The Rosenbaum Law Firm P.C. Blog

Every retirement plan committee benefits from knowledgeable people. What it doesn’t need is a room full of people who automatically agree with each other.

One of the biggest risks for any committee is groupthink. Everyone nods in agreement, nobody asks difficult questions, and decisions get made simply because no one wants to challenge the consensus. That may make meetings shorter, but it doesn’t make fiduciary oversight better.

The most effective committees I’ve seen always have at least one person willing to ask uncomfortable questions.

Why are we changing investments?

Why are fees increasing?

Why are we hiring this provider?

What problem are we actually trying to solve?

Those questions aren’t obstacles. They’re part of the fiduciary process.

Too often, vendors present a new service, a new feature, or a new investment solution, and everyone immediately focuses on the benefits. The better approach is to ask whether the plan actually needs it. Not every new idea is a good fit for every plan.

A healthy committee discussion should involve debate. It should involve different viewpoints. It should include people who are willing to challenge assumptions and ask for additional information before making a decision.

The goal isn’t conflict. The goal is better decision-making.

Some sponsors mistakenly believe that a successful committee meeting is one where everyone agrees. I disagree. A successful meeting is one where the committee carefully evaluates the facts, considers alternatives, and documents why it reached a decision.

Fiduciary prudence doesn’t come from unanimous agreement. It comes from a thoughtful process.

Your retirement plan committee doesn’t need more cheerleaders. It needs people willing to ask the questions nobody else wants to ask. That’s often where the best fiduciary decisions begin.

One of the most common and expensive mistakes in a 401(k) plan isn’t a complicated investment issue or a sophisticated compliance failure. It’s the employee who never enrolled.

Sometimes it’s because the employee was never offered the opportunity to participate. Sometimes payroll coded them incorrectly. Sometimes an eligibility date was missed during a period of rapid growth or employee turnover. Whatever the reason, the result is the same: a participant who should have been in the plan but wasn’t.

Plan sponsors are often surprised when they discover that a simple administrative oversight can require corrective contributions, lost earnings calculations, and significant time spent fixing the problem. What may seem like a minor clerical error can become a costly correction exercise.

The challenge is that these mistakes often go unnoticed for months or even years. An employee assumes they are participating because they completed onboarding paperwork. HR assumes payroll handled it. Payroll assumes someone else verified eligibility. Everyone assumes the process worked.

Then one day an employee checks their account and discovers there isn’t one.

The best way to avoid these problems is through process. Regular reviews of newly eligible employees, periodic payroll audits, and clear communication between HR, payroll, and plan providers can catch issues before they become expensive corrections.

Technology helps, but technology is only as good as the information entered into it. A system cannot fix a process that doesn’t exist.

I’ve seen sponsors spend thousands of dollars correcting mistakes that could have been prevented by spending fifteen minutes reviewing an eligibility report.

The employee who never enrolled is rarely the result of bad intentions. It’s usually the result of assumptions. In the retirement plan business, assumptions are often far more expensive than anyone expects.

Most employee complaints involve relatively minor issues. Questions about vacation time, payroll, benefits, or workplace policies are common in every organization. However, when an employee raises a concern about the company’s retirement plan, plan sponsors should pay close attention.

Participant complaints are often the first indication that something is wrong.

An employee may notice a missing contribution, question an employer match calculation, or report that they were never given the opportunity to enroll. At first glance, these concerns may appear isolated. In reality, they frequently reveal larger operational issues affecting multiple employees.

Over the years, I have seen participant complaints uncover late contribution deposits, eligibility failures, incorrect matching contributions, and administrative errors that had existed for years. What began as a single inquiry often exposed a systemic problem requiring correction.

The worst response a plan sponsor can have is to dismiss the complaint or assume the participant is mistaken. Even if the employee’s understanding is incomplete, the concern deserves investigation. Retirement plan issues rarely resolve themselves. Delaying a review often increases correction costs and potential liability.

Participant complaints can also attract regulatory attention. Employees who believe their concerns are being ignored may contact the U.S. Department of Labor. Once a government inquiry begins, the issue can become significantly more complicated and expensive.

A prudent plan sponsor should establish a process for receiving, investigating, and documenting participant concerns. Questions should be addressed promptly, and appropriate professionals should be consulted when necessary.

One of the most important lessons in retirement plan administration is that small problems often signal larger ones. A participant who points out an issue may actually be doing the plan sponsor a favor by identifying a problem before regulators, auditors, or other participants discover it.

The employee complaint you should never ignore is the one involving your retirement plan. It may be the earliest warning sign that corrective action is needed.

One of the biggest misconceptions among plan sponsors is that providing required notices and disclosures means employees understand their retirement plan.

They don’t.

Most employers distribute Summary Plan Descriptions, enrollment materials, fee disclosures, and a variety of other required documents. From a compliance perspective, that is important. From a communication perspective, it is often not enough.

The reality is that most employees never read the Summary Plan Description. Those who do often skim it. Many participants only become interested in plan provisions when they are about to retire, need a loan, experience a hardship, or discover a problem with their account.

Unfortunately, by then it may be too late to prevent confusion or disappointment.

Effective participant communication requires more than distributing documents. Employees need information presented in a way that is understandable, relevant, and timely. A new hire may need basic enrollment guidance. A mid-career employee may benefit from education about increasing deferral rates. An employee approaching retirement may need information about distributions and rollover options.

Plan sponsors should view communication as an ongoing process rather than a one-time event. Educational meetings, webinars, emails, payroll inserts, and periodic reminders can all help reinforce important information. Clear communication can also reduce participant complaints and improve plan participation.

One of the goals of a retirement plan is to help employees prepare for retirement. That goal becomes much harder to achieve when participants do not understand the benefits available to them.

Providing required disclosures remains essential. However, employers should not confuse distribution with communication. Simply handing someone a lengthy document does not mean they have read it, understood it, or acted upon it.

The best plan sponsors recognize that participant education is not merely a compliance obligation. It is an opportunity to help employees make better decisions about their financial future.

Many plan sponsors spend a great deal of time selecting investments, reviewing fees, and ensuring contributions are deposited timely. Yet one of the most overlooked aspects of retirement plan administration is fiduciary liability insurance.

Many employers mistakenly assume that their general business insurance policy or ERISA fidelity bond provides complete protection. It does not. An ERISA fidelity bond protects the plan against losses caused by fraud or dishonesty involving plan assets. Fiduciary liability insurance, on the other hand, is designed to protect the individuals and entities serving as plan fiduciaries when claims are made alleging breaches of fiduciary duty.

Even the most diligent fiduciaries can face claims from participants, beneficiaries, regulators, or other parties. A participant may allege excessive fees, improper investment selection, inadequate oversight of service providers, or errors in plan administration. Whether those allegations ultimately prove valid is often beside the point. Defending against such claims can be expensive and time-consuming.

Fiduciary liability insurance can help cover defense costs, settlements, and certain judgments, depending on the policy terms. While no insurance policy eliminates fiduciary responsibility, it can provide an important layer of protection when problems arise.

The reality is that retirement plans have become increasingly complex. Regulatory scrutiny has increased, participant lawsuits have become more common, and fiduciaries are expected to maintain prudent processes and oversight. The risks are real, even for employers acting in good faith.

Plan sponsors should work with qualified insurance professionals to review their coverage and determine whether fiduciary liability insurance is appropriate for their situation. They should also understand the policy’s exclusions, limits, and reporting requirements.

A retirement plan represents a significant commitment to employees’ financial futures. Protecting the individuals responsible for overseeing that plan should be part of every employer’s risk management strategy. Fiduciary liability insurance is not a substitute for good governance, but it is an important safeguard when governance alone is not enough.

The worst employers I ever worked for were labor lawyers.

That may sound strange coming from someone who spent years practicing law, but it’s true. These were attorneys who represented unions and workers, yet many of them treated their own associates poorly. Looking back, I often joke that I should have tried organizing the associates into a union. Needless to say, they would not have taken kindly to that idea.

It reminds me of the old saying that the cobbler’s children have no shoes.

I see the same thing in the retirement plan business. Over the years, I have encountered more than a few retirement plan providers with lousy 401(k) plans. Some had weak employer contributions. Others had poor participation rates. Some failed to take advantage of the very plan design features they routinely recommended to clients.

That has always puzzled me.

If you spend your career helping employers create successful retirement plans, shouldn’t your own plan be an example of best practices? If you preach the value of automatic enrollment, why don’t you use it? If you talk about the importance of employer contributions, why are yours so minimal? If you stress participant education, are your own employees receiving it?

I am not suggesting that every provider needs the richest plan in America. Every business has different financial realities. What I am saying is that there should be consistency between what you recommend and what you do yourself.

The truth is that employees notice. Clients notice too. It is difficult to sell best practices when you are not following them.

One of the lessons I learned from those labor lawyers is that credibility matters. Whether you are representing workers or advising retirement plan sponsors, people pay attention to whether you practice what you preach.

You can’t effectively handle your clients’ retirement plans if you can’t handle your own. The best providers lead by example, not merely by advice.

Most compliance disasters do not begin with a regulatory investigation. They begin with an email.

Perhaps a payroll manager asks why employee deferrals have not been deposited in several weeks. Maybe a participant questions why a contribution appears to be missing. A human resources employee mentions that a company acquisition recently closed and asks whether it affects the retirement plan.

These inquiries often seem routine. They arrive among dozens of emails demanding immediate attention. Yet sometimes the most expensive problem facing a plan sponsor is hidden inside what appears to be a simple question.

I have seen situations where a casual inquiry uncovered late contributions, eligibility failures, incorrect matching contributions, operational defects, and controlled group issues. Had those matters been addressed immediately, the cost and complexity of correction would have been significantly reduced.

The danger is that providers become accustomed to handling large volumes of communication. It is easy to assume that an email can wait until tomorrow, next week, or after a more pressing project is completed. Unfortunately, compliance problems rarely improve with time. They tend to become larger, more expensive, and more difficult to correct.

This is why documentation and responsiveness matter. Every client inquiry deserves attention. That does not mean every email represents a crisis. It does mean that providers should train themselves to recognize potential warning signs and investigate when something does not look right.

One of my long-standing beliefs is simple: if it looks wrong, it is wrong. A seemingly minor question may reveal a significant compliance issue lurking beneath the surface.

The most expensive email you will ever ignore is usually the one that appears completely ordinary. By the time you realize its importance, the correction costs may be far greater than the few minutes it would have taken to respond.

Retirement plan providers spend a tremendous amount of time helping clients prepare for retirement, yet many fail to prepare for their own professional future. Every provider needs an exit strategy.

An exit strategy is not simply about retirement. It is about ensuring continuity for clients, employees, and business partners when circumstances change. Those circumstances may include retirement, disability, illness, the sale of a practice, or even the unexpected departure of a key employee.

Many retirement plan practices are built around one individual. That person possesses the client relationships, technical knowledge, and institutional memory that keeps the operation running. The problem becomes obvious when that individual is suddenly unavailable. Clients still need service. Deadlines still need to be met. Compliance issues still need attention.

Without a succession plan, a successful practice can quickly become vulnerable. Clients may leave, employees may become uncertain about their future, and the value of the business can decline dramatically.

An effective exit strategy includes documented procedures, cross-training of staff, clear client communication protocols, and an understanding of how ownership will transition if necessary. Providers should also evaluate whether there are potential internal successors or external buyers who would be a good fit for the business.

As a solo practitioner, I understand the challenges. Much of what we do is based on relationships and expertise developed over decades. But that is precisely why planning is so important.

The irony is that we routinely advise plan sponsors to prepare for the unexpected. Providers should follow the same advice. A well-designed exit strategy protects clients, preserves the value of the business, and ensures that years of hard work do not disappear because of a lack of planning.

The best time to create an exit strategy is long before you think you need one.

One of the least glamorous jobs in retirement plan administration is dealing with missing participants.

People change jobs. They move. They get married and change their names. Some pass away without beneficiaries updating records. Over time, plan sponsors and recordkeepers are left trying to track down former employees who are entitled to retirement benefits but cannot be located.

For years, this has been a persistent headache for plan fiduciaries. It is not enough to simply throw your hands up and say, “We can’t find them.” The Department of Labor expects fiduciaries to make reasonable efforts to locate missing participants. That means searches, mailings, database reviews, and documentation. All of that takes time and money.

A newly launched States’ Unclaimed Retirement Clearing House (SURCH) may offer some relief. The program creates a centralized system through which plan sponsors and recordkeepers can voluntarily transfer certain unclaimed retirement distributions to participating state unclaimed property programs. Instead of dealing with dozens of different state processes, the clearinghouse serves as a single portal. Currently, dozens of states and the District of Columbia are participating.

The concept makes sense. State unclaimed property offices have decades of experience reuniting people with forgotten assets. They maintain searchable databases, conduct outreach efforts, and are in the business of finding owners of abandoned property. Retirement benefits are simply another type of forgotten asset.

Of course, this is not a free pass for fiduciaries to stop searching for participants. Plan sponsors still need prudent procedures and documentation. But for plans struggling with stale checks and missing participants, this may finally provide a practical solution to a problem that has frustrated the retirement plan industry for years.

The missing participant issue is not going away. However, for the first time in a long time, plan fiduciaries may have a new tool that makes the problem a little easier to manage.

For years, the retirement plan industry operated under a relatively straightforward business model. Recordkeepers made money by providing administrative services to retirement plans. Plan sponsors hired them to maintain participant accounts, process transactions, and support plan operations.

That model is changing.

As recordkeeping fees continue to decline, many providers are searching for new revenue sources. Increasingly, that means offering wealth management services directly to plan participants. Industry leaders openly discuss the convergence of retirement, wealth management, and workplace benefits as one of the defining trends shaping the future of the business.

From a recordkeeper’s perspective, the strategy makes perfect sense. The economics of recordkeeping have become increasingly challenging. Technology costs continue to rise. Cybersecurity expenses continue to grow. Participants expect sophisticated digital experiences. Meanwhile, fee compression remains relentless.

The problem is that what makes sense for a recordkeeper may not always align with the interests of plan sponsors, advisors, or participants.

Many retirement plan advisors built their practices around helping participants prepare for retirement. Participant education, retirement readiness, distribution planning, and rollover advice have long been part of the advisor’s value proposition. When recordkeepers begin pursuing the same participants for wealth management opportunities, conflicts can emerge.

Plan sponsors should not necessarily oppose these developments. Participants often need access to financial advice and retirement planning services. The real issue is transparency.

Who owns the participant relationship? What participant data is being shared? How are participants being approached? Are there clear rules of engagement between advisors and providers?

These questions matter because the retirement plan marketplace is evolving rapidly. The traditional recordkeeping business is no longer sufficient for many providers. As fees decline, providers are increasingly looking at participant assets as the next growth opportunity.

For plan sponsors, this trend reinforces an important lesson: selecting a recordkeeper is no longer just about technology, investments, or administrative services. It is also about understanding the provider’s business model and whether it aligns with the goals of the plan.

The retirement plan industry is changing. Plan sponsors need to understand not only what their providers do today, but how those providers expect to make money tomorrow.