The Rosenbaum Law Firm P.C. Blog

One of my favorite Yiddish words is “schnorrer.” While it means beggar or sponger, it essentially refers to a cheapskate who tries to get something for nothing. There is nothing wrong with potential clients negotiating fees to get a bargain. I often offer discounts as long as clients ask and their requests are reasonable.

However, it’s important to draw the line somewhere because my work and effort deserve compensation. What distinguishes someone seeking a discount from a schnorrer is that a schnorrer often disregards how insulting their behavior may be. A perfect example is selling sponsorships for That 401(k) Conference. If people book multiple events and request a discount as new sponsors, I am generally open to reducing the $1,500 speaking fee per event. However, when a plan provider invited me for lunch at their private club and claimed they only had a budget of $250 for my $500 supporting sponsorship, I declined. Don’t invite me to your private club while claiming to be on a tight budget.

Dealing with chiselers is part of business, but you have to recognize when an offer is too insulting or low. In those cases, it’s better to walk away, as you know you might face difficulties with them every step of the way.

I believe that plan providers who promised they will make me wealthy have consistently failed in that promise. While it’s perfectly fine to dream of retirement plan profits, it’s important not to let those dreams turn into mere fantasies. The key difference between a dream and a fantasy is the effort involved. Dreams can become a reality through hard work, whereas fantasies require no effort at all.

Both can create a certain level of expectation, but only dreams can meet those expectations. Fantasies fall short because nothing is done to realize them. When managing expectations, it’s crucial to establish achievable goals for both your partners and clients, and to actually meet those goals. There’s nothing worse than facing a six-month period filled with excuses about why you can’t deliver on your initial promises.

A plan provider once asked me if I had written a comprehensive article on why trustee-directed 401(k) plans are superior to participant-directed plans. Although I believe in this argument, I haven’t actually written such an article. I don’t think it would attract much attention, as people have been conditioned over the last 25 years to favor participant-directed plans. Trustee-directed plans have several advantages over participant-directed plans, with the primary benefit being that trustees are generally better equipped to make investment decisions than participants. This is often the case.

However, the situation is reminiscent of how Betamax was a superior VCR compared to VHS. Ultimately, it didn’t matter because the public overwhelmingly chose VHS for various reasons, such as the fact that multiple manufacturers produced VHS, while only Sony made Betamax, and Betamax originally had a shorter recording time of just 60 minutes. To succeed in this industry, it is crucial to understand what the client wants. Don’t focus on multiple employer plans if the public is leaning toward pooled employer plans, or the other way around. Flexibility is key to success; stubbornness won’t help anyone.

When I was 13 and had my Bar Mitzvah, I spent around $2,000 (in 1985 money) on a state-of-the-art Apple IIe with a monochrome monitor. One of the first pieces of software I purchased was the top desktop publishing program known as Print Shop. I ordered it through mail order (yes, there was life before Amazon.com) for about $30. I remember my wealthy uncle bought the same program for my cousin at around $60. He didn’t mind paying double the price I paid. It seems that some people are willing to overpay.

I have a mantra: I dislike paying retail. I love a good sale. However, some people look down on those who pay less or shop at discount or outlet stores, thinking it’s somehow wrong to seek bargains. Unfortunately, plan fiduciaries, such as plan sponsors and trustees, don’t have that luxury. With their fiduciary duty at stake, plan sponsors must pay reasonable expenses for the services they utilize. They can only determine whether the fees they incur are reasonable by comparing their plan with those offered by other service providers. If they fail to shop around and end up overpaying, they could face liability from plan participants. It’s important to note that plan sponsors are not obligated to choose the cheapest providers, as lower prices can sometimes indicate a lack of quality. So, how can one determine if a plan sponsor is paying excessively? As Justice Potter Stewart famously stated, “I know it when I see it.” I have encountered information disclosed on Form 5500 that illustrates this issue. For example, I’ve seen a plan sponsor pay $54,000 to a Big 4 accounting firm for a limited scope audit or another sponsor pay a broker 60 basis points (0.60%) on a $14 million 401(k) plan. These examples show that some plan sponsors are significantly overpaying for services. Fee disclosure has made it easier to identify these cases, but again, plan sponsors can only determine this by surveying the 401(k) marketplace to see what their peers are paying.

At work and at home, one of the worst things I ever did was make a mistake and not accept responsibility for it. Instead of owning up, I would make excuses, turning the fight over the mistake into a bigger issue than the mistake itself. Many Third Party Administrators (TPAs) make errors when managing 401(k) plans for sponsors, yet they often refuse to take responsibility. Instead, they place the burden on the plan sponsor to rectify the situation and seek absolution from their accountability. \

Recently, I encountered a case where a TPA made an error in plan design and expected the 401(k) plan sponsor to take responsibility for the correction. In such instances, it’s clearly time for the TPA to be replaced.

Retirement plan provider 401GO is partnering with isolved, a human capital management (HCM) technology solution, to offer retirement plans within isolved’s cloud network.

The new plan, isolved 401(k), will be powered by 401GO and will include three 401(k) plans, each tailored by company size. The plans will be available on the isolved People Cloud. isolved currently works with 189,000 employers with 7.7 million employees.

According to an announcement, plan sponsors will have the option between selecting three plans, including: isolved 401(k) Enterprise – A c plan for growing businesses, featuring profit-sharing, investment support, and automated compliance tools; isolved 401(k) Small Business – a salary deferral-only 401(k) plan for businesses looking to comply with state mandates; and isolved 401(k) Solo – designed for one person plans.

Betterment Advisor Solutions (BAS), announced the launch of an all-digital solo 401(k), designed for independent advisors and their self-employed clients.

Key features of the plan include paperless account opening with no setup fees, fully digital contributions, spouse participation at no additional cost, and the fact that it offers both Roth and traditional tax strategies. From a business standpoint, I have found Solo 401(k) multiple employer or pooled employer plan situations difficult in collecting assets.

Correcting your late deferrals by depositing them and making a contribution to compensate for lost earnings in your 401(k) plan isn’t sufficient.

Why? Because Form 5500 requires you to honestly indicate whether you have late deferrals. If you answer “yes” (which you must, or you risk penalties for perjury), this alerts the Department of Labor (DOL) to your situation. The DOL will review their records and check if you submitted a Voluntary Fiduciary Compliance Program application. If you haven’t, they will reach out to you and recommend that you do so, which will also involve filing Form 5330. Many plan sponsors avoid this process due to the cost and choose to wait for DOL contact instead. From my experience, I prefer to address potential problems proactively and resolve them ahead of time.

I have worked at places that were so unpleasant that I consider myself lucky the vesting schedule was only six years. If they had the option, I’m convinced they would have implemented a 20-year vesting schedule. For me, vesting schedules have never been a reason to stay at a job. Recent research from Vanguard reveals that vesting schedules are ineffective at promoting employee retention.

According to the Internal Revenue Code, defined contribution plans must either immediately vest employer contributions at a rate of 100% or utilize a cliff or graded vesting schedule. A cliff vesting schedule allows employees to become fully vested in their employer contributions after a specific period—usually within three years of eligibility. Conversely, a graded vesting schedule gradually vests employees over six years. These represent the maximum requirements, so plans can actually offer more generous cliff and graded schedules than mandated.

Data from Vanguard in 2024 indicates that 49% of retirement plans feature a full and immediate vesting schedule, while the remaining plans apply either graded or cliff vesting with various service requirements. The most common alternatives include a five-year graded schedule, used by 16% of plans, and a three-year cliff schedule, used by 9% of plans. To assess the cost savings for employers resulting from forfeitures, Vanguard analyzed 4.7 million job separations across 1,500 of its administered plans from 2010 to 2022. Their review indicated that the cost savings were generally modest. Vanguard concluded that vesting does not provide a systematic benefit for employee retention, recouping only about 2.5% of employer contributions for the average plan. One reason for the minimal impact on retention is that many 401(k) participants may be unaware of their plan’s vesting requirements. A recent survey of current participants in Vanguard-administered plans revealed that only one-third (33%) correctly identified whether their plan had a vesting schedule.

Sponsors of 401(k) plans are increasingly recognizing the need to provide personalized investment options for their participants; however, access to managed accounts still remains limited.

According to PGIM DC Solutions’ 2025 DC Plan Sponsor Landscape Survey, a resounding 88% of plan sponsors believe that personalized advice and guidance will significantly improve retirement outcomes. Despite this strong consensus on the value of personalized investment strategies, managed accounts are not widely available.

While 60% of plan sponsors with assets over $100 million offer managed accounts, only 35% of those with assets between $10 million and $99 million either provide these accounts or are even aware of them. This limited availability is primarily attributed to cost, as managed accounts commonly involve high fees. Interest in managed accounts at current pricing levels, usually around or exceeding 25 basis points, remains low.

Still, 70% of plan sponsors assert that they would consider offering managed accounts as an opt-in option if fees were reduced to 10 basis points or less. Additionally, 63% would be enthusiastic about having managed accounts as their plan’s default investment at that competitive price point.