The Rosenbaum Law Firm P.C. Blog

In the world of retirement plans, it’s easy to overlook the fine print — until someone sues you over it. The IRS just reminded us why distribution notices matter with the release of Notice 2026-13, which updates the safe harbor 402(f) model explanations for eligible rollover distributions.

Let’s cut to the fiduciary core: Section 402(f) requires that a written explanation be furnished to any participant or beneficiary eligible for a rollover distribution — and it must be provided within a reasonable period of time before the distribution is paid. For years, plan administrators have relied on prior IRS model language to satisfy this requirement. Now the IRS has updated those safe harbor explanations to reflect SECURE 2.0 changes and other tax law developments.

Here’s what changed, and why you should care.

First, there are now separate model notices for non-Roth accounts and designated Roth accounts. That matters because the tax consequences are different, and sloppy drafting here creates confusion at best and exposure at worst.

Second, the updated language incorporates the expanded exceptions to the 10% early withdrawal penalty, including newer SECURE 2.0 distribution categories. If your notice doesn’t reflect those changes, you’re giving participants incomplete information.

Third, the models reflect changes to required minimum distribution rules, including updated RMD ages and special surviving spouse provisions.

This isn’t glamorous work. No one markets their firm based on beautifully drafted rollover notices. But outdated 402(f) language is a preventable compliance failure.

Sponsors and providers should review distribution packages now. Because when a participant challenges a payout, “we didn’t update the template” is not a defense.

Details matter. Especially the ones at the back of the packet.

In the world of retirement plans, it’s easy to overlook the fine print — until someone sues you over it. The IRS just reminded us why distribution notices matter with the release of Notice 2026-13, which updates the safe harbor 402(f) model explanations for eligible rollover distributions.

Let’s cut to the fiduciary core: Section 402(f) requires that a written explanation be furnished to any participant or beneficiary eligible for a rollover distribution — and it must be provided within a reasonable period of time before the distribution is paid. For years, plan administrators have relied on prior IRS model language to satisfy this requirement. Now the IRS has updated those safe harbor explanations to reflect SECURE 2.0 changes and other tax law developments.

Here’s what changed, and why you should care.

First, there are now separate model notices for non-Roth accounts and designated Roth accounts. That matters because the tax consequences are different, and sloppy drafting here creates confusion at best and exposure at worst.

Second, the updated language incorporates the expanded exceptions to the 10% early withdrawal penalty, including newer SECURE 2.0 distribution categories. If your notice doesn’t reflect those changes, you’re giving participants incomplete information.

Third, the models reflect changes to required minimum distribution rules, including updated RMD ages and special surviving spouse provisions.

This isn’t glamorous work. No one markets their firm based on beautifully drafted rollover notices. But outdated 402(f) language is a preventable compliance failure.

Sponsors and providers should review distribution packages now. Because when a participant challenges a payout, “we didn’t update the template” is not a defense.

Details matter. Especially the ones at the back of the packet.

Fee compression isn’t coming. It’s here.

Every provider I speak to says the same thing: “We’re losing deals on price.” But here’s the uncomfortable question — are you losing on price, or are you losing on clarity?

If a prospect can’t clearly articulate what makes you different, you’ve already become a commodity. And commodities compete on price.

Sponsors and advisors don’t wake up thinking about your workflow efficiency, your testing accuracy rate, or your turnaround times. They think about risk, outcomes, and whether you make them look smart.

If you don’t define your value — technical expertise, responsiveness, niche focus, litigation awareness, SECURE 2.0 mastery — someone else will reduce you to a line item in a spreadsheet.

“Provider A: $X per head.” “Provider B: $X minus 10%.”

That’s not a strategy. That’s erosion.

The firms that are winning right now are precise about who they are. They specialize. They write. They speak. They educate. They explain complex issues in plain English. They become trusted experts rather than interchangeable vendors.

Price pressure is inevitable in a maturing industry. But margin compression is optional if you position yourself correctly.

If your differentiator is “great service,” you don’t have a differentiator. That’s the baseline.

Define your value before someone else discounts it.

Plan sponsors are busy people. Running a business involves managing employees, customers, vendors, and finances. In the middle of all that, a 401(k) plan can feel like just one more administrative burden competing for attention.

The problem is that ERISA does not make allowances for busy schedules. Deadlines still apply whether the company is growing rapidly or struggling to keep up. Late employee deferral deposits, missed notices, and incomplete census data are common problems that arise when retirement plan responsibilities are pushed aside.

Many sponsors assume that service providers will catch problems before they become serious. Sometimes they do, but often they can’t. Providers depend on timely and accurate information from the employer. When that information is delayed, the plan can fall out of compliance quickly.

Late deposits are one of the most common examples. Sponsors often intend to make deposits promptly but allow payroll timing or cash flow concerns to interfere. The Department of Labor treats late deposits as prohibited transactions, regardless of intent.

Annual notices and Form 5500 filings create similar risks. Missing a deadline rarely feels urgent at the time, but small oversights can lead to penalties and correction costs later.

Running a business is demanding, but a retirement plan requires consistent attention. ERISA does not recognize good intentions or busy schedules as excuses.

The sponsors who avoid problems are the ones who treat their 401(k) plan like an ongoing responsibility instead of an occasional task.

We’ve all seen it. The branded tablecloth. The stress balls. The bowl of candy. The hopeful smiles.

And then… nothing.

Conferences don’t generate revenue. Relationships do.

Too many providers treat conferences like fishing expeditions. Set up the booth, wait for traffic, collect business cards, send one follow-up email, and move on. That’s not business development. That’s wishful thinking.

Real conference ROI starts before the event. Who’s attending? Which advisors or sponsors do you want to meet? Did you schedule conversations in advance? Are you speaking on a panel? Are you publishing content tied to the event theme?

And it continues after the conference. Structured follow-up. Personalized outreach. Thoughtful articles referencing conversations you had. Consistent visibility.

The booth is a prop. The real value is credibility and positioning.

If you show up as “another provider,” you’ll be treated like one. If you show up as someone who understands SECURE 2.0 chaos, Roth catch-up confusion, pooled plan strategy, or testing nuances — you become memorable.

Networking without strategy is expensive socializing.

The firms that grow don’t rely on foot traffic. They use conferences as amplifiers for an already clear message.

The booth doesn’t close the deal.

You do.

I can’t tell you how many times I hear this from plan sponsors: “The plan is fine. No one’s complaining.”

Silence is not a fiduciary audit.

Participants rarely complain about fees they don’t understand, investment lineups they didn’t choose, or administrative errors they can’t see. A quiet plan is often just a disengaged plan. And disengagement is not a compliance strategy.

When was the last time your committee benchmarked recordkeeping fees? Not glanced at a report — actually benchmarked them. When did you last review your investment policy statement and compare it to what’s actually in the lineup? Do your target-date funds reflect your workforce demographics, or are they there because they were “good enough” ten years ago?

Fiduciary responsibility under ERISA isn’t about reacting to problems. It’s about process. Documented, consistent, thoughtful process.

Markets fluctuate. That’s normal. But stale governance is avoidable. If your committee meets once a year to rubber-stamp reports, that’s not oversight — that’s ceremonial.

I’ve seen plans that were “fine” for years until a DOL investigator asked for meeting minutes, fee benchmarking reports, and service agreements. Suddenly “fine” turned into “we meant to get to that.”

The absence of complaints is not evidence of prudence. It’s often evidence that no one is looking closely.

If you’re a plan sponsor, assume your plan is not fine until you can prove it is — with documentation, benchmarking, and regular review.

Quiet plans don’t stay quiet forever.

Recurring 410(b) failures are rarely random.

When a plan consistently struggles with coverage testing, it’s not bad luck. It’s structural.

Maybe the ownership group is highly compensated and aging while rank-and-file turnover is high. Maybe eligibility rules were designed for a workforce that no longer exists. Maybe compensation definitions create unintended exclusions.

The coverage test isn’t just a compliance hurdle. It’s diagnostic.

Too many providers treat testing failures as technical puzzles to be solved at year-end — add a QNEC here, adjust a gateway there, lean on fail-safe language. Problem fixed. Until next year.

But if you’re fixing the same problem repeatedly, you’re not solving it. You’re patching it.

Coverage failures often signal deeper design misalignment between the business model and the retirement plan. A growing professional services firm needs a different structure than a seasonal employer. A closely held company with family ownership requires intentional design from day one.

The providers who stand out don’t just “run the test.” They interpret it. They go back to the sponsor and say, “Here’s what this is telling us about your workforce.”

That conversation elevates you from processor to advisor.

Testing is not just about passing. It’s about understanding.

If 410(b) keeps flashing red, it’s not the test that’s broken.

Too many plan providers approach the retirement plan business like traditional salespeople. They focus on pitching services, promoting features, and explaining why their company is better than the competition. The problem is that plan sponsors aren’t looking for sales presentations. They are looking for solutions to real problems.

Sponsors worry about compliance failures, late deposits, testing issues, and confusing plan rules. They want to know what happens when an employee was missed for eligibility or when payroll used the wrong compensation definition. These are the situations that keep employers up at night. A provider who walks in with a polished sales pitch but no practical guidance usually misses the mark.

The providers who stand out are the ones who identify problems and offer solutions before being asked. They review plan operations, ask questions about payroll procedures, and point out risks the sponsor may not even realize exist. That approach builds trust far faster than any brochure or slide presentation ever will.

Plan sponsors remember the provider who helped them fix a testing failure or avoid a costly correction. They remember the advisor who explained a complicated rule in plain English. Those experiences create lasting relationships because the sponsor sees the provider as a partner rather than a salesperson.

Selling services may bring in new business, but solving problems keeps clients for the long term. In a competitive marketplace where sponsors have many choices, providers who focus on practical solutions rather than sales pitches will always have an advantage.

The retirement plan business isn’t really about selling. It’s about helping plan sponsors run better plans.

Nobody brags about changing the oil in their car. It’s not exciting. It doesn’t generate applause. But skip it long enough, and the engine fails.

Fiduciary governance works the same way.

Most retirement plan failures don’t happen because of dramatic market crashes or exotic investments. They happen because of neglect. Committee meetings that get postponed. Minutes that don’t get finalized. Investment policy statements that gather dust. Fee reviews that never happen because “we did one a few years ago.”

Governance is maintenance.

A prudent process means regular meetings with agendas. Documented review of investment performance against stated criteria. Fee benchmarking on a reasonable schedule. Monitoring service providers. Reviewing plan operations, including payroll practices and deposit timing.

These tasks are not glamorous. They won’t impress your employees at the holiday party. But they are what courts and regulators look for if something goes wrong.

I’ve seen sponsors defend plans with mediocre investment returns because they had excellent documentation and disciplined oversight. I’ve also seen sponsors with strong returns struggle because their governance process was informal and undocumented.

The law rewards process, not perfection.

Changing the oil doesn’t guarantee your car will never break down. It dramatically reduces the risk.

Treat your retirement plan the same way. Regular maintenance is not optional. It’s what keeps the engine running.

I like bagels as much as the next person. But breakfast meetings do not equal fiduciary protection.

Plan sponsors often assume that because their recordkeeper provides education sessions, quarterly reports, and cheerful service reps, someone else is “handling the fiduciary stuff.” That’s a dangerous assumption.

Most recordkeepers are service providers. They are not fiduciaries unless they explicitly agree in writing to act as one under ERISA. And even then, you need to understand whether they are acting as a 3(21) co-fiduciary, a 3(38) investment manager, or merely providing administrative support.

Those labels matter.

If you retain discretion over selecting and monitoring investments, you are a fiduciary. If you decide which fees to pass along to participants, you are a fiduciary. If you appoint and monitor service providers, you are a fiduciary.

Outsourcing services does not outsource responsibility.

Too many committees treat quarterly review meetings like vendor updates instead of governance sessions. The recordkeeper reports performance; everyone nods; someone asks about participant engagement; meeting adjourned. That is not fiduciary oversight.

You must review fees independently. You must document decisions. You must understand what your service agreements actually say.

ERISA doesn’t care how friendly your relationship is. It cares about process and prudence.

Bagels are nice. Written fiduciary agreements are better.