The Rosenbaum Law Firm P.C. Blog

Walk into most 401(k) plans and you’ll see the same thing: a bloated investment lineup filled with options that all start to look the same after a while. Large cap blend A, large cap blend B, large cap blend C—different names, same story. Somewhere along the way, more became confused with better.

It’s not.

Most investment lineups are just noise. They create the illusion of choice without delivering meaningful differentiation. And for participants, especially those who aren’t financially sophisticated, that noise becomes paralysis. Too many options don’t empower people—they overwhelm them.

From a fiduciary perspective, this is where things get interesting. Plan sponsors think they’re doing the right thing by offering a wide range of investments. But if participants can’t reasonably navigate those choices, what’s the real benefit? A lineup should be constructed with intention, not excess.

The best plans I see are disciplined. A core menu that covers the essentials. A well-constructed target date fund series as the QDIA. Maybe a brokerage window for those who truly want more control. That’s it. Clean, understandable, and effective.

Providers sometimes push larger lineups because it feels safer—more options, less second-guessing. But in reality, fewer, better choices lead to better participant outcomes and a stronger fiduciary story.

Because a 401(k) plan isn’t a buffet. It’s not about offering everything. It’s about offering the right things—and making sure participants can actually use them.

My wife loves Le Creuset, which means, by extension, so do I. I’ve been to enough factory-to-table sales across the country to know one thing: for every cooking need, they’ll happily sell you three different versions of the same product. Bread oven, Dutch oven, braiser—at some point, it’s all just cast iron doing roughly the same job. Beautiful, yes. Necessary? Not always.

That’s the 401(k) industry in a nutshell.

Plan providers have become masters at packaging “nice to have” features as if they’re essential. Managed accounts layered on top of target date funds. Financial wellness tools nobody uses. Proprietary analytics dashboards that look impressive but don’t change a single fiduciary outcome. It’s not that these things are inherently bad—it’s that they’re often sold without regard to whether the plan sponsor actually needs them.

And here’s the problem: unnecessary complexity isn’t harmless. Every added feature introduces cost, confusion, and sometimes even fiduciary risk. Sponsors don’t need ten moving parts—they need a plan that works, is easy to understand, and keeps them compliant.

The best providers I’ve worked with don’t lead with bells and whistles. They lead with questions. What are you trying to solve? Where are the risks? What actually matters to your employees?

Because at the end of the day, a great 401(k) plan isn’t about how much you can include—it’s about how much you can strip away and still deliver strong outcomes.

Sometimes the best thing you can sell a plan sponsor is less.

Let’s not overcomplicate it. A federal court wiped out the 2024 Retirement Security Rule, and the Department of Labor responded the only way it really could—by reverting to the old five-part fiduciary test. That’s not reform. That’s not progress. That’s hitting rewind and pretending the last few years were just a bad sequel nobody wants to talk about.

What Actually Happened (Without the Nonsense)

Here’s the clean version you can explain without needing a whiteboard. The DOL tried to expand fiduciary status, especially to capture one-time advice like rollovers and annuity recommendations. The courts looked at that and said the agency overreached. Not a little—fundamentally. Instead of continuing the fight, the DOL stepped back, and with that, the rule collapsed. We are now back to the same framework that has governed this space for decades.

The core issue was simple. The DOL tried to stretch fiduciary status beyond ongoing advisory relationships and into transactional sales conversations. The courts weren’t buying it. They made it clear that without a real, continuing relationship of trust and reliance, you don’t get to call someone a fiduciary just because money is changing hands.

The Five-Part Test: The Cockroach That Won’t Die

The five-part test survives again, and at this point, it feels indestructible. Advice must be given for a fee, on a regular basis, under a mutual understanding that it will serve as a primary basis for decisions, and it must be individualized. Miss one element and fiduciary status falls apart.

That’s why rollover advice has always been so slippery. It’s often a one-time interaction, not part of an ongoing advisory relationship, and that distinction matters. The DOL has tried repeatedly to blur that line. The courts keep drawing it right back.

My Take: This Was Always Going to Happen

Let me be blunt. This outcome was predictable. The DOL keeps trying to solve a problem that really requires Congress to act, not regulators trying to reinterpret a statute written for a different era. Each time they push too far, the courts step in and remind them where the boundaries are.

We’ve seen this movie before. Different rule, same ending. At some point, it stops being about poor drafting and starts being about the limits of what ERISA actually allows. You can’t retrofit a 1970s law to fully regulate a modern rollover-driven retirement system without running into legal walls.

The Real Issue Nobody Wants to Say Out Loud

This debate gets dressed up as participant protection, but let’s not kid ourselves. This is about money, specifically rollover money. That’s where the battles are being fought, and that’s where the incentives collide. The insurance side wants flexibility. Broker-dealers want to operate under Regulation Best Interest. RIAs want a broader fiduciary standard. The DOL wants to expand its authority. The courts keep pushing back. Meanwhile, billions in retirement assets are moving every year, and everyone wants a piece of that flow. That’s why this issue never goes away. It’s not philosophical. It’s economic.

What This Means for You

From a practical standpoint, we’re back to where we were. The compliance framework doesn’t suddenly change. The five-part test governs. PTE 2020-02 remains part of the landscape. Advisors still operate in a world where fiduciary status depends on facts and circumstances rather than bright-line rules. Rollovers remain the gray area they’ve always been. Some advisors will structure their practices to avoid fiduciary status. Others will embrace it. Either way, the lack of clarity isn’t going anywhere.

The Ary Rosenbaum Bottom Line

This isn’t a win for one side or a loss for another. It’s a reminder of the structural problem. ERISA was designed for ongoing retirement plan relationships, not for a marketplace dominated by rollovers, IRAs, and one-time advice interactions. Until Congress steps in and rewrites the rules for the modern retirement system, regulators will keep trying to stretch the existing framework, and courts will keep pulling it back. And every few years, we’ll get another headline, another rule, and another reversal. Different day. Same result.

This is one of those stories where the headline sounds important, but the conclusion is something anyone in this business already knows. Student loan anxiety impacts retirement savings. Of course it does. That’s not insight—that’s reality. But what continues to get lost in these discussions is that we are focusing on the symptom instead of the disease. We don’t really have a student loan problem. We have an education cost problem, and everything else flows from that.

The Study Says What You Already Know

The premise is straightforward. People burdened with student loan debt save less for retirement. Their contributions are lower, their balances lag, and their long-term financial outlook is weaker. That’s been true for years, and it doesn’t require a study to confirm it. When individuals are dealing with significant monthly loan payments, retirement savings becomes a secondary priority. Not because they don’t care, but because they don’t have the flexibility to do both at the level they should.

What’s interesting is that we continue to frame this as a behavioral issue. It’s not. People are responding exactly how you would expect them to.

The Real Problem: We Built a System That Forces Bad Choices

We’ve created a system where young people take on significant debt before they fully understand the long-term consequences, and then we expect them to seamlessly transition into disciplined retirement savers. That expectation ignores the reality of the choices they face.

When someone is deciding between paying down a loan with a relatively high and guaranteed interest rate or contributing to a retirement account that is subject to market volatility, the decision to prioritize debt repayment is not irrational. It’s logical. It’s math. The system is structured in a way that forces individuals into tradeoffs that have long-term consequences no matter which path they choose.

Anxiety Isn’t the Cause—It’s the Result

The focus on anxiety is misplaced. Anxiety is not what’s driving reduced savings. It’s the outcome of financial pressure, not the source of it. The real issue is constrained cash flow. When a meaningful portion of income is committed to loan repayment each month, there is simply less available for retirement contributions.

Over time, this creates a compounding disadvantage. Lower contributions in early years translate into significantly lower balances later on. That gap doesn’t just close on its own. It persists, and in many cases, it widens.

The Industry Response: Helpful, But Missing the Point

To its credit, the retirement industry has tried to respond. Legislative changes and plan design innovations have introduced mechanisms to help employees balance loan repayment with retirement savings. Employer contributions tied to student loan payments and broader financial wellness initiatives are steps in the right direction.

But these are ultimately adjustments around the edges. They help mitigate the impact, but they don’t address the underlying issue. They are solutions designed to manage the consequences of a larger structural problem.

The Ary Rosenbaum Take

This is not fundamentally a retirement issue, and it’s not even primarily a student loan issue. It is a pricing issue that has been allowed to grow unchecked. The cost of education has increased to the point where debt has become the default mechanism for access. That debt then competes directly with retirement savings for limited financial resources.

When we frame the conversation around anxiety, we risk missing the bigger picture. The challenge is not that individuals are making poor decisions. The challenge is that they are making rational decisions within a system that gives them limited good options.

The Bottom Line

If the goal is to improve retirement outcomes, the conversation has to extend beyond plan design and behavioral nudges. Those tools matter, and they can make a difference at the margins. But they cannot fully offset the impact of large, sustained debt obligations.

At its core, this is about resources. People are not saving less because they are anxious. They are saving less because they have less available to save. Until the cost side of the equation is addressed, the outcome on the savings side is not going to meaningfully change.

For plan sponsors subject to annual retirement plan audits, the audit process can feel intimidating. Many sponsors worry that an audit will uncover problems that reflect poorly on their organization or create regulatory trouble.

In reality, audits often serve a very useful purpose: identifying operational issues that might otherwise go unnoticed.

Retirement plan administration involves a number of moving parts—eligibility tracking, payroll withholding, contribution calculations, and participant communications. Even when sponsors work with experienced service providers, mistakes can occur. Auditors frequently identify issues such as missed deferrals, incorrect eligibility determinations, or contribution calculation errors.

Discovering these issues during an audit is not necessarily bad news. In many cases, the errors can be corrected through established IRS correction programs.

The IRS Employee Plans Compliance Resolution System (EPCRS) allows plan sponsors to correct a wide range of operational failures. Depending on the circumstances, corrections may involve making corrective contributions to affected participants, adjusting plan procedures, or adopting retroactive amendments when appropriate.

The key benefit of the correction system is that it encourages sponsors to fix problems rather than ignore them. Addressing an issue promptly often prevents larger compliance problems down the road.

Plan sponsors should view the audit process not as an adversarial exercise, but as part of the overall compliance framework that keeps retirement plans operating properly.

No retirement plan is immune from operational errors. What matters most is how those issues are handled once they are identified.

A well-managed plan sponsor understands that audits are not just about finding problems. They are about ensuring that the retirement plan continues to serve participants effectively and in compliance with the law.

Many plan sponsors believe that once they hire a recordkeeper, TPA, or investment advisor, their fiduciary responsibilities are largely taken care of. While service providers certainly help manage the plan, there is one fiduciary duty that plan sponsors can never fully delegate: the responsibility to monitor those providers.

Under ERISA, the plan sponsor is ultimately responsible for ensuring that the retirement plan is operated prudently and in the best interests of participants. Hiring competent service providers is part of that obligation, but it does not end the sponsor’s responsibility.

Monitoring service providers means more than simply signing a contract and assuming everything will work smoothly. Plan sponsors should periodically evaluate the performance of their recordkeeper, TPA, advisor, and other vendors. This includes reviewing service levels, responsiveness, accuracy of administration, and reasonableness of fees.

For example, if a recordkeeper consistently makes operational errors or fails to respond promptly to participant requests, the sponsor has a duty to address those issues. Similarly, if fees become excessive compared to industry standards, sponsors should evaluate whether a change is necessary.

Monitoring does not mean micromanaging providers or questioning every operational decision. Instead, it involves maintaining reasonable oversight and ensuring the providers hired to assist with the plan are performing their roles effectively.

This responsibility sometimes surprises plan sponsors because they assume the experts they hire assume all of the legal risk. In reality, ERISA places the ultimate responsibility on the plan sponsor to ensure the plan is administered properly.

The good news is that monitoring providers does not need to be overly burdensome. Periodic reviews, regular communication with advisors, and documentation of decisions can go a long way toward fulfilling fiduciary obligations.

At the end of the day, hiring good providers is important. But overseeing them is just as critical.

Many plan sponsors assume that once a retirement plan is established and service providers are hired, the plan will simply run itself. Unfortunately, that assumption is one of the reasons operational mistakes in retirement plans are far more common than most sponsors realize.

Retirement plans operate in a complicated regulatory environment. Payroll systems, eligibility tracking, participant elections, and contribution calculations must all work together properly. When one piece of that system fails, errors occur. In many cases, those errors go unnoticed for years.

One of the most common problems involves missed deferrals. An employee becomes eligible for the plan, but payroll never begins withholding contributions. Sometimes the employee was never properly enrolled, while other times the payroll system simply didn’t process the election correctly. By the time the issue is discovered—often during an audit or compliance review—multiple pay periods have passed and a correction must be made.

Eligibility errors are also frequent. Employees who should have entered the plan are left out because of incorrect service tracking or misunderstandings about eligibility rules. Conversely, employees sometimes enter the plan earlier than permitted by the document.

Another common issue involves late deposits of employee deferrals. The Department of Labor requires employee contributions to be deposited as soon as they can reasonably be segregated from the employer’s assets. When payroll processes are inconsistent, deposits may occur later than permitted.

What surprises many plan sponsors is that these mistakes don’t necessarily reflect negligence or bad intentions. Retirement plans involve complex administrative processes, and even well-run organizations can experience operational failures.

The key for plan sponsors is not assuming mistakes will never happen. Instead, sponsors should conduct regular reviews with their TPA, recordkeeper, and advisors to ensure the plan is operating according to its terms.

Retirement plan compliance isn’t about perfection. It’s about identifying problems early and correcting them before they grow into something bigger.

When plan providers lose a client, the first assumption is usually pricing.

The advisor must have found a cheaper recordkeeper. The TPA must have been undercut by a competitor. The bundled provider must have offered a lower asset-based fee.

While pricing occasionally plays a role, it’s rarely the real reason a provider loses a client.

More often than not, the problem is communication.

Retirement plans are complicated. Plan sponsors depend heavily on providers to explain rules, identify problems, and guide them through regulatory requirements. When that communication breaks down, frustration builds quickly.

It usually starts with small issues. Emails go unanswered for days. Compliance questions receive vague responses. Plan sponsors feel like they have to chase their provider for basic information.

Over time, those small frustrations accumulate. A missed deadline or operational error can become the tipping point that convinces a plan sponsor to look elsewhere.

Ironically, the provider losing the client often believes the relationship was perfectly fine until the termination notice arrives.

The truth is that service matters far more than pricing in this industry. Plan sponsors want responsiveness, clarity, and confidence that their provider understands the plan’s operations.

Providers who succeed long term understand that their real value isn’t just compliance expertise. It’s the ability to guide clients through a complex regulatory environment without making them feel lost or ignored.

In the retirement plan business, clients rarely leave because someone else is cheaper.

They leave because they feel like no one is listening.

Anyone who works in the retirement plan industry has heard the complaint from advisors and plan sponsors alike: it’s getting harder to find a good TPA.

That shouldn’t surprise anyone. Being a third-party administrator today requires a combination of legal knowledge, technical expertise, and operational discipline that didn’t exist twenty years ago.

Administering a retirement plan used to be relatively straightforward. The rules were simpler, plan designs were more standardized, and compliance testing followed predictable patterns. Today, however, the regulatory environment has grown far more complex.

Consider just a few of the issues TPAs now handle routinely: SECURE 2.0 changes, safe harbor plan rules, coverage testing corrections, automatic enrollment compliance, Roth provisions, and the ever-present risk of operational errors. Each one of those areas can trigger IRS corrections, Department of Labor scrutiny, or participant complaints if handled improperly.

At the same time, industry consolidation has reduced the number of independent TPAs. Larger recordkeepers increasingly offer bundled services, and many smaller firms have been acquired or simply closed their doors as the regulatory burden grew.

The result is an industry where experienced administrators are in short supply.

It’s not unlike professional football. Every team wants a great quarterback, but there simply aren’t enough elite ones to go around. The same dynamic exists with TPAs. Everyone wants the experienced administrator who understands plan design, compliance testing, and operational risk.

But there are only so many of them.

For advisors and plan sponsors, the lesson is simple: when you find a good TPA, treat them like a franchise quarterback. Protect them, respect their expertise, and understand their value.

Because replacing them is far harder than you might think.

Whenever Congress creates a new savings vehicle, the legislation is only the beginning. The real work begins when the IRS and Treasury try to translate the statute into operational rules. That’s exactly what we’re seeing now with the proposed regulations for so-called “Trump Accounts.”

Trump Accounts were created under tax legislation enacted in 2025 and are designed as tax-advantaged investment accounts for children. The idea is simple: give families a way to start building long-term savings early in a child’s life. But like most things involving retirement and tax law, the details matter.

Under the program, the federal government plans to deposit a one-time $1,000 contribution into accounts for eligible children born between 2025 and 2028, provided a parent or guardian elects to participate.

Parents and others may also contribute up to $5,000 annually to the account. Employers may contribute up to $2,500 per year toward an employee’s child’s account as part of a contribution program, with overall limits applying to total annual contributions.

The accounts resemble individual retirement accounts in several respects. Funds generally must remain invested until the child reaches adulthood, and investments are limited to broad, low-cost index funds tracking U.S. equity markets. Eventually the account converts into a traditional IRA-type structure, with typical tax rules applying to distributions.

For the retirement plan community, the IRS proposal is an important step because it begins to answer operational questions. Who opens the account? How is the government contribution triggered? What responsibilities fall on parents, employers, and financial institutions?

Those questions matter because every new savings vehicle eventually creates administrative challenges.

Whether Trump Accounts become widely adopted remains to be seen. But one thing is clear: whenever the government creates a new tax-favored savings program, the financial services industry inevitably becomes part of making it work.

And as always, the devil is in the details.