The Rosenbaum Law Firm P.C. Blog

Too many employers talk about their 401(k) plan the way they talk about free coffee in the break room—as a perk, a nice extra, something to mention in the benefits brochure and forget about until renewal season. That mindset misses the point. A 401(k) isn’t a perk. It’s a promise you make to the people who show up every day to build your business.

When an employee defers part of a paycheck, they’re trusting you to choose competent providers, reasonable fees, and investments that give them a fighting chance at retirement. They’re not thinking about ERISA sections or fiduciary standards; they’re thinking about paying a mortgage at 70 and not becoming a burden to their kids. That’s heavy stuff, and it deserves more respect than an annual “set it and forget it” meeting.

I’ve seen plans treated like afterthoughts—old fund menus no one has reviewed in years, advisors who never show up, payroll files that don’t match eligibility rules. None of that comes from bad intentions. It comes from forgetting what the plan really represents. Every match dollar, every enrollment meeting, every investment change sends a message about how much you value your workforce.

The good news is that keeping the promise isn’t complicated. It means having a process: benchmarking fees, documenting decisions, educating employees in plain English, and surrounding yourself with partners who answer the phone. It means remembering that a retirement plan is part of your company’s culture, just like safety or customer service.

Employees will forgive a lot—tough years, tight budgets, even modest matches—if they believe you care about their future. But they won’t forgive indifference. Treat the 401(k) like the long-term commitment it is, and it becomes more than a benefit. It becomes proof that the company they’re helping to build hasn’t forgotten them on the other side of the finish line.

I’ve walked into more companies than I can count where the 401(k) plan gets the same level of attention as the office copier—nobody thinks about it until it breaks. The copier jams, people complain, someone calls the vendor, and life moves on. Too many employers manage their retirement plan the exact same way: ignore it for years, then scramble when a participant gets confused, a fee looks high, or a lawsuit hits the news.

A 401(k) isn’t a piece of equipment. It’s the largest financial asset most of your employees will ever own. Yet sponsors often delegate everything to a provider and hope for the best. Hope isn’t a fiduciary process. ERISA doesn’t ask whether you meant well; it asks whether you were prudent.

Treating the plan like a copier shows up in small, dangerous ways. No committee meetings. No fee benchmarking. An investment lineup that hasn’t changed since flip phones were cool. Advisors who appear once a year with a glossy report and disappear before anyone asks a real question. That’s not management—that’s neglect with a service agreement.

The irony is that doing it right doesn’t require heroics. It requires paying attention. Meet twice a year. Read the fee disclosures. Ask why a fund is on the menu. Make sure new employees actually understand what a 401(k) is. Those simple steps separate a responsible sponsor from one waiting for a problem.

Your business depends on people who trade today’s paycheck for tomorrow’s security. The plan is part of your compensation promise, not background noise next to the coffee machine. When sponsors treat the 401(k) with the same seriousness they give revenue, safety, and customer relationships, participation rises, complaints fall, and employees notice.

So the next time someone says, “The provider handles all that,” remember: vendors manage copiers. Fiduciaries manage retirement futures.

Every few years, someone in Washington rediscovers the 401(k) and decides it should be used for something other than retirement.

This time, it’s housing.

The latest proposal floating around would allow people to tap their 401(k) accounts—penalty-free—to fund a home down payment. The idea is pitched as “helping first-time buyers,” but in reality it’s just another example of policymakers treating retirement plans like a piggy bank.

I hate it.

And interestingly enough, so does Donald Trump. When even Trump is saying he’s “not a huge fan” of raiding 401(k)s for housing, that should tell you something. This isn’t a left-right issue. It’s a common-sense issue.

Leakage Is Already a Problem

The retirement plan system already suffers from too much leakage. Hardship withdrawals. Loans that don’t get repaid. Cash-outs when employees change jobs. COVID distributions that were supposed to be “temporary” but became permanent exits from the system.

Every time we loosen the rules, more money leaks out—and almost none of it ever makes its way back in.

Adding home down payments to the list just accelerates that damage.

This Hurts Participants More Than Anyone

Supporters frame this as “giving people flexibility,” but flexibility isn’t always a virtue. Retirement money is supposed to be hard to access. That friction is intentional. It protects people from themselves.

Pulling $30,000 or $50,000 out of a 401(k) in your 30s or 40s doesn’t just reduce your account balance—it destroys decades of compounded growth. That’s not theoretical. That’s math.

Yes, owning a home matters. But robbing your future retirement to do it is a trade most people don’t fully understand until it’s too late.

And when retirement shortfalls appear 25 years later, guess who gets blamed? Not Congress. Not the politicians who loosened the rules. The 401(k) system itself.

It Also Undermines the Retirement Plan Business

From a plan-sponsor and provider perspective, this kind of policy is corrosive.

401(k) plans work best when assets stay in the system. Scale matters. Long-term participation matters. Leakage increases costs, complicates administration, and weakens outcomes across the board.

You can’t keep selling retirement plans as a long-term solution while simultaneously encouraging people to drain them for short-term policy goals.

That contradiction hurts everyone in the ecosystem.

The Slippery Slope Is Real

Once you justify housing withdrawals, what’s next?

Education again? Medical expenses expanded further? Inflation relief? Disaster relief—real or imagined? At some point, the 401(k) stops being a retirement plan and becomes a general-purpose savings account with a tax wrapper.

And once that happens, the entire premise collapses.

The Bottom Line

Retirement plans exist for one reason: retirement.

Every carve-out, every exception, every “just this once” proposal weakens the system. Using 401(k) money for home down payments may sound compassionate, but it’s shortsighted policy that trades long-term security for short-term optics.

Too much leakage hurts the retirement plan business—but it hurts plan participants far more.

Some things should be protected from political tinkering. The 401(k) should be one of them.

When companies talk about mergers and acquisitions, the conversation usually revolves around tax treatment, valuation, and deal structure. What often gets overlooked—until it’s too late—is the 401(k) plan.

From a retirement plan perspective, the difference between an asset sale and a stock sale is not academic. It’s fundamental.

In a stock sale, the employer sponsoring the 401(k) plan stays intact. Ownership changes, but the company—and the plan—continue. Employees remain employees of the same legal entity, and the 401(k) plan generally rolls on without interruption.

In an asset sale, everything changes.

Employees typically terminate employment with the seller and are hired by the buyer. From a 401(k) standpoint, that means eligibility rules reset, service credit questions arise, and the seller’s plan often must be terminated or affirmatively merged. None of this happens automatically, and none of it fixes itself after closing.

This is where plan sponsors get burned.

I’ve seen deals labeled “tax-free reorganizations” where executives assumed the 401(k) plan would simply follow the business. It doesn’t work that way. ERISA doesn’t care how the deal is marketed. It cares who the employer is after the dust settles.

Failing to address this upfront leads to late enrollments, missed deferrals, improper plan terminations, and audit headaches that surface months—or years—later.

The takeaway for plan sponsors is simple: your 401(k) plan needs a seat at the deal table. HR, legal, payroll, and retirement advisors should be involved before documents are signed, not after employees start asking where their accounts went.

M&A transactions close fast. Retirement plan mistakes last a long time.

Most 401(k) problems don’t start in the plan.

They start in payroll.

Plan sponsors tend to think of payroll as an administrative function and the 401(k) as a separate benefits issue. That separation is convenient—but it’s also wrong. Payroll is the engine of the retirement plan, and when it misfires, the damage spreads fast.

A missed deferral election. An incorrect compensation code. A delayed remittance. An employee misclassified as ineligible. These errors often seem small in isolation, but in a 401(k) plan, they create a domino effect.

One payroll mistake can lead to missed employee contributions. Missed contributions lead to corrective qualified nonelective contributions. Corrections trigger earnings calculations, amended tax reporting, and participant notices. If the error is widespread or persistent, it can even rise to the level of a compliance failure requiring formal correction under IRS programs.

And that’s before you get to audits or litigation.

What makes payroll errors particularly dangerous is how quietly they occur. Many plan sponsors don’t discover them until an annual nondiscrimination test fails, an auditor asks uncomfortable questions, or a participant complains that their deferrals never showed up. By then, the error may have been repeating for months—or years.

Technology hasn’t eliminated the problem. In some ways, it’s made it worse. Payroll systems, recordkeepers, and HR platforms don’t always speak the same language. A change in one system doesn’t automatically flow to the others unless someone is actively monitoring it.

For plan sponsors, the lesson is clear: payroll oversight is fiduciary oversight.

That means regular payroll audits, clear ownership of deferral data, documented reconciliation processes, and coordination between payroll, HR, and plan vendors. The goal isn’t perfection—it’s early detection.

In a 401(k) plan, small payroll errors don’t stay small. They compound. And by the time they surface, the fix is always harder—and more expensive—than anyone expected.

I started my own practice almost sixteen years ago because I was tired of working for other people.

Not because I couldn’t work for others—but because too many of the places I worked were mismanaged, short-sighted, and transactional when it came to employees. Loyalty flowed one way. You could give a firm your best years, do strong work, and still be discarded like yesterday’s garbage once leadership changed or a spreadsheet demanded it.

That reality is what pushed me to bet on myself.

Over the past decade, consolidation in the 401(k) business has only magnified this problem. Firms got bigger. Platforms expanded. Market share grew. But the human cost was real. Talented people—people with deep plan knowledge, client relationships, and institutional memory—were suddenly expendable. Ten, fifteen years at a firm, and the farewell was a severance package and a calendar invite.

Some packages were generous. Some weren’t. All of them were final.

In baseball terms, they were put on waivers.

Waivers exist so a team can cut a player and obtain an unconditional release. No future obligation. No sentimentality. Just a clean break that says, “We’re moving on.”

If you’ve ever been “waived” in this industry—laid off due to a merger, restructured out, or told your role was redundant—remember this: you can’t keep good talent down.

Like cream, it rises to the top.

I’ve seen it repeatedly. People who were let go went on to build better firms, smarter practices, and more client-focused businesses than the ones that cut them loose. Some became consultants. Some launched TPAs. Some started law firms, advisory shops, or niche providers that now compete head-to-head with their former employers.

And they’re stronger for it.

Consolidation may eliminate positions, but it doesn’t erase skill, judgment, or experience. Those don’t vanish when an email account is shut off. They just get redeployed—often more effectively and with far more purpose.

If you’re sitting in that uncomfortable space after being waived, wondering what comes next, take it from someone who’s been there: this isn’t the end of your story. Sometimes getting cut loose is the push you didn’t know you needed.

You may not have chosen free agency—but free agency has a way of revealing who you really are.

And in the long run, the best players always find a roster.

The retirement plan industry loves to talk about value, but it keeps pricing itself as if value doesn’t matter. Nowhere is this more obvious than in the constant race to the bottom on provider fees. TPAs, recordkeepers, and bundled providers keep cutting prices to win business, then act surprised when margins disappear and risk increases.

The problem isn’t competition. Competition is healthy. The problem is that many providers are selling compliance work as a commodity, even though it isn’t one. Administering a 401(k) plan isn’t the same as processing payroll or hosting data. It requires judgment, interpretation, and experience—especially in an era of SECURE 2.0, complex correction rules, and heightened litigation risk.

Low fees create a dangerous incentive structure. Providers price as if they are offering data entry, but sponsors expect legal-adjacent guidance, operational problem-solving, and real-time answers. Something eventually gives. Either the provider cuts corners, overloads staff, or quietly shifts risk back to the plan sponsor without making that shift explicit.

There’s also a long-term cost to the industry. When fees collapse, experienced professionals leave. Training suffers. Institutional knowledge disappears. What’s left is automation without judgment—and automation doesn’t testify well in court.

Ironically, racing to the bottom doesn’t even protect providers from liability. Plaintiffs’ attorneys don’t discount claims because the fee was low. Courts don’t either. If anything, low fees make it harder to explain why robust processes weren’t in place.

Providers need to stop competing on price alone and start competing on clarity, competence, and accountability. The plans that fail—and the lawsuits that follow—are rarely caused by overpricing. They’re caused by underestimating what the work is really worth.

Something meaningful is happening in the retirement plan world, and it has nothing to do with another round of Roth versus pre-tax debates. Some of the biggest names in private markets — Blackstone, Apollo, and Ares — are making a concerted push to bring private equity and private credit into U.S. retirement plans. Not just pensions. Not just endowments. 401(k) plans.

That alone should make plan sponsors, advisers, and participants pause. For decades, 401(k)s lived in a relatively narrow investment universe. Public stocks, public bonds, mutual funds, target-date funds. Predictable. Familiar. Now that universe is starting to stretch.

What’s Actually Being Proposed

Despite the headlines, this isn’t about letting participants click a button and buy private equity alongside their index fund. The structure being discussed is far more controlled. Private market exposure would live inside professionally managed account programs, where advisers — not participants — decide whether private assets belong in a portfolio.

That distinction matters. This is not a free-for-all. It’s a model where private markets become one component of a broader strategy, typically for participants with long time horizons and appropriate risk profiles. In theory, that adds a layer of protection. In practice, it shifts more responsibility onto advisers and plan fiduciaries.

Why Private Markets Are Suddenly So Attractive

The pitch is simple and seductive. Private equity and private credit are often described as offering diversification beyond traditional stocks and bonds. Proponents argue these investments may deliver returns that don’t move in lockstep with public markets, especially over long periods.

There’s truth there. Institutional investors have used private markets for years.

But there’s a reason those assets rarely showed up in 401(k) plans. Private investments can be illiquid, complex, difficult to value, and more expensive. None of that disappears just because the asset is wrapped inside a managed account. Complexity doesn’t vanish — it just gets outsourced.

Why This Is Happening Now

This push didn’t appear overnight. Policymakers and regulators have been signaling for years that alternative investments may be permissible in defined contribution plans if fiduciaries follow a prudent process. At the same time, the retirement industry is under constant pressure to innovate.

With trillions of dollars sitting in 401(k) plans, private market firms see an opportunity that’s impossible to ignore. For them, this isn’t about ideology. It’s about access to capital. For plan sponsors and participants, the question is whether innovation actually improves outcomes or simply adds another layer of risk.

The Fiduciary Reality Check

This is where enthusiasm needs to slow down.

ERISA doesn’t ban private markets. But it demands prudence, diligence, and a relentless focus on participants’ best interests. Introducing private assets — even indirectly — raises real fiduciary questions.

Are fees reasonable and transparent? How is liquidity handled for loans, distributions, and rollovers? What happens during market stress when pricing is unclear? Do participants understand what exposure they actually have?

Private markets aren’t inherently bad investments. But they are less forgiving when governance is sloppy. Plan sponsors can’t hide behind big names or glossy presentations. If something goes wrong, fiduciaries still own the decision.

What This Means for Most 401(k) Plans

Despite the noise, most plans are not about to overhaul their investment menus. This is not a tidal wave. It’s a measured rollout likely limited to larger plans, managed account users, and participants with long investment horizons.

But even if a plan never adopts private market exposure, this trend still matters. It signals that the traditional boundaries of 401(k) investing are loosening. That has implications for adviser responsibility, fiduciary liability, and participant expectations going forward.

Once the door opens — even a crack — it rarely closes.

The Bottom Line

The push by private market giants into the 401(k) space is a reminder that retirement plans evolve alongside markets and regulation. Innovation can be healthy. But retirement plans aren’t laboratories for financial experimentation.

Every change should be judged by one standard: does it meaningfully improve retirement outcomes without exposing participants to risks they don’t understand or can’t afford?

Private markets may eventually earn a place in defined contribution plans. Or they may prove too complex for broad adoption. Either way, plan sponsors and advisers shouldn’t be swayed by brand names alone.

In the 401(k) world, process still matters more than promises.

One of the first people I met at Stony Brook was a kid I’ll call Avi. We met at orientation, became friends, and for two years were even suite mates. At the time, he was just another college friend. It wasn’t until much later—long after graduation—that I understood what the real dynamic was. Avi was deeply competitive with friends and quietly jealous of other people’s progress. Back then, I didn’t have the language for it. Years later, I did: narcissism.

After college, our lives went in different directions. I went on to law school. Avi took five years to graduate and eventually became a teacher. Years later, we reconnected on Facebook, and that’s when everything crystallized. Every positive post I shared was met with a jab. Why didn’t my kids go to Hebrew day school? Why didn’t we keep kosher? With narcissists, nothing exists in a vacuum. Everything is filtered through their own insecurities. They don’t celebrate others; they measure themselves against them.

When political disagreements surfaced, things escalated. And instead of getting past political differences, Avi did what narcissists often do when challenged—he defriended me. It was abrupt, petty, and revealing. Years later, he tried to reconnect, but I declined. I didn’t need that energy in my life. Cutting off negativity isn’t bitterness; it’s clarity.

I’ve spoken openly about my own struggles working at law firms. For a long time, I thought partnership was the ultimate goal. Eventually, I realized it wasn’t for me—unless I built my own firm. And that realization brought peace.

Here’s the contrast that matters. My wife has been at her firm for three years, and she recently became a partner. I’m incredibly proud of her. Truly happy for her—maybe even happier than she is. It wasn’t my path, but it was hers.

That’s graciousness. Understanding that someone else’s success isn’t a verdict on your own life. Narcissists can’t do that. But the rest of us can choose better.