The Rosenbaum Law Firm P.C. Blog

In the world of retirement plans, some stories feel like déjà vu with a fresh set of dollar signs. The latest lawsuit filed by former participant Brian Byrne against TIAA and its associated retirement plans is no exception. But beneath the legalese and financial jargon is a familiar, troubling pattern—one that raises fundamental questions about fiduciary duty, loyalty, and who actually benefits when plan sponsors double as asset managers.

Let’s strip it down. This case isn’t about exotic investments or esoteric financial engineering. It’s about share classes—specifically, why TIAA allegedly kept plan participants in higher-cost R3 share classes when lower-cost R4 share classes were available for the exact same funds. The allegations? That this wasn’t an oversight or a slow administrative pivot. This was a choice—a conscious one. And like so many fiduciary failures I’ve seen over the past two decades, it was a choice that benefitted the plan provider at the expense of the participants.

According to the complaint, TIAA made the R4 share class available to institutional investors back in September 2022. These R4 shares carried “significantly less” in fees compared to the R3 shares—yet as of December 31, 2023, TIAA still had over $2.2 billion of plan assets parked in the higher-cost R3s. That’s not pocket change. That’s participants’ money being used inefficiently, allegedly to pad margins and prop up the in-house business.

Worse still, the complaint highlights what’s become a recurring issue in proprietary fund litigation: underperformance. The suit claims that TIAA kept a proprietary fund in its lineup that has been trailing its benchmark since 2009—to the tune of more than 186%. If that number sounds absurd, that’s because it is. No prudent fiduciary keeps a fund like that in place—especially not when alternatives exist. But a conflicted one might.

And here’s the crux of the matter: TIAA, as both recordkeeper and asset manager, occupies a conflicted position. When a plan provider offers its own proprietary investments, the incentives are inherently misaligned. Every dollar that stays in a TIAA-managed fund—even a higher-cost, underperforming one—is a dollar that benefits TIAA before it benefits the plan participant.

The numbers tell the story: $1.6 billion of the Retirement Plan’s assets—nearly a third—remained in the higher-cost R3 share class. Another $150 million in the 401(k) Plan, and $370 million in the Retirement Plan, were still invested in the same TIAA Growth Fund that, according to the lawsuit, has chronically failed to meet expectations. In a world where institutional investors fight tooth and nail over basis points, this isn’t just negligence. It’s potentially disloyal, imprudent, and, if proven true, a textbook ERISA violation.

This lawsuit underscores a broader truth: fiduciary breaches don’t always wear masks. Sometimes, they come dressed in familiar logos, wrapped in marketing about “long-term stewardship” and “participant-first service.” But when the numbers don’t add up, when performance lags and fees remain unjustifiably high, it’s worth asking: who is the plan really working for?

I’ve long warned about the dangers of proprietary funds, the misuse of share classes, and the subtle erosion of fiduciary standards when providers profit from their own conflicts. This case, like others before it, is a reminder that vigilance is not optional—it’s essential.

Stay tuned. If history is any guide, this won’t be the last time we see a headline like this. But perhaps, if participants, attorneys, and yes, even some plan sponsors, keep speaking up, it might just be one of the last times it’s allowed to happen.

When I was at American University Washington College of Law, the dean at the time was a man named Claudio Grossman. He was from Chile and seemed to carry that fact around like a passport that needed stamping at every conversation. His favorite word was paradigm. He used it constantly—so much, in fact, that I often wondered if he truly understood what it meant. It was like a magician pulling the same rabbit out of the same hat over and over again, insisting it was a new trick each time. In lectures, meetings, hallway conversations—“paradigm” this, “paradigm” that. Eventually, the word lost all meaning. It became noise. A kind of academic Muzak that played in the background while students like me tried to focus on surviving law school.

But lately, and especially in reflecting on Full Circle, I’ve come to understand that paradigm was always the right word—just misused, misapplied, and, in Grossman’s case, misplaced.

You see, my life has been defined by resisting paradigms. Not society’s, but my parents’. Their paradigm of what a child should be. What I should have been. And more importantly, what I should have done for them.

I wasn’t the son they ordered from a catalog. I didn’t go to Harvard. I didn’t write perfect essays in high school, or chase after the Ivy League dream they wore like a badge. I didn’t win the medals they could hang in their mental trophy case and polish at dinner parties. I didn’t become their reflection.

Instead, I built something from the ground up. My practice. My integrity. My independence. No silver spoon, no handouts, no shortcuts—just sweat, stubbornness, and survival. I took the long way, because that’s the only road I had. And in doing that, I broke their paradigm. Or maybe I just refused to live inside it.

My parents were broken people. Narcissistic to the core. Everything I achieved had to be theirs. Everything I failed at was entirely mine. Their love—if you can call it that—was transactional, conditional, and forever out of reach. I spent years in that loop, trying to decode their expectations, trying to earn their approval by shaping myself into someone else’s ideal. But the more I tried, the further I drifted from who I actually was. Until one day, I stopped trying. I let go of the idea that I had to fit their image. That I had to play a role in their performance.

That was the beginning of the real paradigm shift. Not in a lecture hall. Not from a dean’s monologue. But in the quiet, painful realization that I could not—and would not—spend my life being a character in someone else’s script.

The funny thing is, Claudio Grossman probably thought he was introducing us to a revolutionary concept when he said paradigm. But for me, the revolution was personal. It was walking away from a broken inheritance. It was building a life that didn’t need their approval. It was writing Full Circle—not just as a memoir, but as a declaration.

I was not their paradigm. I never will be. And that’s the point.

ERISA is filled with traps for the unwary. Some are complex, hiding in layers of regulatory nuance. Others are deceptively simple—like plan forfeitures. Yes, I’m talking about those dollars left behind when participants fail to vest in employer contributions. Easy to ignore. Easy to mishandle. And now, thanks to the IRS, impossible to overlook without consequence.

The IRS has spoken, and here’s the message in plain English: if you’re sitting on plan forfeitures from 2024 or any earlier year, you’ve got until December 31, 2025 to use them—or you’ve got a compliance failure on your hands.

Let me back up a bit. In 2023, the IRS issued proposed regulations aimed at cleaning up the widespread misuse—or nonuse—of forfeitures in defined contribution plans. The rule? Forfeitures must be used no later than 12 months after the end of the plan year in which they’re incurred. That’s not a suggestion. That’s an expectation. Miss the deadline, and you’ve got a formal compliance issue.

Now here’s the good news. Recognizing that many plan sponsors haven’t been following the rule—some because they didn’t know better, others because they just didn’t know at all—the IRS is offering a one-time reprieve. Under the proposed regulations, any forfeitures incurred during plan years beginning before January 1, 2024, are treated as if they were incurred in the first plan year starting on or after that date. Translation: if you’re on a calendar-year plan, all of those pre-2024 and 2024 forfeitures must be put to use by December 31, 2025.

Let’s be clear—this isn’t a “we’ll look the other way if you try your best” situation. It’s a window. A deadline. And if you fail to act, it slams shut, and you’ll be left facing a compliance failure with no easy way out.

Of course, utilizing forfeitures isn’t as simple as dumping them back into the plan. The use must be consistent with the terms of your plan document. Are forfeitures allocated to participants? Used to reduce employer contributions? Cover plan expenses? Your plan document holds the answer—and you’d better be following it. If you’re not, you’re risking not just IRS scrutiny, but participant lawsuits, which we’ve already seen cropping up across the country.

Now, a common question: “But Ary, these are just proposed regulations—do I really have to follow them?” My answer? Yes. The IRS has made it crystal clear: you can rely on these proposed regs now. There’s no need to wait until they’re final to get your house in order. And if you’re sitting on unused forfeitures, there’s no excuse not to act.

So here’s your action plan:

1. Inventory your forfeitures. Figure out what you’ve been carrying forward—and for how long.

2. Check your plan document. Make sure you know what the governing rules are for using forfeitures.

3. Develop a plan. Use the forfeitures in a compliant way before December 31, 2025.

4. Document everything. If the IRS or a plaintiff’s lawyer comes knocking, you’ll want a clear paper trail.

Retirement plan compliance isn’t just about keeping the IRS happy—it’s about doing right by your participants. Forfeitures aren’t “extra” money. They belong to the plan, and they must be used for the benefit of participants, according to the rules you agreed to when you adopted the plan.

The clock is ticking. The relief is temporary. Do the right thing now—before the IRS does it for you.

The 401(k) match has long been one of the most powerful tools for building retirement savings. It’s the “free money” we’ve all been trained to chase—and advise our clients to chase. So when Fidelity, Schwab, and others start finding new, creative ways to repurpose that match money—like paying down student loan debt or even contributing to HSAs—it raises an important question:

Are we helping, or are we just rearranging deck chairs on the Titanic?

Let’s start with the good. SECURE 2.0 opened the floodgates for some real innovation. Allowing employers to treat student loan repayments like 401(k) deferrals, and now, in a recent private letter ruling, even potentially using those same employer match dollars for HSAs—these are genuinely interesting, forward-thinking concepts. They recognize the financial reality of today’s workers: Gen Z and Millennials are drowning in debt and struggling with healthcare costs. Telling a 28-year-old with $110,000 in student loans and a $3,000 deductible to “save for retirement” feels tone-deaf. These ideas meet people where they are.

But here’s where the lawyer in me—and the long-term fiduciary thinker—starts raising red flags.

We’re still pulling from the same pot of money. The 401(k) match was never designed to be a catch-all financial wellness fund. It was supposed to build retirement security. Full stop. If we start siphoning those dollars toward today’s problems, what happens tomorrow? Yes, we reduce current stress, but do we increase future financial vulnerability?

It’s a bit like giving someone an umbrella in a thunderstorm, while quietly poking holes in their roof for when the next storm rolls in.

There’s also a bigger concern here—one that gets lost in all the cheerleading about “flexibility” and “innovation.” What if employers start using these programs not as a supplement, but as a substitute? “Oh, we don’t offer a 401(k) match andstudent loan help. We offer one pot of money, and you choose where it goes.” Sounds equitable. Feels empowering. But it’s really just a cost-saving rebrand. And once the marketing gloss fades, the math doesn’t lie: less going into retirement accounts means less available when people need it most.

Am I being cynical? Maybe. But I’ve been in this business too long not to recognize when a good idea starts becoming a Trojan horse.

So, what’s the answer?

Yes, give employees student loan help. Yes, fund their HSAs. But don’t do it instead of helping them save for retirement. Do it in addition to. Expand the benefit, don’t just reallocate it.

Because the only thing worse than not helping people today… is leaving them stranded tomorrow.

I was never going to be the guy—the one people rallied around, the golden child, the anointed one. I wasn’t the star quarterback of anyone’s career fantasy draft. More often than not, I was the last pick in the schoolyard pick’em. And it wasn’t because I lacked ability. Quite the opposite. I had the talent. What I lacked was the pedigree, the polish, the politics. The things narcissists and gatekeepers latch onto when they’re deciding who “belongs.”

I’ve written before—most recently in Full Circle—that in the law firm world, maybe half of the people who make partner actually deserve it. The other half? Beneficiaries of the right lunch buddies, the right mentor, or the right last name. It’s a club. And if you don’t have the right handshake, they’ll make damn sure you stay outside.

There were moments in my life when that weighed on me. Watching someone far less capable than me get the job, the praise, the platform. It eats at you, if you let it. Makes you question if talent really matters at all. But here’s the thing I learned: they can only keep you down for so long.

Real talent—paired with relentless hope—is a force. Maybe not the kind that storms the gates on day one. But it chips away. It endures. It makes itself undeniable over time.

It’s something I think about a lot, and not just professionally. Hope is hard-earned when you come from a family where love is conditional and success is never your own. My parents had their idea of who I should be—and spoiler alert, I didn’t fit their mold. I didn’t go to Harvard. I didn’t climb the ladder they imagined. I built my own. And I climbed that. And it worked out.

There’s a quote from The Shawshank Redemption—one of the few films that gets the long game of resilience right: “Hope is a good thing, maybe the best of things, and no good thing ever dies.”

That’s the kind of hope I clung to. Not the naïve, starry-eyed version. The kind born of disappointment and grit. The kind that gets up after the fifth, sixth, or fifteenth rejection and says, “I’m not done yet.”

So no, I was never their guy. But I became my own guy. And eventually, I became the right guy—for the clients who valued what I did, for the readers who saw themselves in my story, and for the people who believed that merit still matters, even in a world that often forgets it.

They may overlook you. They may underestimate you. But they can’t stop you—if you’ve got talent. And if you’ve got hope.

If you’ve worked in the retirement plan industry long enough, you’ve had that moment — that gut punch — where you know you’re the best person for the job, but the gig goes to someone else. Someone who isn’t as experienced. Someone who doesn’t know the ins and outs of plan design, ERISA compliance, or fee benchmarking. Someone who might, let’s be honest, blow it.

It’s frustrating. It’s unfair. And it’s reality.

We like to believe that meritocracy rules, that decisions are based on who can best serve the plan and its participants. But hiring — like most things in life — is never that clean. It’s messy, personal, and filled with variables we’ll never see.

Maybe the chosen provider plays golf with the CFO. Maybe they went to the same alma mater. Maybe they dropped their fees by 5 basis points just long enough to win the business. Or maybe the decision-maker just liked them better. There’s no ERISA rule against “chemistry.”

Plan sponsors aren’t ERISA attorneys. They’re HR managers, CFOs, business owners — often overwhelmed and under-informed about what a good plan provider actually does. They’re susceptible to shiny sales decks, big brand names, or smooth talkers with nothing under the hood. The best person for the job doesn’t always get it, because not every decision is made with clarity or competence.

I’ve said it before: You can’t explain irrational behavior from a rational viewpoint. Trying to make sense of it will only drain you. So don’t.

Grin. Bear it. And move on.

Because the good news is, not all plan sponsors are irrational. There are still plenty out there who care about the right things: transparency, expertise, and participant outcomes. The trick is to find them. They’re the ones who will recognize what you bring to the table — and stick with you when it matters.

In this business, you won’t win every plan. But you don’t need to. You just need to win the right ones. The ones that value substance over flash. The ones that care about getting it right, not just getting it done.

Stay in the game. Stay true to your value. And when the right sponsor comes along, they’ll know exactly who the best person for the job is.

In this business—the retirement plan business, the ERISA world—you don’t build anything alone. You might draft the documents, run the meetings, fix the failures, and chase the clients, but if you’re lucky, a few people walk the road with you. Some give you a push when you’re stuck. Others hand you a brick when you’re building. And some? Well, some just stand by the side and watch. Or worse—they pretend they’re helping while quietly betting against you. You don’t forget any of them.

When I think back to the early days of my ERISA practice, it’s not just a blur of plan restatements and prototype documents. It’s people. People who returned my calls when no one else would. People who referred business to me not because they had to, but because they believed I knew what I was doing—or at least, would figure it out. Some of them are still in my life. A few aren’t. But I remember all of them.

There was a TPA who took a chance on me before I had a name. Before the blog, before the speaking gigs, before the law firm had any traction. They gave me a referral when I was still moonlighting and hustling, working nights and weekends to get my solo practice off the ground. I didn’t ask them to take a risk. They just did. That kind of loyalty stays with you.

Then there were the plan sponsors—small business owners mostly—who didn’t care that I wasn’t at a big law firm anymore. They wanted someone who would return their calls, who actually understood how 401(k) plans worked in practice, not just on paper. I built my firm on clients like that. People who didn’t need a slick PowerPoint, just honest advice and someone who wouldn’t disappear after the retainer check cleared.

Of course, not everyone was supportive. Some smiled to my face while warning others not to work with me. There were advisors I’d worked alongside for years who suddenly couldn’t find the time to grab coffee. Industry colleagues who vanished the moment I wasn’t “useful” to them anymore. They’re the same ones who later reached out when I had a following and a platform. The thing is, you can always tell who’s there for the work and who’s there for the spotlight.

You learn, fast, who’s on your side. Not when things are easy, but when the client is angry, the plan is broken, and the DOL is breathing down your neck. Those are the moments that separate the real partners from the fair-weather ones. I’ve had people step up for me in those moments. I’ve also had people disappear. You don’t chase the ones who leave. You just remember.

I’ve never needed a large crowd—just a loyal few. The ones who showed up when it wasn’t convenient. The ones who didn’t need to be asked twice. The ones who believed in me when all I had was a laptop, a home office, and a belief that doing the right thing still mattered in this industry.

You never forget who was there. And you especially never forget who wasn’t.

I’ve been working with organizations—political, civic, religious, and business—since my days at Stony Brook, back when I was involved with student political groups and the school paper. I’ve written ad copy, designed flyers, and helped companies craft their messaging. And while advertising has its place, let me say this loud and clear: advertising is not a cure-all.

Too many organizations think that a slick ad campaign or a boosted social media post is the key to growth. But if your business is struggling or your group can’t keep members engaged, chances are the real issue isn’t visibility—it’s culture.

You can’t fix poor customer service with Google ads. You can’t fix an unwelcoming civic group by running a promo in the local paper. If you’re running your organization like a private club instead of an inclusive community, new members will come once—and never return.

The same goes for retirement plan providers. If you’re not growing, you need to look inward. Is your pricing competitive? Are your services aligned with what plan sponsors want? Do you build real relationships or just chase transactions?

Advertising might get people in the door, but it won’t keep them there. Fix the culture first, then advertise. Not the other way around.

When it comes to your health, there are signs—little warnings your body gives you—that something might be off. You don’t ignore chest pain, blurry vision, or persistent fatigue (at least, you shouldn’t). The same is true with your company’s 401(k) plan. There are symptoms that, while not always catastrophic on their own, can be early warnings that your plan is unhealthy and potentially heading for serious compliance trouble.

As someone who’s been in the trenches of the retirement plan world for more than two decades, let me walk you through the signs I look for when assessing the health of a 401(k) plan. If your plan checks just one of these boxes, it’s time to schedule a checkup. More than one? You’ve got a real problem.

1. Late Deposit of Salary Deferrals

This is the equivalent of chest pain in the 401(k) world. Participant contributions must be deposited as soon as reasonably possible—often within days. Late deposits aren’t just bad form; they’re a prohibited transaction and one of the first things the Department of Labor will flag.

2. Low Average Account Balances

If your plan has been around for years and participant balances are still anemic, that’s not just a sign of low wages—it’s a sign of low engagement, poor education, and possibly bad plan design.

3. No ERISA Bond in Place

This one’s simple: if your plan doesn’t have a fidelity bond, it’s out of compliance. It’s the most basic ERISA requirement. No bond, no excuse.

4. Low Deferral Participation Rate

If only a fraction of eligible employees are contributing, something’s wrong—either with communication, plan design, or company culture. Auto-enrollment and re-enrollment features can help, but only if someone is actively managing the plan.

5. Compliance Testing Failures, Corrective Contributions Made

One failed test might be forgivable. Chronic failures that require annual refunds to highly compensated employees? That’s a sign of poor plan design. There are ways to fix this—safe harbor, automatic enrollment, better education—but it starts with someone paying attention.

6. Too Many Hardship Requests

While hardships happen, a steady stream of them may indicate deeper financial instability among your workforce—or that the plan is being used like a piggy bank instead of a retirement vehicle.

7. Too Many Defaulted Plan Loans

Defaults aren’t just unfortunate—they’re taxable events for participants and administrative headaches for employers. If participants are consistently defaulting, it’s a sign your loan policy needs tightening and your education efforts need strengthening.

8. No Benchmarking of Fees

If you haven’t compared your plan’s fees to market standards in the last three years, you’re failing as a fiduciary. High fees chip away at participant balances, and plaintiffs’ attorneys love to find overpaying plans.

9. No Review of Plan Providers

If your TPA, recordkeeper, or advisor hasn’t been evaluated in years, that’s a red flag. Loyalty is fine, but blind loyalty leads to stagnation. Providers should be reviewed—not necessarily replaced—but reviewed regularly.

10. No Formal Fiduciary Process Followed

If your plan doesn’t have documented investment reviews, meeting minutes, or a clear process for decision-making, it’s not a matter of if you’ll get in trouble—it’s when. A formal fiduciary process protects the plan, the participants, and you.

When I draft a new 401(k) plan for a client, one of the first provisions I’ll recommend—including with some reluctance—is a loan feature. Not because I enjoy dealing with it. On the contrary, it’s an administrative pain. But because I believe, deeply and stubbornly, that participants should have access to their own money if they find themselves in a bind. Life doesn’t schedule emergencies around retirement planning. People don’t always have the luxury of waiting until age 59½ to solve a crisis.

That said, experience has taught me where to draw lines. A loan feature in a retirement plan without limits is like handing out aspirin in a hurricane—unhelpful, possibly dangerous, and guaranteed to create more work later. That’s why I always set a $1,000 minimum loan amount. I don’t want participants draining their accounts $250 at a time, especially not when each loan is subject to a $50–$75 fee. Borrowing small amounts ends up being self-defeating. Those fees are disproportionately high, and frankly, if someone’s emergency is a $250 problem, there might be better ways to help them than with a retirement loan.

I also insist on a one-loan-at-a-time rule. I’ve seen plan records—some managed by large providers, mind you—where participants were juggling eight or nine loans simultaneously. That’s not a retirement plan; that’s a shadow banking system, and it’s a compliance disaster waiting to happen. Every additional loan increases the chances that something goes wrong, and trust me, things do go wrong.

Even with those guardrails, loan provisions cause headaches. Payroll mistakes are common. One missed payment and suddenly you’ve got a prohibited transaction on your hands. If quarterly payments aren’t made, the loan defaults. That’s when the dreaded 1099-R gets issued to the participant. There’s no joy in handing someone a tax form that essentially says, “Congratulations, your loan is now a taxable distribution—and you might owe penalties, too.” Especially when that happened not because they failed to pay, but because someone in payroll missed a line in a spreadsheet.

The worst part? These loan errors usually don’t come to light right away. They hide in the weeds. You only find them during a government audit or—more likely—when the plan changes third-party administrators. Then it’s a forensic exercise. You’re piecing together loan histories from years ago, trying to reconstruct amortization schedules and payroll feeds from a different HR system. It’s a migraine, not just for the TPA or advisor, but for the plan sponsor who now has to correct a problem they didn’t even know existed.

So yes, I include a loan provision. Not because I like them, but because sometimes the human element of retirement planning matters more than pristine administrative simplicity. But like anything in this business, good intentions are useless without strong procedures. Want a loan provision in your plan? Fine. Just be prepared to babysit it like it’s your firstborn child.