The Rosenbaum Law Firm P.C. Blog

Last week, Rep. Haley Stevens (D-MI) introduced legislation aimed at waiving early withdrawal penalties for victims of retirement account fraud.

The proposed bill, titled the “No Penalties for Victims of Fraud Act,” seeks to alleviate the financial strain on individuals affected by fraud related to their 401(k) or retirement plans. Under this legislation, the 10% early withdrawal penalty typically imposed on individuals who take money out of their retirement accounts before the age of 59½ would be eliminated for verified victims of fraud.

These individuals must provide documentation of their fraud losses through law enforcement or court verification to qualify for the penalty waiver. While victims would not face penalties for early withdrawals, they would still be required to repay the amount they take out.

This legislation comes in response to a growing number of cyber-attacks targeting Americans’ long-term savings. The bill has been referred to the House Ways and Means Committee for consideration.

The Department of Labor (DOL) has issued a model notice for applicants to the Voluntary Fiduciary Correction Program (VFCP).

This notice is essential for informing plan participants that the plan has applied to utilize this important correction program. It is crucial to understand that this model notice is exclusively for applicants. It is not intended for use by those who are engaged in self-correction to rectify errors.

The issuance of this model notice follows the Employee Benefits Security Administration’s (EBSA) final rule released in January, which introduced significant changes to the VFCP that were originally proposed in November 2022.

Through the VFCP, fiduciaries can report specific administrative errors to the DOL and receive a no-action letter. These errors include prohibited purchases and sales, improper loans, and late contributions. The final rule highlights two critical new self-correction features. The first, articulated in section 7.1(b), covers failures to timely transmit participant contributions and participant loan repayments to pension plans. The second, detailed in section 7.3(c), addresses specific participant loan failures self-corrected under the IRS’s Employee Plans Compliance Resolution System (EPCRS).

Moreover, the updates to the VFCP and the amendments to Prohibited Transaction Exemption (PTE) 2002-51 are now in effect as of March 17, 2025.

This model notice firmly informs plan participants that the plan sponsor is actively participating in the DOL’s VFCP. It clearly outlines that the program is voluntary and is designed to empower plan administrators to correct potential breaches of Title I of the Employee Retirement Income Security Act (ERISA).

Merit Financial Advisors, a financial advisory firm based in Georgia, recently announced its acquisition of Sanctuary Wealth Management, LLC, and Fiduciary Services, LLC. This deal will enable Merit to establish a presence in Idaho and collectively grow its assets by $1.6 billion.

Sanctuary specializes in investment advisory and portfolio management, primarily serving private clients. Additionally, the firm offers a variety of retirement and investment solutions for corporate clients, including 401(k) plans. Fiduciary Services, a subsidiary of Sanctuary, focuses on employee stock ownership plans (ESOPs), providing both transactional and ongoing trustee services for their clients.

This acquisition marks Merit’s thirty-fourth since it received a minority investment in December 2020 from Wealth Partners Capital Group, along with a group of strategic investors led by HGGC’s Aspire Holdings platform. Last month, Merit also acquired Hershey Wealth Advisors, LLC, which increased its assets by $233 million and added a fifth office in Pennsylvania.

I have been an ERISA attorney since 1998. More than half my career now has been in my practice for 15 years this April. For about a three-year run from 2007-2010, I had three different jobs, and the whole process of working for others and the job search process made it an easy choice to get off the employee carousel once and for all.

I have a good friend going through the whole job search and job offer process. Like someone with Post Traumatic Stress Disorder, this experience is bringing back everything that I tried to forget about the whole job search process. That includes the incessant multiple interviews, the salary range that the job offer doesn’t include but the ad did, and just the whole dashing of what something should be so joyous.

Around 2006, I was looking to leave the Third-Party Administration (TPA) firm where I was the head ERISA attorney. I could no longer work there because we had a minority owner who ran the place and he ran it poorly. So I interviewed at a larger firm in Westchester for a junior ERISA position. Went for several interviews, and they also enticed me with a flexible work schedule. The job offer came in at about $25,000 short of the top salary range of the position. They then promised me the bonus, which still came up short of that top range. When I asked about the flexible work schedule, the offer was withdrawn.

I don’t know how my friend will proceed in this job negotiation because several promises made on pay and benefits aren’t in the job offer. What is included is some arbitration provision that any employment lawyer would second guess. The point here is that the whole point to entice people to join your firm is to be transparent and honest. Yes, that extra $5,000 or $10,000 is coming out of your pocket, but the last thing you want is to leave a sour taste of someone you want to hire.

A friend of mine is interviewing for a new job. What was supposed to be one interview has morphed into three. All, it did was bring up bad memories for me. There is nothing as hopeful and agonizing as interviewing for a position. I probably could write a book on interview catastrophes.

The first catastrophe was when I was near graduating from the Boston University School of Law for my tax LLM. I interviewed with an insurance company. The general agent said the job was for $35,000. I went through about a half dozen interviews with almost every agent in the office. I think I was around the 7th interview, told the general agent I needed an answer, and he said the job was for $30,000. That was that.

The last catastrophe was interviewing as an attorney for what is now, a well-known recordkeeper and third-party administrator. They played the old job bait and switch where the job posting offer was a lot higher than what they offered me. When I then asked about the work-flex time that they happily advertised, the job was pulled.

When Interviewing people for positions, don’t lead them on, and don’t waste their time. Advertise the salary range that is accurate ($50,000 to $200,000 is not accurate because I know you’ll offer closer to $50k) and you can fifure if someone is good enough within 2-3 interviews, this isn’t like dating in contemplation of marriage.

I knew early from my law school days that I had zero interest in litigation. It was probably from Moot Court when that second year law student admonished my tie. I late discovered this second year law student was the mastermind of one of the biggest law school scandals I uncovered a couple of years later and he’s still suspended from the practice of law for lying to the FBI. But that’s another story, you can read elsewhere on this site.

Litigation, especially on a class action level can be a hit or a miss. Litigators recruit plaintiffs, for the expenses, and hope for a quick settlement. For many of those excessive fee cases, they were home runs. But the biggest dud is the litigation against large 401(k) plans with BlackRock Lifepath in its fund lineup.

Most of us in the industry figured these were clunkers and they truly have been. Plaintiffs have had their complaint dismissed and their amended complaints dismissed. One law firm was behind this folly of a dozen cases. As the cases peter out, it was clear that taking on these cases and this fund was a bad idea.

Someone from my past was in a new line of work and I wanted to help them out. They were presenting a new 401(k) tool, which I thought was perfect. I thought it was a solution that could help third-party administrators (TPAs) immensely in the conversion process. Since I try to help people out, I offered that person a free spot at one of my conferences.

Then that person was no longer working for this company or presenting them around. So the brains behind the operation reached out, after some time. The principal behind the product honestly didn’t do a great job of reaching out and I felt that my goodwill was being tested. So I honestly, didn’t follow up with the event coming up with this friend no longer in the picture.

Lo and behold, I discovered the product is the brainchild of someone that people would say is a competitor of mine. Honestly, I don’t think we are in the same type of business, but I just find it weird that this was never mentioned to me when I was presented with this new product. Had I known this firm was behind the product, it wouldn’t have changed my feelings about giving a speaking slot to them, boasting about their great tool. I just think it’s weird when people aren’t open and honest about a fact that is going to be discovered anyway. The point is you should always be open and honest with people. That’s it.

As a 401(k) plan sponsor, you need to know that plan errors happen all the time. A 401(k) plan has so many moving parts, so that means something might break. The problem here is that while things can happen without control, you can control some errors by avoiding some problems.

One of the most avoidable errors you can avoid is offering multiple loans through your loan program. I believe you should offer only one loan maximum at all times. You’re not in the business of being a loan shark and I have seen so many errors happen because the plan sponsor or third-party administrator forgot that one or more loans weren’t being repaid, which may lead to defaulted loans and deemed distributions. Having just one loan outstanding at all times can help avoid that error.

There are many things with the plan you can’t control, but you should avoid any errors that are under your control.

There are so many articles for plan sponsors (I’ve written quite a few) where they go on and on about what plan sponsors need for a successful 401(k) plan.

Rather than go into a whole diatribe, here is a Reader’s Digest of what good 401(k) plans have:

1. The leadership of the 401(k) plan understands their duty as plan sponsor and plan fiduciary.

2. A third-party administrator (TPA) who does a competent job in plan administration.

3. A financial advisor who understands the retirement plan business and understands that their real role is minimizing the plan sponsor’s liability.

4. A plan design that fits their needs, goals, and pocketbook.

5. An investment lineup that isn’t too large that it increases participant confusion which depresses the rate of salary deferrals.

6. Communication and technology that will get plan participants more engaged which would lead to higher participation.

7. A review of costs and plan providers to make sure what works still actually does work.

8. An ERISA attorney on call when they need them.

9. An auditor (when the plan needs an audit) that gets the job done competently and ahead of any Form 5500 deadline.

A new report by research consultant Corporate Insight (CI) highlights that TIAA, Fidelity, and T. Rowe Price provide the best digital experiences among U.S. recordkeepers.

The report, titled “DC Plan Sponsor Website Experience Benchmark,” evaluates the digital experiences of leading recordkeepers in the country.

In this inaugural report, Corporate Insight recognizes TIAA as the top-performing recordkeeper, achieving a score of 77 out of 100. Fidelity follows closely with a score of 76, while T. Rowe Price comes in third with a score of 74. Overall, scores in the report range from 77 to 45.