistakes, they create liabilities, trigger audits, and give participants reasons to file complaints.

And for the love of compliance, make sure your administrators know that Puerto Rico is part of the United States.

Because whether it’s hardship withdrawals, vesting schedules, or geography, ignorance isn’t bliss—it’s a DOL audit waiting to happen.

When I was younger, I didn’t say much. I figured keeping quiet was the best way to avoid trouble. I didn’t want to create waves, and truthfully, I thought that was how you earned respect, by keeping your head down and working hard. I thought if I didn’t make noise, people would notice my effort and appreciate it. Turns out, silence doesn’t always command respect — sometimes it just gives fools more room to talk.

When I was at Boston University for my LLM, our classes were at night, so I decided to get a part-time job at a law firm. I landed one at Bernkopf Goodman, a medium-sized Boston firm with about thirty lawyers. The place was split between litigation and real estate, with one lonely negligence attorney floating around.

One afternoon at lunch, that negligence lawyer and one of the real estate partners started goofing on me. I don’t even remember what about — probably something stupid. I just sat there, said nothing. They were partners, and I was a $23-an-hour law clerk trying to build a résumé. At that age, you assume anyone older, especially a partner, must be smarter and wiser. You think success automatically equals intelligence.

Here’s the punchline: they weren’t. The negligence guy ended up leaving to hang his own shingle, and the real estate guy had to tag along with a senior partner just to keep clients. In the end, they weren’t anything special, just two insecure lawyers trying to make themselves feel bigger by cutting someone else down.

It took me years to learn that lesson, that title and experience don’t equal competence or integrity. The law is full of people who confuse volume with knowledge and seniority with wisdom. Sometimes the loudest voices in the room are the ones who know the least.

And me? I kept quiet then because I didn’t know better. But life has a funny way of teaching you when to speak up. Today, I don’t stay silent when I see something wrong, whether it’s a bad plan design, a fiduciary mistake, or some self-proclaimed expert making it up as they go. Because I’ve learned that being quiet to keep the peace only helps the people who don’t deserve it.

Those two partners at Bernkopf Goodman? They probably forgot that lunch. I didn’t. Because in the end, they weren’t better, they weren’t wiser, they just got there first. And years later, when I built my own practice and my own voice, I realized something important: I was never beneath them. I was just still becoming me.

On a client call the other day, we were knee-deep in the usual chaos that comes with transitioning to a new TPA, mapping plan provisions, reconciling documents, and making sure the new prototype plan doesn’t trip over the old one. These calls are a blend of ERISA minutiae and emotional endurance tests.

Then came the sticking point: the automatic enrollment percentage. The old plan defaulted participants at 1%, but the new TPA’s system didn’t like anything under 3%. HR hesitated. “We’ve always done 1%. I’m not sure our employees will go for 3%.”

That’s when I said it: you know your employees better than anyone, even better than an ERISA attorney.

Automatic enrollment isn’t just a checkbox in a plan document; it’s behavioral finance in action. Whether the number starts at 1% or 3% changes how people view saving. One feels like a token effort, the other like a meaningful start. But culture matters, and no one understands the culture of a company better than the people inside it.

Sometimes, plan design comes down to principle. You pick your hills. For me, this one was worth dying on, not because of 1% or 3%, but because ownership matters. A plan sponsor who listens to their workforce and stands by what works for them? That’s fiduciary leadership in its purest form.

At the end of the day, TPAs, attorneys, and recordkeepers all provide structure and compliance. But the sponsor is the heart of the plan. You know your people, their fears, habits, and paychecks, better than any spreadsheet or prototype document.

And that’s why, when it comes to the right default percentage, the real answer isn’t in ERISA Section 404(c). It’s in the breakroom conversations, the payroll deductions, and the quiet trust between employer and employee. That’s the hill I’ll always stand on.