The Rosenbaum Law Firm P.C. Blog

Folks, here’s something that ought to wake up even the sleepiest retirement-plan consultant: there are now an estimated $2.1 trillion in “forgotten 401(k)” assets out there — accounts people either abandoned, forgot about, or lost track of. That’s not pocket change. That’s systemic drift.

The Scope of the Problem

We’re not talking about a few stray accounts. We’re talking about trillions. The kind of number that forces you to squint and ask, “How did we let this happen?” What used to be anecdotal is now a deep structural issue. Between job changes, mergers, relocations, or just poor communication, these accounts slip through the cracks.

Why It Matters (Beyond the Headline)

1. Fiduciary exposure. Plan sponsors and administrators can’t wave this off as someone else’s problem. If participants come knocking (and they will), questions will be asked about due diligence, communication, tracing efforts.

2. Participant outcomes. Sure, some of these will be small balances. But left unchecked, even small balances can erode via fees, inflation, misallocation, or poor default investments. A forgotten 401(k) isn’t just “dormant”—it’s being whittled away.

3. Operational burden & inefficiency. The administrative drag of attempting to locate and reconcile these accounts, the headaches of potential litigation, the reputational risks—these are real, material costs.

What Can Be Done (Yes, There Are Moves)

· Proactive outreach & communication. Use data (postal, email, phone) to actively engage participants who haven’t interacted with their account in year(s).

· Automated tracing & matching technologies. Modern tools can help reconcile current and past addresses, employment records, or cross-entity databases to find “lost” participants.

· Default consolidation policies. When employees leave, making consolidation (or forced rollover) the default unless they opt out reduces fragmentation.

· Standardized disclosure and reporting rules. Benchmark what “best practice” looks like (timely statements, nudges, transparency) and push the envelope there.

· Collaborative industry efforts. Cross-plan data sharing (within privacy and regulatory bounds), third-party locate services, or even regulatory nudges can help reduce the burden on individual plan sponsors.

A Warning & a Call

Let me be clear: this is not a quaint administrative nuisance. This is a symptom of a retirement system under strain. If $2.1 trillion can just evaporate into “forgotten” accounts, how many other cracks are we ignoring? If we let complacency reign, we risk undermining confidence in workplace retirement plans.

My appeal to all of you managing, governing, advising: treat forgotten accounts as a first-order priority. Don’t relegate them to the “administrative back burner.” Get moving now — because those assets? They belong to people, not spreadsheets.

Another week, another headline from the ERISA litigation circus — this time it’s Jerry Schlichter asking for a $17.5 million payday in the Pentegra case. That’s right, after landing what’s being called the largest jury verdict ever in an ERISA class action ($38 million) and then settling for $48.5 million, Schlichter’s firm now wants a third of the pot.

Don’t get me wrong — they did the work. Five years, 16,000 hours, over a million dollars advanced in expenses. But when the attorneys’ fee motion is as big as the recordkeeper’s alleged overcharges, it makes you wonder who really benefits from “fiduciary duty.”

If the court grants it, this could set a new benchmark — not for prudence, but for profit. Plan sponsors should take note: these lawsuits aren’t just about plan fees anymore; they’re about who gets the biggest slice of the settlement pie. The plaintiffs’ bar calls it justice. I call it a business model.

As Lucille Bluth would say, “Good for her.”

We’ve all kept an eye on default rates creeping upward lately. But here’s what catches my attention: rising defaults don’t just affect participants, they test the backbone of a plan’s design, governance, and fiduciary discipline. As defaults increase, questions cascade: Are your safe-harbor defaults still appropriate? Are participants being nudged properly, or shoved into poor allocations just because inertia took over?

Higher default rates can mask hidden trouble. Plans that lean too heavily on default strategies may see behavior that deviates wildly from expectations. That increases the risk that someone will point at you and say your “qualified defaults” weren’t in participants’ best interests after all.

The fix begins before defaults spike: regularly stress test your default strategy; monitor participant behavior; consider a tiered or graduated approach rather than a one-size option; and document your rationale every step of the way. When default rates go up, the difference between prudent design and litigation bait is how defensible your structure and process were before the risk spike.

Because once default rates are high and things go sideways, plaintiffs and regulators don’t ask whether you hoped it would be fine, they ask how you prepared for exactly this.

Serving as counsel to a private school board, I had the chance to join their recent retreat, and I think it went pretty well. I gave a talk on fiduciary responsibility, what it means for the board, how it shapes every decision, and how duties extend beyond the four walls of a classroom. We even touched on social media, which, in today’s world, can be both a blessing and a liability for schools.

That reminded me of a story I wrote about in Full Circle. Fifteen years ago, I told the managing attorney at my old law firm that I wanted to use social media to build a national ERISA practice. You’d think I suggested selling fish out of a trunk on Sunrise Highway and Route 110. She was visibly displeased, as though the mere thought of self-promotion was unbecoming of a lawyer. The firm, already too old in its thinking, couldn’t see where things were headed. And as I predicted, it’s now less than half its size compared to when I left in 2010.

Why do I share this? Because it’s vindication, yes, but also a real-world example of how communication tools—whether Twitter, LinkedIn, or a blog post like this—aren’t frivolous. They’re powerful. They built my practice. They gave me a national platform. And for schools, boards, and nonprofits, they can be equally powerful tools for engagement, transparency, and trust, when used wisely.

Fiduciary duty isn’t just about numbers on a balance sheet; it’s about vision. It’s about seeing risks and opportunities before they knock you over. And sometimes, it’s about not being afraid to sell a dish or two from the trunk if it helps you get the word out.

AI can feel like magic—predicting outcomes, personalizing communications, streamlining decisions. But in the fiduciary world, magic without guardrails is a ticking lawsuit. Here’s what every sponsor should do before turning on the “AI switch”:

1. Start with your risk appetite, not the vendor’s pitch.

AI’s predictive analytics and digital twins are tempting. But before you deploy, calibrate how much error or bias you accept. Don’t let vendor demos drive the strategy—your fiduciary obligations must.

2. Document your governance at every layer.

Every AI model, training dataset, output, override decision—capture the thinking. When plaintiffs probe, “Why did you trust that algorithm?” your minutes and memos must not go blank.

3. Test for bias, fairness, and “hallucinations.”

Algorithms can replicate systemic bias or “invent” guidance (“hallucinate”) in surprising ways. Have independent audits. Validate recommendations manually in pilot runs before full deployment.

4. Keep humans in the loop.

Even the slickest model should defer to human judgment in edge cases. A chatbot nudging a participant toward a portfolio change? Let a fiduciary reviewer step in when thresholds are crossed.

5. Guard your data and privacy like it’s your last defense.

AI needs data—lots of it. But every data point is a vulnerability. Safeguard participant records, anonymize where possible, control access, and ensure your model can’t be reverse-engineered into private data.

6. Monitor outcomes continuously. Post-deployment, don’t set and forget. Watch for patterns of underperformance, discrimination, or abnormal behavior. If your outputs stray, pause, recalibrate, or shut down features.

7. Disclose transparently—and simply. Your participants don’t need an AI thesis, but they deserve clarity. Explain when AI is used, how, and what oversight exists. Don’t hide “automated advice” behind vague terms.

8. Start small—fewer assets, narrower scope.

Don’t let AI roll out across your entire plan at once. Use it first in lower-risk areas (communications, education, diagnostics). Gain operational trust before letting it touch portfolio or default mechanisms.

AI in retirement plans is not a gimmick, it’s a superpower, if constrained. But superpowers demand discipline, not recklessness. Do the homework now, build defensibility, and treat every AI decision as though it might end up in a complaint. Because in our field, the difference between innovation and exposure is always process.

When Pew reports that U.S. retirement assets crossed nearly $46 trillion in Q2 2025, it’s easy to be awed by scale. But what really caught my eye was their spotlight on the Saver’s Match, set to launch in 2027, and how it might supercharge automated savings programs like state auto-IRAs.

Here’s why I take this as both opportunity and warning:

· Incentives change behavior. The Saver’s Match promises a 50% federal match (up to $1,000 single / $2,000 married) deposited directly into eligible retirement accounts. That kind of incentive could turn passive savers into active savers. Operational complexity will be your fiercest adversary. The match can only go into traditional IRAs (not Roth), and many eligible contributors don’t even file federal returns. If the claiming process is clunky, much of the upside evaporates.

· Governance & process matter more than ever. With new dollars on the line and more participants entering via auto-IRA programs, the fiduciary exposure multiplies. Every allocation, every match, every error will be under the microscope.

· Disparities at stake. The match is targeted to low- and moderate-income workers—those groups historically underrepresented in plan ownership. So the upside is strong. But failure to deliver could worsen distrust.

So here’s what every plan sponsor, provider, and fiduciary should do now:

1. Model the match impact. Simulate how many new accounts, how much additional assets, and what processing burden the match could generate.

2. Design claiming systems defensibly. Make the match automatic where possible; minimize steps. If the software, payroll systems, or tax forms are awkward, you’ll get caught on the backend.

3. Layer in governance. This isn’t just about new dollars—it’s about managing massive growth while keeping fees, conflicts, and errors in check.

4. Communicate clearly. For people who’ve never been in a retirement plan, the match and how to access it must be simple, transparent, and low friction.

If the Saver’s Match works as intended, it could reshape the retirement savings landscape in America. But with great policy comes great responsibility. In a world of $46 trillion, the biggest differentiator will be who builds systems built for scrutiny—not just scale.

When total U.S. retirement assets hit a record $45.8 trillion in Q2 2025, it was headline news—and for good reason. not just a number; it’s a massive concentration of faith, expectations, and fiduciary risk. As one of the largest pools of private capital in our economy, these assets demand more than passive oversight—they demand vigilance.

But here’s the rub: growth begets scrutiny. As assets swell across IRAs, 401(k) plans, defined benefit plans, and annuity reserves, so too does the pressure on those entrusted to manage them. Are fees justified? Are conflicts disclosed and controlled? Are processes defensible? Every basis point and every decision now carries outsized exposure.

Plan fiduciaries must treat every allocation, every document, and every conversation as though it might land in a complaint. In a $45.8T world, there are no small cases—only small defensibility. The capital may be growing. But so is the need for ironclad governance, razor-sharp documentation, independent review, and transparency from top to bottom.

Because when you’re responsible for tens of trillions, there’s no margin for error.

It’s one thing for a corporate giant to be hit with fiduciary litigation—but quite another when the defendant is a law firm built on legal discipline. The recent lawsuit against Husch Blackwell, filed by a former partner, alleges the firm withheld employee 401(k) contributions, failed to timely forward them, and used them to cover its own operating expenses. \

What jumps out to me is how this case exemplifies the “small & grab” risk—where an internal actor becomes plaintiff, and a single misstep can become a full-blown ERISA action. If part of your firm’s compensation structure or benefits plan involves withholding or directing funds, you better have your fiduciary house in order: clean trails, strict oversight, independent review, and no ambiguity about every penny’s direction.

Because in the retirement plan world, the people doing the suing sometimes know the law better than you do—and they’ll drag you through all your own documents.

If you thought catch-up contributions were settled territory, think again. The IRS has now issued final regulations under SECURE 2.0 that require, as of January 1, 2026, that catch-up contributions for certain higher-earning participants must be made on a Roth (after-tax) basis.

Here’s the bottom line: if a participant aged 50+ had FICA wages above $145,000 in the previous year (subject to indexing), any catch-up contributions they make must be designated Roth contributions. That changes the tax dynamics, the recordkeeping, and the communication burden for sponsors.

Key Implications for Plan Sponsors

1. System & Vendor Readiness

Your payroll, recordkeeping, and elections systems must be able to distinguish between catch-up contributions that must go Roth versus those that can remain pre-tax. That’s a nontrivial update.

2. Document & Plan Design Review

If your plan doesn’t currently allow Roth contributions, catch-up participants subject to the rule will be unable to make catch-up contributions. The regulations provide nondiscrimination relief in such cases — but you need to understand how it works and consider whether to amend your plan.

3. Communication Is Critical

Many participants will never have made Roth contributions in a retirement plan before. You must educate them about the tax tradeoffs — paying taxes now vs. potential tax-free distributions later — and help them recalibrate their deferral strategies.

4. Good-Faith Compliance

Window Even though the statutory requirement begins in 2026, the final regulations give sponsors leeway to rely on a “reasonable, good-faith interpretation” through the end of 2026. But that’s a bridge — not a long-term excuse.

The Rosenbaum Take

This is a move with real teeth. It forces a shift in how retirement saving is taxed for higher earners in their catch-up years. If you’re a plan sponsor who delays preparation, you risk scrambling — or worse, failing compliance.

Start working now with your legal, recordkeeper, and payroll teams. Update your plan documents, run mock elections, and communicate proactively. Because once 2026 hits, the era of pre-tax catch-up for high earners ends — whether your systems are ready or not.

If you thought catch-up contributions were settled territory, think again. The IRS has now issued final regulations under SECURE 2.0 that require, as of January 1, 2026, that catch-up contributions for certain higher-earning participants must be made on a Roth (after-tax) basis.

Here’s the bottom line: if a participant aged 50+ had FICA wages above $145,000 in the previous year (subject to indexing), any catch-up contributions they make must be designated Roth contributions. That changes the tax dynamics, the recordkeeping, and the communication burden for sponsors.

Key Implications for Plan Sponsors

1. System & Vendor Readiness

Your payroll, recordkeeping, and elections systems must be able to distinguish between catch-up contributions that must go Roth versus those that can remain pre-tax. That’s a nontrivial update.

2. Document & Plan Design Review

If your plan doesn’t currently allow Roth contributions, catch-up participants subject to the rule will be unable to make catch-up contributions. The regulations provide nondiscrimination relief in such cases — but you need to understand how it works and consider whether to amend your plan.

3. Communication Is Critical

Many participants will never have made Roth contributions in a retirement plan before. You must educate them about the tax tradeoffs — paying taxes now vs. potential tax-free distributions later — and help them recalibrate their deferral strategies.

4. Good-Faith Compliance

Window Even though the statutory requirement begins in 2026, the final regulations give sponsors leeway to rely on a “reasonable, good-faith interpretation” through the end of 2026. But that’s a bridge — not a long-term excuse.

The Rosenbaum Take

This is a move with real teeth. It forces a shift in how retirement saving is taxed for higher earners in their catch-up years. If you’re a plan sponsor who delays preparation, you risk scrambling — or worse, failing compliance.

Start working now with your legal, recordkeeper, and payroll teams. Update your plan documents, run mock elections, and communicate proactively. Because once 2026 hits, the era of pre-tax catch-up for high earners ends — whether your systems are ready or not.