The Rosenbaum Law Firm P.C. Blog

As we peer into the not-too-distant horizon of 2026, the forecasted changes to 401(k) contribution rules demand the attention of every plan sponsor, fiduciary, and serious saver. These aren’t cosmetic tweaks — they represent structural shifts. Ignore them at your peril.

The Big Move: A $1,000 Bump

According to industry projections, the standard employee elective deferral cap (the 402(g) limit) is expected to rise from $23,500 in 2025 to $24,500 in 2026. That’s not a radical jump, but in the world of retirement plan compliance, every dollar counts.

At the same time, catch-up contributions (for those age 50 or over) are likely to increase from $7,500 to $8,000. And for those in the 60–63 “super catch-up” bracket, we could see limits as high as $11,500 or even $12,000, depending on final inflation adjustments.

Combine those, and a 50+ participant may be able to contribute up to roughly $32,500, before employer matching or allocations come into play. Not bad, considering where we were just a few short years ago.

A Thornier Issue: The Roth Catch-Up Mandate for High Earners

Now, here’s where things get tricky. Beginning in 2026, catch-up contributions made by participants whose prior-year wages exceed $145,000 will be forced into Roth (after-tax) form — no more pre-tax deduction for those dollars. That’s a big deal for higher earners.

The change is a product of SECURE 2.0, meant to shift more retirement savings into after-tax, tax-free growth. The problem? Many plans still don’t have Roth 401(k) features in place. If your plan lacks a Roth option, high earners may be disqualified from making catch-up contributions entirely.

The threshold ($145,000) is indexed to inflation, so it may creep upward, but the reality remains: this rule will separate proactive plan sponsors from reactive ones.

What Plan Sponsors and Fiduciaries Must Do (Now)

1. Review and revise plan design. If your plan doesn’t already support Roth contributions, now is the time to enable it. Waiting until 2026 could create administrative chaos and angry participants.

2. Update communication and disclosure materials. Participants must understand that future catch-ups may be after-tax only. Surprises are for birthdays, not retirement deferrals.

3. Monitor compensation thresholds. $145,000 is the current cutoff, but it may change. Build flexibility into your payroll and recordkeeping processes.

4. Watch for IRS guidance. Expect final rules and clarifications later this year. The IRS may adjust definitions, timing, or implementation deadlines.

5. Document your process. Every fiduciary decision — including why you added or didn’t add Roth — should be documented. Litigation loves ambiguity.

6. Advise participants proactively. Those approaching 50 need to know how these changes impact them. Educate early and often — before the first paycheck of 2026.

Bottom Line

The projected 2026 limits may not be revolutionary, but the Roth catch-up shift for high earners is a game-changer. This isn’t just about a $1,000 bump — it’s about how plan sponsors manage communication, compliance, and participant trust.

As Lucille Bluth might say, “It’s going to be a hot mess.” The best fiduciaries will make sure it isn’t theirs.

The ERISA world never runs out of courtroom drama, and the latest episode comes courtesy of Seidman v. American Airlines. The court ruled that while the plaintiffs may have alleged fiduciary breaches tied to ESG (environmental, social, and governance) investment choices, there was no proof of monetary harm, and without financial loss, there would be no financial recovery.

That’s not a “get out of jail free” card. It’s more like a warning label. The court didn’t bless ESG investing as a fiduciary practice; it just said, “show me the money.”

Here’s what matters for plan sponsors and fiduciaries.

1. No Damages Doesn’t Mean No Risk

Just because the court didn’t order American Airlines to pay up doesn’t mean other sponsors are safe. The case underscores how process remains the bedrock of fiduciary duty. Whether your plan lineup includes ESG options or not, document everything. The “why” matters more than the “what.” A well-reasoned investment process beats a well-intentioned one every time.

2. ESG Still Isn’t a Free Pass

ESG investing isn’t the problem, using it as a marketing gimmick or political statement is. ERISA doesn’t prohibit ESG considerations, but it doesn’t let fiduciaries prioritize them above returns, either. If you’re picking funds based on social objectives rather than economic merit, you’re playing fiduciary roulette.

3. The “No Monetary Harm” Defense Is a Temporary Shield

In this case, the plaintiffs couldn’t prove that ESG choices cost participants money. That’s a technical victory, not a philosophical one. Another case with stronger data could easily go the other way. Courts aren’t rejecting ESG-related fiduciary claims—they’re rejecting poorly framed ones.

4. Optics Still Matter

Even if you win in court, you may lose in reputation. Plan participants don’t want to hear that their retirement savings are a testing ground for corporate virtue signaling. They want fiduciaries who make investment decisions with their financial future in mind, not their social media image.

5. The Takeaway for Plan Sponsors

Stay grounded. ESG can coexist with fiduciary duty—but only if it’s tied to risk management, long-term value, and documented prudence. Avoid letting ideology drive investment policy. Courts may forgive a lack of damages, but they won’t forgive sloppy process.

In the end, Seidman v. American Airlines reminds us that ERISA isn’t about buzzwords or moral crusades, it’s about loyalty, prudence, and measurable outcomes. “No monetary harm” might get you out of this case, but it won’t get you out of your fiduciary responsibilities.

And as I tell every plan sponsor: you can’t always predict what a court will decide, but you can control your process. That’s the real ESG, Every Step Governed.

Mergers are great when you’re talking about chocolate and peanut butter. But when you’re talking about merging 401(k) plan assets, it’s not always a smooth combination. Plan mergers, whether due to acquisitions, company restructuring, or TPA transitions, can create an administrative nightmare if the details aren’t handled with surgical precision. As a plan provider, you’ll quickly learn that merged assets and sloppy reconciliation are the kind of problems that turn your clean 5500 into a red flag for auditors and regulators.

The Merged Assets Time Bomb

When two or more plans merge, the assumption is simple: assets from Plan A roll into Plan B, participants and balances are consolidated, and life goes on. But ERISA doesn’t reward assumptions—it punishes sloppiness. If the assets don’t reconcile perfectly, if forfeiture accounts or outstanding loans don’t match, or if there are lingering “ghost” accounts that never transferred, the result is a mess that compounds every year until someone has to unwind it under pressure.

The problem often begins during the transfer process. Custodians send over assets that don’t line up with participant records. Old plan numbers get confused with new ones. Sometimes, participant-level data arrives incomplete or mislabeled, and no one realizes it until the next plan year’s audit. The financial data might look “close enough,” but close enough doesn’t satisfy auditors or the Department of Labor.

Reconciliation—The Lost Art

Reconciliation isn’t glamorous work, but it’s the backbone of clean plan accounting. Every dollar in the trust should have a name, and every transaction should make sense. After a merger, that means going line by line, making sure every asset transferred matches the participant balances and historical data from the predecessor plan.

Too often, reconciliation is left to chance or rushed because “we just need to get the plan live.” But the moment you cut corners, you inherit someone else’s problem—and that problem becomes yours once the audit comes around. When the auditor asks why the trust doesn’t reconcile to the participant ledger, or why the forfeiture balance ballooned from $12,000 to $48,000 with no explanation, “it came from the merger” isn’t an answer—it’s an indictment.

Form 5500—Garbage In, Garbage Out

If you’ve ever heard the phrase “garbage in, garbage out,” it applies perfectly to the 5500. When plan data isn’t reconciled before filing, you’re certifying inaccurate information under penalty of perjury. Think of it this way: the 5500 is the plan’s public face, and if it shows inconsistent participant counts, mismatched assets, or unexplained adjustments, it’s like showing up to court in a stained suit and flip-flops. The DOL notices, the IRS notices, and eventually, participants notice.

Merged plans with unclean data often lead to 5500s that don’t tell the full story. One plan might report prior-year assets that don’t match the carryforward from the predecessor plan. Or worse, the audit notes a “qualified opinion” because the records are incomplete. Once that happens, you’re on the DOL’s radar—and that’s a place no one wants to be.

Best Practices—Avoiding the Merged Asset Mayhem

1. Audit Before You Merge: Don’t just merge assets, review them. Reconcile old plan balances before a single dollar moves. Identify missing data, stale loans, or unallocated forfeitures.

2. Map Provisions Carefully: Make sure every plan feature (eligibility, match, vesting, loans) aligns correctly. A misalignment can lead to operational errors that spiral into disqualification issues.

3. Communicate Between Teams: HR, payroll, the recordkeeper, and the TPA all need to be on the same page. Merged plans fail when each group assumes someone else has “checked the math.”

4. Document the Process: Keep a written record of how the merger was handled—asset transfer confirmations, reconciliation notes, and communication logs. When the auditor asks, “How do you know these assets were correct?”, documentation saves the day.

5. Clean Up Before Filing: Never rush a 5500 just to meet the deadline. Extensions exist for a reason. A clean, accurate 5500 a few weeks late is better than a fast one that triggers a DOL letter.

The Takeaway

As an ERISA attorney, I’ve seen too many “merger disasters” where plan sponsors trusted that everything would just work out. Spoiler alert: it rarely does. Merged assets without proper reconciliation are like uncashed checks and forgotten passwords, they create confusion, liability, and unnecessary exposure.

The lesson? Don’t let the merged plan be your problem child. Get reconciliation right, make the 5500 reflect reality, and don’t rely on hope as a compliance strategy. Because in the ERISA world, merged assets that don’t add up eventually make everyone’s numbers look bad.

When you work as an ERISA attorney for TPAs for nearly a decade, you get a front-row seat to some of the most creative interpretations of the law imaginable. I don’t say that as an insult—I say it as someone who spent ten years putting out fires that never should have been lit in the first place. Let’s just say there were some plan administrators who could have benefitted from a crash course in ERISA basics, or maybe even a high school civics class.

There was one guy, God bless him, who didn’t know Puerto Rico was a U.S. Commonwealth. I wish I was making that up. To him, Puerto Rico might as well have been another country with its own ERISA rules and 5500 filing system. I tried explaining that Puerto Rico is as American as apple pie, but he didn’t quite buy it. Maybe he thought you needed a passport to approve a loan distribution.

Then there was the plan administrator who approved hardship distributions on 401(k) deferral earnings, twelve years after that practice was outlawed. He looked at me like I was speaking Klingon when I told him earnings weren’t eligible for hardship withdrawal anymore. I didn’t know whether to laugh, cry, or hand him a copy of the regulations with a highlighter.

And who could forget the guy using a seven-year graded vesting schedule five years after EGTRRA eliminated it? I guess he thought “EGTRRA” was some kind of dinosaur. Every participant who terminated that year got a benefit statement straight out of 1995. I remember explaining that EGTRRA had changed vesting rules years earlier, and his answer was something like, “Well, that’s how we’ve always done it.” Famous last words in the ERISA world.

But the one that will live in infamy for me was the plan administrator who proudly admitted—without a hint of shame, that he reconciled a daily valued plan quarterly. I actually paused, thinking maybe I misheard. Nope. He was reconciling a plan that changed every single market day four times a year. That’s not plan administration, that’s wishful thinking.

The moral of the story? If you’re a plan sponsor, make sure the people administering your 401(k) plan know what they’re doing. ERISA isn’t a “learn as you go” area of law, it’s a “get it right or pay for it later” business. A bad plan administrator doesn’t just make mistakes, they create liabilities, trigger audits, and give participants reasons to file complaints.

And for the love of compliance, make sure your administrators know that Puerto Rico is part of the United States.

Because whether it’s hardship withdrawals, vesting schedules, or geography, ignorance isn’t bliss—it’s a DOL audit waiting to happen.

When I was younger, I didn’t say much. I figured keeping quiet was the best way to avoid trouble. I didn’t want to create waves, and truthfully, I thought that was how you earned respect, by keeping your head down and working hard. I thought if I didn’t make noise, people would notice my effort and appreciate it. Turns out, silence doesn’t always command respect — sometimes it just gives fools more room to talk.

When I was at Boston University for my LLM, our classes were at night, so I decided to get a part-time job at a law firm. I landed one at Bernkopf Goodman, a medium-sized Boston firm with about thirty lawyers. The place was split between litigation and real estate, with one lonely negligence attorney floating around.

One afternoon at lunch, that negligence lawyer and one of the real estate partners started goofing on me. I don’t even remember what about — probably something stupid. I just sat there, said nothing. They were partners, and I was a $23-an-hour law clerk trying to build a résumé. At that age, you assume anyone older, especially a partner, must be smarter and wiser. You think success automatically equals intelligence.

Here’s the punchline: they weren’t. The negligence guy ended up leaving to hang his own shingle, and the real estate guy had to tag along with a senior partner just to keep clients. In the end, they weren’t anything special, just two insecure lawyers trying to make themselves feel bigger by cutting someone else down.

It took me years to learn that lesson, that title and experience don’t equal competence or integrity. The law is full of people who confuse volume with knowledge and seniority with wisdom. Sometimes the loudest voices in the room are the ones who know the least.

And me? I kept quiet then because I didn’t know better. But life has a funny way of teaching you when to speak up. Today, I don’t stay silent when I see something wrong, whether it’s a bad plan design, a fiduciary mistake, or some self-proclaimed expert making it up as they go. Because I’ve learned that being quiet to keep the peace only helps the people who don’t deserve it.

Those two partners at Bernkopf Goodman? They probably forgot that lunch. I didn’t. Because in the end, they weren’t better, they weren’t wiser, they just got there first. And years later, when I built my own practice and my own voice, I realized something important: I was never beneath them. I was just still becoming me.

On a client call the other day, we were knee-deep in the usual chaos that comes with transitioning to a new TPA, mapping plan provisions, reconciling documents, and making sure the new prototype plan doesn’t trip over the old one. These calls are a blend of ERISA minutiae and emotional endurance tests.

Then came the sticking point: the automatic enrollment percentage. The old plan defaulted participants at 1%, but the new TPA’s system didn’t like anything under 3%. HR hesitated. “We’ve always done 1%. I’m not sure our employees will go for 3%.”

That’s when I said it: you know your employees better than anyone, even better than an ERISA attorney.

Automatic enrollment isn’t just a checkbox in a plan document; it’s behavioral finance in action. Whether the number starts at 1% or 3% changes how people view saving. One feels like a token effort, the other like a meaningful start. But culture matters, and no one understands the culture of a company better than the people inside it.

Sometimes, plan design comes down to principle. You pick your hills. For me, this one was worth dying on, not because of 1% or 3%, but because ownership matters. A plan sponsor who listens to their workforce and stands by what works for them? That’s fiduciary leadership in its purest form.

At the end of the day, TPAs, attorneys, and recordkeepers all provide structure and compliance. But the sponsor is the heart of the plan. You know your people, their fears, habits, and paychecks, better than any spreadsheet or prototype document.

And that’s why, when it comes to the right default percentage, the real answer isn’t in ERISA Section 404(c). It’s in the breakroom conversations, the payroll deductions, and the quiet trust between employer and employee. That’s the hill I’ll always stand on.

Folks, here’s something that ought to wake up even the sleepiest retirement-plan consultant: there are now an estimated $2.1 trillion in “forgotten 401(k)” assets out there — accounts people either abandoned, forgot about, or lost track of. That’s not pocket change. That’s systemic drift.

The Scope of the Problem

We’re not talking about a few stray accounts. We’re talking about trillions. The kind of number that forces you to squint and ask, “How did we let this happen?” What used to be anecdotal is now a deep structural issue. Between job changes, mergers, relocations, or just poor communication, these accounts slip through the cracks.

Why It Matters (Beyond the Headline)

1. Fiduciary exposure. Plan sponsors and administrators can’t wave this off as someone else’s problem. If participants come knocking (and they will), questions will be asked about due diligence, communication, tracing efforts.

2. Participant outcomes. Sure, some of these will be small balances. But left unchecked, even small balances can erode via fees, inflation, misallocation, or poor default investments. A forgotten 401(k) isn’t just “dormant”—it’s being whittled away.

3. Operational burden & inefficiency. The administrative drag of attempting to locate and reconcile these accounts, the headaches of potential litigation, the reputational risks—these are real, material costs.

What Can Be Done (Yes, There Are Moves)

· Proactive outreach & communication. Use data (postal, email, phone) to actively engage participants who haven’t interacted with their account in year(s).

· Automated tracing & matching technologies. Modern tools can help reconcile current and past addresses, employment records, or cross-entity databases to find “lost” participants.

· Default consolidation policies. When employees leave, making consolidation (or forced rollover) the default unless they opt out reduces fragmentation.

· Standardized disclosure and reporting rules. Benchmark what “best practice” looks like (timely statements, nudges, transparency) and push the envelope there.

· Collaborative industry efforts. Cross-plan data sharing (within privacy and regulatory bounds), third-party locate services, or even regulatory nudges can help reduce the burden on individual plan sponsors.

A Warning & a Call

Let me be clear: this is not a quaint administrative nuisance. This is a symptom of a retirement system under strain. If $2.1 trillion can just evaporate into “forgotten” accounts, how many other cracks are we ignoring? If we let complacency reign, we risk undermining confidence in workplace retirement plans.

My appeal to all of you managing, governing, advising: treat forgotten accounts as a first-order priority. Don’t relegate them to the “administrative back burner.” Get moving now — because those assets? They belong to people, not spreadsheets.

Another week, another headline from the ERISA litigation circus — this time it’s Jerry Schlichter asking for a $17.5 million payday in the Pentegra case. That’s right, after landing what’s being called the largest jury verdict ever in an ERISA class action ($38 million) and then settling for $48.5 million, Schlichter’s firm now wants a third of the pot.

Don’t get me wrong — they did the work. Five years, 16,000 hours, over a million dollars advanced in expenses. But when the attorneys’ fee motion is as big as the recordkeeper’s alleged overcharges, it makes you wonder who really benefits from “fiduciary duty.”

If the court grants it, this could set a new benchmark — not for prudence, but for profit. Plan sponsors should take note: these lawsuits aren’t just about plan fees anymore; they’re about who gets the biggest slice of the settlement pie. The plaintiffs’ bar calls it justice. I call it a business model.

As Lucille Bluth would say, “Good for her.”

We’ve all kept an eye on default rates creeping upward lately. But here’s what catches my attention: rising defaults don’t just affect participants, they test the backbone of a plan’s design, governance, and fiduciary discipline. As defaults increase, questions cascade: Are your safe-harbor defaults still appropriate? Are participants being nudged properly, or shoved into poor allocations just because inertia took over?

Higher default rates can mask hidden trouble. Plans that lean too heavily on default strategies may see behavior that deviates wildly from expectations. That increases the risk that someone will point at you and say your “qualified defaults” weren’t in participants’ best interests after all.

The fix begins before defaults spike: regularly stress test your default strategy; monitor participant behavior; consider a tiered or graduated approach rather than a one-size option; and document your rationale every step of the way. When default rates go up, the difference between prudent design and litigation bait is how defensible your structure and process were before the risk spike.

Because once default rates are high and things go sideways, plaintiffs and regulators don’t ask whether you hoped it would be fine, they ask how you prepared for exactly this.

Serving as counsel to a private school board, I had the chance to join their recent retreat, and I think it went pretty well. I gave a talk on fiduciary responsibility, what it means for the board, how it shapes every decision, and how duties extend beyond the four walls of a classroom. We even touched on social media, which, in today’s world, can be both a blessing and a liability for schools.

That reminded me of a story I wrote about in Full Circle. Fifteen years ago, I told the managing attorney at my old law firm that I wanted to use social media to build a national ERISA practice. You’d think I suggested selling fish out of a trunk on Sunrise Highway and Route 110. She was visibly displeased, as though the mere thought of self-promotion was unbecoming of a lawyer. The firm, already too old in its thinking, couldn’t see where things were headed. And as I predicted, it’s now less than half its size compared to when I left in 2010.

Why do I share this? Because it’s vindication, yes, but also a real-world example of how communication tools—whether Twitter, LinkedIn, or a blog post like this—aren’t frivolous. They’re powerful. They built my practice. They gave me a national platform. And for schools, boards, and nonprofits, they can be equally powerful tools for engagement, transparency, and trust, when used wisely.

Fiduciary duty isn’t just about numbers on a balance sheet; it’s about vision. It’s about seeing risks and opportunities before they knock you over. And sometimes, it’s about not being afraid to sell a dish or two from the trunk if it helps you get the word out.