The Rosenbaum Law Firm P.C. Blog

Many employers view their 401(k) plan primarily as a tax deduction. The company makes contributions, deducts them on its tax return, and considers the job done. While the tax benefits are important, treating a retirement plan as just another deduction misses the bigger picture and creates real risk for plan sponsors.

A 401(k) plan is not simply a line item on a tax return. It is an employee benefit plan governed by ERISA, and that means fiduciary responsibility. Plan sponsors must make decisions in the best interests of participants, not just in the best interests of the company’s tax position.

Sponsors who focus only on deductions often overlook the operational side of the plan. Eligibility tracking, deposit timing, plan notices, and investment monitoring are not optional tasks. They are legal obligations. When these responsibilities are ignored, the plan can drift out of compliance without anyone noticing until a problem surfaces during an audit or correction project.

Employers also underestimate the impact the plan has on their employees. For many workers, the 401(k) plan represents their primary retirement savings vehicle. Decisions about fees, investments, and matching contributions affect real people’s futures.

Tax deductions are helpful, but they should never be the primary reason a plan exists. A well-designed retirement plan helps employees build financial security and helps employers attract and retain talent.

A good plan sponsor understands that the tax deduction is a benefit. It is not the purpose. The real purpose of a 401(k) plan is retirement.

One of the biggest misconceptions plan sponsors have is that their 401(k) plan runs itself. Many employers believe that once they hire a recordkeeper and a TPA, the heavy lifting is done and the plan essentially goes on autopilot. Unfortunately, ERISA doesn’t work that way. A retirement plan requires active oversight, and the plan sponsor remains responsible no matter how many service providers are involved.

Hiring good providers is important, but providers only work with the information they are given. If payroll data is wrong, eligibility dates are missed, or ownership information changes without being communicated, the plan will operate incorrectly. Service providers don’t sit inside your business watching your day-to-day operations. They rely on you.

Fiduciary responsibility cannot be delegated away completely. Even when a sponsor hires a 3(21) or 3(38) investment advisor, the sponsor still has the duty to monitor those providers. That means reviewing fees, understanding services, and making sure the plan is operating according to its terms.

Too many sponsors only think about their plan once a year when the census is due or the Form 5500 needs to be signed. A retirement plan deserves more attention than that. Regular review of eligibility, contributions, notices, and plan operations can prevent expensive corrections later.

The truth is simple: a 401(k) plan that is left alone will eventually develop problems. The sponsors who avoid trouble are the ones who stay involved and ask questions.

A well-run 401(k) plan is never on autopilot. It requires attention, oversight, and a sponsor who understands that responsibility ultimately rests with them.

The Department of Labor has proposed new regulations updating ERISA electronic disclosure rules to implement the SECURE 2.0 requirement that participants receive periodic paper benefit statements. Under the proposal, defined contribution plans would be required to provide at least one paper statement annually, while defined benefit plans would have to provide a paper statement every three years. Participants could still elect electronic delivery, but paper would become the default baseline.

The retirement plan industry has spent years building efficient electronic delivery systems. Electronic disclosures are faster, easier to track, and far less expensive than traditional mail. Most participants already check their accounts online or through mobile apps. For many plans, electronic delivery is no longer an innovation — it is simply how communication works.

The Department of Labor’s concern is that electronic disclosures may not always reach participants effectively. While that concern is understandable, requiring paper statements feels like a regulatory solution looking backward instead of forward. The reality is that many participants ignore paper statements just as easily as they ignore emails. Paper does not guarantee engagement, and in many cases it simply creates more returned mail and more administrative work.

Plan sponsors will ultimately bear the burden of these new requirements. Paper statements mean additional costs, additional coordination with service providers, and another compliance obligation that must be monitored. Even a simple annual mailing becomes another task that must be documented and done correctly.

Plan providers will adapt, as they always do, but this proposal represents another reminder that retirement plan administration rarely becomes simpler.

Electronic delivery moved the industry forward. Mandatory paper statements move it back.

Plan sponsors should start preparing now, because if the proposal becomes final, paper statements will once again become part of everyday plan administration whether sponsors think participants want them or not.

During the State of the Union address, President Trump floated a proposal to expand retirement coverage to millions of workers who currently have no access to an employer-sponsored retirement plan. The idea is to create a government-backed retirement account modeled after the federal Thrift Savings Plan, with the possibility of a government match of up to $1,000 per year for eligible savers.

The proposal highlights a real problem. Tens of millions of American workers still do not have access to a workplace retirement plan. The employer-based system works well for those who have it, but there remains a large segment of the workforce that has been left out. Expanding access to retirement savings has been a goal of policymakers from both parties for many years.

From a retirement plan perspective, the concept is interesting but raises a number of questions. The proposal appears to overlap with provisions already scheduled to take effect under SECURE 2.0, including government matching contributions for lower-income workers. Without more details, it is difficult to know how the new program would fit into the existing retirement system.

For plan sponsors and plan providers, the proposal is a reminder that the employer-based retirement system remains the backbone of retirement savings in this country. Government-sponsored alternatives tend to emerge when employers do not offer plans.

If anything, proposals like this reinforce the value of employer-sponsored 401(k) plans. Employers who sponsor plans provide something government programs cannot easily replicate — payroll integration, employer contributions, and ongoing participant engagement.

The proposal may evolve or change as details emerge, but the message is clear. Expanding retirement coverage remains a national priority, and the retirement plan system will continue to adapt.

The headline sounds reassuring: many employers now offer a penalty-free emergency withdrawal from a 401(k). On its face, allowing participants to access up to $1,000 without the 10% early-distribution penalty feels like a sensible, humane change. And in some cases, it is. But like many SECURE 2.0–era provisions, the simplicity of the headline masks the complexity underneath.

The idea is straightforward. Participants facing a genuine financial emergency can tap a small portion of their retirement savings without being punished by penalties, even though ordinary income taxes still apply. If the amount is repaid within a defined period, those taxes can potentially be recovered. The goal is to give workers a pressure-release valve before they turn to high-interest debt or worse financial outcomes.

From a plan sponsor’s perspective, this is not just a participant-friendly feature. It’s a governance decision. The provision is optional, which means it must be deliberately adopted, reflected in plan documents, and properly administered. That alone should trigger committee discussion. Anytime money is allowed to leave the plan earlier than originally intended, fiduciary oversight matters.

There’s also the behavioral side. Access changes behavior. Even small withdrawals can quietly erode retirement readiness, especially if participants view the plan as an emergency fund rather than a long-term savings vehicle. Committees should think carefully about how this feature is communicated, how frequently it can be used, and whether participants truly understand the tradeoffs.

This isn’t an argument against flexibility. It’s an argument against complacency. Emergency withdrawal provisions reflect a broader shift toward acknowledging real-world financial stress. That’s a good thing. But empathy without structure creates risk.

As with every plan feature, the question isn’t “Can we do this?” It’s “Should we, and how do we do it responsibly?” That’s where fiduciary process still matters most.

The recent settlement involving Providence Health & Services is one of those cases that makes plan sponsors uncomfortable for the right reasons. There was no allegation of flashy misconduct, no exotic investments, no dramatic collapse of oversight. Instead, the case focused on something many sponsors barely think about: forfeitures.

That’s exactly why it matters.

Forfeitures live in the category of plan operations that are often treated as background noise. They’re there, they accumulate, and everyone assumes someone else is handling them correctly. The Providence case is a reminder that ERISA doesn’t recognize “administrative afterthoughts.” If it’s a plan asset, it carries fiduciary responsibility.

What makes this settlement instructive is how ordinary the issue was. The claims weren’t about intent or motivation; they were about process. Were forfeitures being used in a way that clearly benefited participants? Were they applied consistently with the plan document? Was anyone actually monitoring how long those amounts sat unused? Those are unglamorous questions, but they’re the ones that get asked when litigation starts.

Plan sponsors often underestimate how risk accumulates. A few thousand dollars left untouched year after year doesn’t feel significant in real time. Over a long enough period, with a large enough plan, it becomes a headline and a settlement figure no one wants to explain to a board or committee.

The lesson here isn’t that forfeitures are dangerous. The lesson is that neglect is. Sponsors should know where forfeitures go, when they’re applied, and why. They should be reviewed regularly and documented clearly. Not because it looks good on paper, but because that’s what a defensible fiduciary process actually looks like.

The Providence settlement is a reminder that in retirement plans, small details don’t stay small forever.

Retirement plan design didn’t emerge fully formed with the first 401(k). Like most things worth understanding, it evolved—slowly, imperfectly, and often in response to failure. When plan providers and sponsors treat design decisions as plug-and-play features, they miss an important truth: every major plan feature exists because something before it didn’t work well enough.

Early retirement systems were built on loyalty and control. Pensions rewarded tenure, punished mobility, and assumed a stable workforce that rarely changed employers. That model made sense in an era when careers were linear and employers held the leverage. But it also concentrated risk in one place—the employer—and left workers vulnerable when companies failed or priorities changed.

The shift toward participant-directed plans wasn’t just innovation; it was adaptation. Portability, diversification, and transparency became necessities as workforces grew more mobile and markets more complex. Automatic enrollment, default investments, and escalation features didn’t appear because they were clever ideas. They appeared because participants weren’t saving enough when left entirely on their own.

Modern best practices are, in many ways, a record of lessons learned the hard way. Fee benchmarking exists because plans paid too much. Investment monitoring exists because underperformance went unchecked. Documentation exists because memories fade but regulators don’t. Each “best practice” is really a response to a prior blind spot.

For plan providers, understanding this evolution matters. Design decisions shouldn’t be framed as trends or upgrades, but as risk-management tools shaped by history. What worked yesterday may not work tomorrow, but ignoring why today’s practices exist is how sponsors repeat old mistakes under new names.

Good plan design isn’t about chasing innovation for its own sake. It’s about respecting the long arc of retirement policy, understanding why guardrails were added, and applying those lessons thoughtfully. The best plans aren’t just modern—they’re informed by everything that came before them.

I’ve sat through more retirement plan meetings than I can count, and if there’s one recurring problem, it’s this: too much time spent on things that don’t materially move the needle, and not enough time on the issues that actually drive fiduciary risk and participant outcomes. That’s where the 80/20 rule quietly applies itself to plan governance.

In most sponsor meetings, roughly 20% of the agenda items create about 80% of the fiduciary exposure. The trouble is that those items are often buried beneath routine reports, surface-level updates, and discussions that feel productive but rarely require a decision. Meetings become informational instead of intentional, and committees leave feeling busy rather than protected.

The highest-impact topics tend to be consistent across plans. Provider performance, fee reasonableness, investment monitoring, participant outcomes, and operational failures are where real risk lives. These issues don’t just deserve airtime; they deserve focused discussion, documented decisions, and clear follow-up. When those items are rushed because the meeting spent too long on housekeeping, the committee hasn’t done itself any favors.

Effective sponsor meetings start with discipline. Agendas should be built around decisions, not presentations. Reports should support discussion, not replace it. If an item doesn’t require analysis, debate, or action, it may not belong in the live meeting at all. That doesn’t mean ignoring details; it means prioritizing judgment over data overload.

From a fiduciary perspective, time allocation is risk allocation. How a committee spends its meeting time says a lot about how seriously it takes its responsibilities. The plans that run the best meetings aren’t the ones with the longest agendas. They’re the ones that understand which 20% of issues truly matter—and make sure those issues get the attention they deserve, every single time.

Benchmarking is often treated as a formality, something sponsors do to check a box. That mindset overlooks the real cost of not benchmarking—and it’s rarely obvious until it’s too late.

Fees don’t usually become unreasonable overnight. They drift. Services change, asset levels grow, and legacy pricing remains untouched because no one pauses to compare it against the market. Over time, that quiet drift can expose sponsors to significant fiduciary risk, even if participants aren’t complaining.

The same is true for services and investments. Without benchmarking, committees lose context. They don’t know whether performance is competitive, whether services are aligned with fees, or whether alternatives would better serve participants. Decisions made without context are difficult to defend, especially years later.

From a regulatory and litigation standpoint, benchmarking is less about results and more about process. Sponsors aren’t required to choose the cheapest option, but they are expected to know what reasonable looks like. Without benchmarking, that knowledge is missing.

There’s also a governance cost. Committees that don’t benchmark tend to rely on assumptions instead of evidence. That weakens decision-making and documentation, even when outcomes appear acceptable.

The real cost of not benchmarking isn’t just higher fees or missed opportunities. It’s the loss of a defensible process. In fiduciary terms, that’s often the most expensive mistake of all.

Most plan committee meetings last an hour or more, but only a small portion of that time actually reduces fiduciary risk. In my experience, the most important part of any meeting is a focused 30-minute window where real decisions are made—or avoided.

Too often, meetings are consumed by routine updates, lengthy reports, and information that feels necessary but requires no judgment. By the time the committee reaches topics that actually matter—provider performance, fees, investment results, or operational failures—the clock becomes the enemy. Important discussions are rushed, deferred, or tabled “until next time.”

That 30-minute window should be protected. It’s where fiduciary responsibility lives. This is the time to ask hard questions, challenge assumptions, and document why decisions are being made. A committee that spends this window listening instead of deliberating is missing the point of the meeting entirely.

Well-run committees flip the script. Reports are reviewed in advance. Meetings are built around decisions, not presentations. The most complex and risky issues are addressed early, when attention is highest and time pressure is lowest.

From a fiduciary standpoint, meeting structure matters. Regulators and plaintiffs don’t care how many pages were reviewed; they care whether the committee exercised judgment. That judgment usually shows up in a concentrated slice of time, not across the entire agenda.

If sponsors want better outcomes, they should stop measuring meetings by duration and start measuring them by impact. Protecting the most important 30 minutes isn’t about efficiency—it’s about governance.