The Rosenbaum Law Firm P.C. Blog

I recently read a survey showing that most Americans would prefer to solve Social Security’s financial problems by reducing benefits for affluent retirees rather than raising taxes on themselves or imposing across-the-board benefit cuts. My reaction was simple.

I’m not shocked. Not even a little.

If you’ve spent any time paying attention to politics or public policy, this result was entirely predictable. When people are presented with a choice between paying more themselves and asking someone else to pay more, they usually choose the second option.

The reality is that Social Security has a math problem. The system is projected to face significant funding shortfalls in the coming years, and policymakers eventually will have to make difficult choices involving taxes, benefits, retirement ages, or some combination of all three. Doing nothing isn’t a solution because doing nothing eventually leads to automatic benefit reductions.

What I found interesting about the survey was not that Americans want affluent retirees to absorb more of the burden. It was that even many higher-income respondents supported that approach.

Of course, the phrase “wealthy retiree” means different things to different people. To some people, it means a billionaire. To others, it means someone who worked for forty years, paid maximum Social Security taxes, saved diligently, and accumulated a comfortable retirement. That’s where these discussions become politically complicated.

As someone who spends his professional life dealing with retirement issues, I think the bigger problem is that Americans continue to believe there is a painless solution. There isn’t.

Every proposal involves winners and losers. Raise taxes and workers pay more. Raise the retirement age and future retirees work longer. Reduce benefits and retirees receive less. Means-testing shifts more of the burden to higher-income retirees. None of these options are politically pleasant.

The survey results don’t surprise me because Americans are behaving exactly as people always do. They want Social Security fixed. They just prefer that somebody else absorb most of the pain.

Unfortunately, Social Security’s finances don’t care about politics. Eventually, the math wins.

I recently read that financial literacy in America has fallen to its lowest level in a decade. Americans answered less than half of basic financial literacy questions correctly, and younger generations performed even worse. The numbers are concerning, but they don’t surprise me.

I’ve spent more than twenty-five years in the retirement plan business. If there is one thing I’ve learned, it’s that we often assume participants know more than they actually do. They don’t.

Many participants don’t understand compound interest. They don’t understand inflation. They don’t understand investment risk. They don’t understand the difference between a traditional pre-tax contribution and a Roth contribution. Most importantly, many don’t understand how much money they need to save to retire comfortably.

The retirement plan industry sometimes acts as if technology can solve every problem. We build better websites. We create mobile apps. We add calculators and interactive tools. Those things are helpful, but technology cannot overcome a lack of basic financial knowledge.

The reality is that many participants are making decisions without understanding the consequences. Some avoid participating because they believe they can’t afford to contribute. Others keep all their money in stable value or money market funds because they are afraid of market volatility. Still others take loans or hardship withdrawals without fully appreciating the long-term impact on retirement readiness.

This is why participant education remains so important.

For plan providers, financial literacy should not be viewed as someone else’s responsibility. Every enrollment meeting, every educational presentation, every participant call, and every communication represents an opportunity to help someone make a better financial decision.

The study also found that retirement-specific knowledge remains alarmingly low. That should concern every provider because defined contribution plans place significant responsibility on participants. The more responsibility participants have, the more important financial literacy becomes.

The retirement plan industry has spent decades focusing on plan design, investment menus, fees, and technology. Those issues matter. But none of them can fully compensate for a participant who lacks a basic understanding of personal finance.

Financial literacy is not a side issue. It is one of the foundations of retirement security.

If Americans are becoming less financially literate, the retirement plan industry needs to do a better job educating participants. Because at the end of the day, a great retirement plan only works if participants understand how to use it.

Most employers think their retirement plan fiduciaries are the committee members, advisors, and service providers involved with the plan. In reality, one of the most important players in the entire operation is usually sitting down the hall: the payroll department.

Payroll drives almost everything in a 401(k) plan.

Deferral elections, employer match calculations, compensation definitions, eligibility tracking, loan repayments, Roth contributions, catch-up contributions, and deposit timing all depend on payroll functioning correctly. When payroll makes mistakes, the retirement plan inherits those mistakes immediately.

That is why payroll departments have become the unofficial co-fiduciaries of modern retirement plans.

The problem is that many employers still treat payroll as a purely administrative function disconnected from fiduciary responsibility. It’s not. A coding error inside payroll can create missed deferrals affecting dozens of participants. A misunderstanding about compensation definitions can create testing failures. Delayed payroll transmissions can create prohibited transaction issues and excise taxes.

Most operational failures do not begin with the investment committee. They begin with payroll data.

This becomes even more complicated during mergers, acquisitions, and conversions, where payroll systems may not align with plan provisions. Employees transfer between entities, compensation codes change, and eligibility service can be interpreted inconsistently. If payroll and retirement plan administration are not coordinated carefully, errors spread quickly.

Sponsors also underestimate how dependent providers are on payroll accuracy. Recordkeepers and TPAs generally process the data they receive. If the payroll information is incomplete or incorrect, the system will continue processing bad data until someone notices the problem.

The best retirement plan operations treat payroll personnel as part of the fiduciary process. They involve payroll in committee discussions, review procedures regularly, and verify that payroll systems properly reflect plan provisions.

Retirement plans do not fail because of one dramatic event. They fail because small payroll mistakes quietly compound over time.

That’s why payroll is no longer just an administrative department. It is one of the most important risk-management functions in the entire retirement plan structure.

Every employer wants to save money on retirement plan costs. That’s understandable. But in the 401(k) business, the cheapest option often becomes the most expensive one in the long run.

Low fees sound great during the sales process. Sponsors hear promises about reduced costs, bundled services, and streamlined administration. What they often discover later is that cheap pricing frequently comes with hidden operational tradeoffs.

The problem is that retirement plans are not commodity products. They are ongoing administrative systems requiring accurate payroll integration, participant communication, compliance oversight, timely corrections, and responsive support. When providers aggressively underprice services, something usually gives way.

Sometimes it’s service quality. Sometimes it’s staffing. Sometimes it’s the willingness to identify problems before they become disasters.

Sponsors rarely leave providers because investment returns differed by 12 basis points. They leave because payroll feeds break, participant complaints pile up, notices go out late, or nobody responds when operational failures occur.

Cheap providers also tend to rely heavily on automation while minimizing human review. Automation is valuable, but it cannot replace experience and judgment when eligibility rules are administered incorrectly or payroll data suddenly stops making sense.

The most dangerous cost-cutting decision is choosing providers solely based on fees without evaluating operational competence. A provider saving a sponsor $5,000 annually can easily create a correction project costing several times that amount if the plan is administered poorly.

There is also a hidden internal cost. HR and payroll departments often spend countless hours fixing problems created by low-cost providers that lacked sufficient support resources from the beginning.

A well-run retirement plan is not about finding the lowest bidder. It is about finding providers capable of reducing risk, preventing errors, and solving problems before they become expensive.

In retirement plans, value matters far more than advertised price.

Because the most expensive plan is usually the one that looked cheapest at the beginning.

Most retirement plan committees spend enormous amounts of time worrying about investment performance. They debate fund lineups, review quarterly returns, and anxiously compare performance benchmarks. Meanwhile, the risks most likely to create lawsuits, penalties, and participant anger are often sitting quietly in the background: operational and process failures.

Bad markets happen. Participants understand markets go up and down. What they do not forgive are preventable administrative mistakes.

The reality is that most major retirement plan disasters are not caused by investment losses. They are caused by missed deferrals, payroll errors, late deposits, incorrect eligibility determinations, bad census data, or failures to follow the plan document. Those are process failures, and unlike market losses, they are entirely within the sponsor’s control.

Courts and regulators increasingly focus on fiduciary process rather than perfect outcomes. A committee that documents decisions, reviews service providers carefully, monitors fees, and corrects errors promptly is in a far stronger position than one obsessed with chasing the best-performing fund every quarter.

Too many committees treat operational oversight as somebody else’s responsibility. They assume the payroll company, recordkeeper, or TPA is “handling it.” That assumption becomes dangerous when nobody verifies whether the processes are actually working correctly.

A retirement plan is not self-executing. It is a chain of operational procedures involving HR, payroll, providers, advisors, and internal management. One weak link can create expensive consequences.

The irony is that sponsors often devote more time selecting lunch options for committee meetings than reviewing payroll controls or eligibility procedures. Yet payroll failures and administrative mistakes create far greater liability exposure than whether a target date fund underperformed for six months.

Investment volatility is unavoidable. Operational chaos is not.

The committees that best protect participants and themselves are the ones that understand retirement plans are ultimately built on disciplined process, not perfect market timing.

The retirement plan business is obsessed with automation. Automated enrollments. Automated payroll feeds. Automated notices. Automated investment rebalancing. If you listen to enough provider presentations, you would think retirement plans now run themselves.

Until something goes wrong.

That’s when everyone suddenly remembers human judgment still matters.

Automation works wonderfully when the facts are clean and predictable. Unfortunately, retirement plans rarely operate that way. Payroll systems code compensation incorrectly. Employees move between divisions. Eligibility provisions are written one way and administered another. M&A transactions create strange employee classifications nobody anticipated when the system was configured.

A computer processes what it is told. It does not stop and ask whether the instruction makes sense.

That becomes dangerous in retirement plans because operational failures often begin with bad assumptions embedded into automated processes. A payroll integration excludes the wrong compensation. A system incorrectly excludes long-term part-time employees. Auto-enrollment deductions start late because payroll coded a rehire incorrectly. The system keeps processing exactly as designed while the error quietly grows more expensive.

Providers sometimes treat automation like a substitute for expertise instead of a tool that supports expertise.

The irony is that automation actually increases the need for experienced people. Someone still has to understand plan design. Someone still has to review exception reports. Someone still has to recognize when a census file looks suspicious or when participant counts suddenly don’t make sense.

The best retirement plan operations combine technology with skepticism. They understand that systems are only as reliable as the assumptions feeding them.

This is especially true during conversions and acquisitions, where providers inherit years of historical data problems from another platform. Automated systems don’t magically cleanse bad information. They simply process bad information faster.

Technology absolutely improves retirement plan administration. But the providers who stand out are the ones who know when to stop relying on automation and start applying judgment.

Because the most expensive words in this business are still: “The system said it was correct.”

Retirement plan providers spend enormous amounts of money trying to win business. Sales presentations. RFP responses. Fee comparisons. Fancy participant education materials. But the truth is that most clients decide whether they trust you after the contract is signed.

The implementation is the sale.

The first 90 days tell a plan sponsor everything they need to know about a provider relationship. Are payroll files handled correctly? Are emails answered promptly? Are eligibility rules understood? Are mistakes acknowledged quickly or buried under layers of corporate jargon?

Sponsors remember operational competence far more than they remember the sales pitch.

Most providers focus on features during the sales process. Mobile apps. Financial wellness tools. AI chatbots. The sponsor usually cares about something much simpler: “Will my employees get paid correctly into the plan and will somebody answer the phone when something breaks?”

That sounds simplistic, but it’s the reality of the business.

The danger is that many providers treat implementation like an administrative handoff instead of a relationship-building exercise. The sales team disappears, the sponsor gets introduced to three different service people in two weeks, and suddenly nobody seems accountable for anything. Deadlines get missed. Payroll feeds fail. Participant notices go out late. Everyone starts blaming the prior provider.

Clients don’t expect perfection during a conversion or implementation. They expect honesty and responsiveness. A provider who says “we made a mistake and here’s how we’re fixing it” builds more trust than a provider pretending everything is fine while the sponsor is discovering problems independently.

The best providers understand that implementation is emotional. Sponsors are nervous. Participants are confused. Payroll personnel are overwhelmed. A calm, organized provider who communicates clearly immediately separates themselves from competitors.

In this business, trust is rarely built by investment returns. It’s built by surviving the first 90 days without chaos.

In the retirement plan business, everyone loves to celebrate the conversion sale. New client signed. Prior provider terminated. Blackout notices sent. Confetti everywhere. What nobody celebrates is the operational mess that often follows a mid-year conversion.

Mid-year conversions are where reputations go to die.

On paper, they sound simple. Transfer assets. Map investments. Load payroll. Educate participants. In reality, every moving part becomes a potential operational failure. Payroll systems speak one language, recordkeepers speak another, and the census data usually arrives held together with duct tape and optimism.

The biggest issue is that providers often underestimate how much bad historical data they inherit. Eligibility dates are wrong. Compensation definitions don’t match payroll coding. Roth sources are improperly tracked. Participants who terminated years ago mysteriously reappear like ghosts in the census file.

Then comes participant counts. Many providers assume the plan size determination is a static issue handled at year-end. It’s not always that simple. A mid-year conversion involving force-outs, rollovers, or terminated employees can create confusion over audit obligations and Form 5500 filings. By the time someone realizes there’s a problem, the sponsor is already angry and the auditor is already billing.

Investment mapping is another landmine. Providers obsess over preserving the “same” investment lineup while ignoring participant behavior and operational practicality. Sometimes the safest answer is simply using a qualified default investment alternative instead of pretending every mapping exercise is perfect.

The reality is that conversions are not technology projects. They are process-management projects. The providers who survive them successfully aren’t the ones with the flashiest software. They’re the ones with disciplined procedures, realistic timelines, and people willing to ask uncomfortable questions before the assets move.

Because once the conversion goes live, there’s no such thing as “we’ll fix it later.”

The recent Fidelity data showing average 401(k) balances dipping in the first quarter of 2026 has already created the predictable financial media panic. Markets decline a few percentage points, balances temporarily fall, and suddenly everyone starts acting like the retirement system is collapsing. It’s the same cycle every time volatility shows up.

What most people missed in the report was the more important story.

Despite market volatility, workers are actually saving at record levels. Fidelity reported that the total average savings rate for 401(k) participants reached 14.4%, combining employee and employer contributions. Employee deferral rates alone hit a record 9.6%, and nearly one in five participants increased their savings rate during the quarter.

That matters far more than whether the average balance temporarily dropped during a volatile quarter.

People obsess over account balances because balances are easy to measure. Process is harder to measure. But retirement success has always been more about consistent behavior than short-term market conditions.

The participants who build meaningful retirement wealth are usually boring. They keep contributing during good markets and bad ones. They don’t stop deferrals because of cable news panic. They don’t treat every market correction like the apocalypse. They understand that retirement investing is a long baseball season, not a single at-bat.

The Fidelity numbers also reinforce how important automatic enrollment and automatic escalation features have become. Many participants save more today because plans increasingly force people to make better decisions for themselves. Behavioral finance matters because most people are not naturally disciplined investors.

Of course, there are warning signs beneath the headline numbers. Hardship withdrawals and participant loans continue to reflect the financial pressure many workers face from inflation and higher living costs. The retirement system still works far better for higher-income employees than lower-income workers.

But the bigger takeaway remains encouraging. Markets fluctuate. Savings discipline matters more. The participants who stayed the course through the first quarter of 2026 probably helped themselves more than they realize.

Just when retirement plan sponsors thought disclosure rules couldn’t get any more convoluted, the Department of Labor has offered temporary relief on SECURE 2.0’s paper statement requirements. For anyone keeping score at home, Congress passed a law requiring certain retirement plan benefit statements to be furnished on paper, even in an age where most participants check balances on their phones while pretending to listen in meetings. Then questions emerged about implementation, practical compliance concerns surfaced, and now the DOL has essentially said, “Make a good-faith effort while we sort this out.” If that sounds like the retirement plan equivalent of building the plane while flying it, welcome to employee benefits regulation.

Beginning with the 2026 plan year, defined contribution plans generally must provide at least one paper benefit statement annually, while defined benefit plans face a paper statement requirement every three years. On paper, that sounds manageable. In practice, it creates all sorts of operational questions because retirement plans rarely exist in a world where one rule applies cleanly without intersecting with five others. Some plans rely on electronic disclosure safe harbors. Some participants have affirmatively consented to electronic delivery. Some recordkeepers have systems built around digital communications because, you know, it’s 2026. So naturally, Congress decided to add a paper mandate back into the mix.

This is where plan sponsors need to stop assuming their vendors have everything under control. One of the great myths in this business is that if a recordkeeper handles participant communications, the compliance burden somehow magically transfers with it. It doesn’t. Somebody needs to know whether paper statements are being generated, how frequently, for whom, under what delivery rules, and whether the plan’s disclosure procedures align with the law. “I thought the recordkeeper had it” is not exactly a compelling defense if this becomes an issue later.

What makes this particularly amusing is that the retirement industry spent years moving away from paper for good reason. Electronic delivery reduces cost, improves efficiency, and reflects how most participants actually engage with their retirement accounts. Very few participants are eagerly waiting by the mailbox for a quarterly statement when they can check their balance between doomscrolling and ordering lunch. Yet here we are, reintroducing paper into a system that had largely modernized itself.

I understand the policy argument. Some participants prefer paper. Some may miss electronic notices or lack reliable digital access. Fair enough. But the way this gets implemented matters. Layering mandatory paper on top of existing electronic disclosure rules creates complexity, not clarity.

The lesson here is simple. Temporary enforcement relief is not the same thing as permission to ignore the issue. In the retirement plan world, “good-faith compliance” often translates to “you should already be figuring this out before someone else decides you didn’t.”