The Rosenbaum Law Firm P.C. Blog

Just when retirement plan sponsors thought disclosure rules couldn’t get any more convoluted, the Department of Labor has offered temporary relief on SECURE 2.0’s paper statement requirements. For anyone keeping score at home, Congress passed a law requiring certain retirement plan benefit statements to be furnished on paper, even in an age where most participants check balances on their phones while pretending to listen in meetings. Then questions emerged about implementation, practical compliance concerns surfaced, and now the DOL has essentially said, “Make a good-faith effort while we sort this out.” If that sounds like the retirement plan equivalent of building the plane while flying it, welcome to employee benefits regulation.

Beginning with the 2026 plan year, defined contribution plans generally must provide at least one paper benefit statement annually, while defined benefit plans face a paper statement requirement every three years. On paper, that sounds manageable. In practice, it creates all sorts of operational questions because retirement plans rarely exist in a world where one rule applies cleanly without intersecting with five others. Some plans rely on electronic disclosure safe harbors. Some participants have affirmatively consented to electronic delivery. Some recordkeepers have systems built around digital communications because, you know, it’s 2026. So naturally, Congress decided to add a paper mandate back into the mix.

This is where plan sponsors need to stop assuming their vendors have everything under control. One of the great myths in this business is that if a recordkeeper handles participant communications, the compliance burden somehow magically transfers with it. It doesn’t. Somebody needs to know whether paper statements are being generated, how frequently, for whom, under what delivery rules, and whether the plan’s disclosure procedures align with the law. “I thought the recordkeeper had it” is not exactly a compelling defense if this becomes an issue later.

What makes this particularly amusing is that the retirement industry spent years moving away from paper for good reason. Electronic delivery reduces cost, improves efficiency, and reflects how most participants actually engage with their retirement accounts. Very few participants are eagerly waiting by the mailbox for a quarterly statement when they can check their balance between doomscrolling and ordering lunch. Yet here we are, reintroducing paper into a system that had largely modernized itself.

I understand the policy argument. Some participants prefer paper. Some may miss electronic notices or lack reliable digital access. Fair enough. But the way this gets implemented matters. Layering mandatory paper on top of existing electronic disclosure rules creates complexity, not clarity.

The lesson here is simple. Temporary enforcement relief is not the same thing as permission to ignore the issue. In the retirement plan world, “good-faith compliance” often translates to “you should already be figuring this out before someone else decides you didn’t.”

The retirement plan industry loves a good panic. Every few years, we’re told something new will destroy the advisor business. Robo-advisors were supposed to make human advisors obsolete. Recordkeepers were supposedly going to absorb every advisory function worth having. Pooled employer plans were going to turn traditional consulting into a commodity. Now artificial intelligence has taken its turn as the latest existential threat. A recent industry survey suggests more advisors believe AI-powered firms will outperform traditional firms, which has predictably triggered the usual anxiety. My response? Good. Maybe a little discomfort is exactly what this business needs.

Let’s be honest about what AI actually does well. It handles repetitive work at remarkable speed. It can summarize meetings, draft communications, analyze large data sets, organize workflows, and generate polished first drafts faster than any associate who just graduated college and still thinks “reply all” is a personality trait. For firms bogged down in administrative sludge, AI is a game changer. If your value proposition is producing reports, assembling meeting decks, or recycling the same fiduciary checklists with a new logo slapped on top, yes, you should probably be nervous. AI will absolutely do that faster, cheaper, and without asking for vacation time.

But retirement plan sponsors do not hire advisors because they can generate paperwork. They hire advisors because retirement plans are messy, human, operationally fragile, and full of bad decisions waiting to happen. The value of a real advisor has never been the production of information. It has always been judgment. It’s the ability to interpret complicated facts, identify risks that aren’t obvious, push back on bad vendor advice, and help clients navigate problems when things inevitably go sideways.

AI can identify a discrepancy in contribution data. It cannot explain to a plan committee why their payroll integration failure caused missed deferrals for 47 employees and what the least painful correction path looks like. AI can summarize SECURE 2.0 provisions. It cannot tell a plan sponsor that their “creative” exclusion class is about to create a minimum coverage disaster. AI can draft a participant communication. It cannot understand that the communication is legally useless because it is being sent after the fact, when the damage has already occurred. Context matters. Judgment matters. Experience matters.

There’s also something deeply amusing about the fear itself. Large firms historically enjoyed structural advantages because they had armies of staff, analysts, service teams, and marketing resources that smaller firms simply couldn’t match. AI starts leveling that playing field. A sharp boutique advisor with strong technical knowledge and the right technology can suddenly deliver work product that looks every bit as polished as something coming out of a national firm. That’s not the collapse of the advisory business. That’s competition. And competition tends to make everyone better.

The firms that should be concerned are the ones that mistake activity for value. There are plenty of advisors who have built careers around looking busy rather than being useful. Endless reports no one reads. Quarterly meetings that exist because the calendar says so. Generic investment commentary copied from somewhere else. Fiduciary checklists treated as if checking boxes

somehow equals meaningful governance. AI is not a threat to real advisory work. It is a threat to expensive mediocrity.

That said, there is a real danger here, and it’s not AI itself. It’s the misuse of AI by people who think speed equals accuracy. AI is a fantastic assistant. It is a terrible final decision-maker. Blindly relying on AI-generated legal or compliance analysis is how firms create problems at scale. If AI hallucinates a regulatory interpretation and you repeat it to a client without independent review, the liability remains yours. Plan sponsors will not be comforted by hearing that the robot made the mistake. Technology can improve efficiency, but it cannot replace professional accountability.

I view AI the same way I’d view a very bright junior associate. Helpful, fast, energetic, occasionally impressive, and absolutely capable of being spectacularly wrong with tremendous confidence. That means supervision matters. Review matters. Skepticism matters. The advisors who thrive will be the ones who use AI to eliminate wasted time while preserving human judgment where it counts.

Retirement plans are not just spreadsheets and notices. They involve human behavior, regulatory nuance, fiduciary responsibility, vendor dysfunction, payroll failures, compliance traps, and all the delightful chaos that comes with asking employers to administer highly technical benefit programs while simultaneously running actual businesses. AI can assist with many aspects of that world, but it cannot own the consequences of bad decisions. Advisors still do.

So no, AI is not coming to replace retirement plan advisors. But it may absolutely replace advisors who confuse process with value, activity with expertise, and automation with wisdom. Frankly, if that happens, the industry may be better for it.

No plan sponsor enjoys participant complaints. Nobody likes angry emails, confused employees, or calls that begin with “I don’t understand why…” The instinct is often defensive. The recordkeeper must have caused it. The payroll department probably made a mistake. Surely the participant misunderstood.

That mindset is dangerous.

Participant complaints are often the earliest warning sign that something in the plan is broken. A missed deferral complaint may reveal payroll timing issues. A loan complaint may expose repayment processing failures. A confusing notice may highlight communication problems. One participant raising a concern often represents ten others who are equally confused but stayed silent.

Complaints also provide insight into participant experience that dashboards and vendor reports rarely capture. Metrics can show call volume, website usage, and enrollment rates. They cannot tell you whether employees actually trust the system.

Smart sponsors treat complaints as operational intelligence, not inconveniences.

That does not mean every participant grievance is valid. Some complaints stem from misunderstanding, unrealistic expectations, or simple human error. But dismissing complaints outright misses the point. Even a mistaken complaint can expose communication weaknesses.

The best fiduciary oversight includes asking why complaints happen, whether patterns exist, and what process improvements are needed. Repeated complaints about distributions, loans, enrollment, or payroll deductions usually signal systemic issues.

Participants are not auditors, but they often spot problems first.

In the retirement plan world, bad news delivered early is a gift.

Bad news discovered during an audit is not.

For once, retirement plan sponsors received a rare piece of regulatory news that doesn’t require antacids. The Department of Labor’s civil monetary penalties for 2026 are staying flat. No inflation adjustment. No annual bump. No fresh chart showing how much more expensive your mistakes have become. In a world where the price of everything seems to rise, it’s almost charming to see at least one government penalty schedule decide to take the year off.

Before anyone starts popping champagne, let’s keep this in perspective.

The fact that penalties are not increasing does not mean they are small. It just means they are remaining at the already uncomfortable levels we’ve all come to know and resent. Failure to file a complete Form 5500 can still be painfully expensive. Missing required notices, failing to provide requested documents, or ignoring compliance obligations remains a terrible strategy. “At least the penalty didn’t go up” is not much comfort when you’re writing a check for a preventable mistake.

This is a little like hearing your favorite baseball team announce that concession prices are frozen after raising them to absurd levels the prior season. Sure, technically that’s stability. You’re still overpaying for the hot dog.

What this does provide is predictability, and in the retirement plan business, predictability is underrated. Plan sponsors, TPAs, advisors, and compliance professionals spend enough time dealing with shifting rules, changing interpretations, and operational curveballs. At least one static number on the compliance landscape is a welcome change.

Of course, no rational plan sponsor should ever base compliance decisions on penalty economics. The cost of correcting a failure often goes beyond regulatory fines. Administrative cleanup, legal fees, participant remediation, auditor scrutiny, and reputational headaches tend to make the actual damage far worse. The penalty is often just the insult added to the injury.

It’s also worth remembering that flat penalties do not mean softer enforcement. Regulators do not become friendlier simply because the dollar amount stayed the same. A referee who keeps the same whistle can still throw more flags.

So yes, enjoy the modest good news. Your DOL penalty exposure did not get more expensive in 2026.

But this is retirement plan compliance. The objective was never to get a better price on mistakes.

The objective is not making them in the first place.

That remains exactly as expensive as ever.

Plan sponsors often approach vendor searches with the best intentions and the wrong priorities. The most common mistake is treating the process like a shopping exercise instead of a fiduciary decision. Fees matter, of course. Nobody wants to overpay for recordkeeping or advisory services. But when cost becomes the dominant factor, sponsors often end up buying the retirement plan equivalent of the cheapest airline ticket, only to discover later that baggage, legroom, and arriving at the destination were apparently optional.

A vendor search goes wrong when sponsors focus on sales presentations instead of execution. Every provider looks polished in a finalist meeting. Every implementation appears seamless in the demo. Every service team sounds experienced. Then reality arrives. Payroll feeds fail. Eligibility files are incomplete. Participant loans get mishandled. Conversion timelines slip. Suddenly the provider that looked like a bargain feels very expensive.

Another common mistake is failing to define what success actually looks like. Is the goal lower fees? Better participant engagement? Improved payroll integration? More responsive service? Cleaner compliance support? If sponsors cannot articulate what problem they are trying to solve, the vendor search becomes little more than organized confusion.

Sponsors also underestimate implementation risk. Selecting a provider is not the finish line. It is the starting point. A bad transition can create participant frustration, operational failures, and reputational damage that dwarf any projected savings.

The best vendor searches ask harder questions. Who owns implementation? How are corrections handled? What happens when payroll data is wrong? How are participant complaints escalated? Good fiduciary process means evaluating how providers perform when things go badly, not just when the PowerPoint slides look impressive.

Choosing a retirement plan provider is not about buying promises. It is about selecting a partner that can execute under pressure.

On paper, daily eligibility sounds like one of those ideas that makes perfect sense. Why make employees wait? Why force someone hired on Tuesday to sit around until the first of the next month or next quarter before they can defer into the 401(k) plan? Immediate access feels employee-friendly, modern, and flexible. It also looks great in a sales presentation.

Then administration begins.

Because what sounds simple in theory often becomes operational chaos in practice.

Daily eligibility means payroll has to identify every newly eligible employee in real time. Deferral elections need to be captured immediately. Enrollment systems need to communicate accurately with payroll. Contribution withholding has to start at precisely the right moment. If automatic enrollment is involved, now you’ve added notice timing requirements and default contribution processing into the mix. Miss one handoff, delay one payroll feed, or rely on one stale census file, and suddenly you’re discussing missed deferrals and correction costs.

This is where the difference between plan design and plan administration becomes painfully obvious.

I’ve always believed zero eligibility requirements for deferrals can make sense if you have the infrastructure to support it. But many employers do not. The retirement plan is only as good as the payroll department’s ability to execute the rules. That’s where beautiful plan design goes to die.

Daily entry dates also create administrative complexity beyond deferrals. Eligibility tracking becomes harder. Testing gets messier. Participant communications require tighter controls. HR and payroll need cleaner coordination than many organizations can realistically deliver. The more moving parts you create, the more opportunities for operational failures.

And let’s not forget SECURE 2.0, LTPT employees, automatic enrollment expansion, and the growing list of eligibility complications that already make plan administration more difficult than it used to be. Adding daily eligibility because it “sounds participant-friendly” without considering execution is like buying a race car for someone who can barely drive stick.

Can daily eligibility work? Absolutely.

Should every plan adopt it? Not even close.

Good plan design is not about choosing the most flexible option. It’s about choosing the option your client can actually administer without turning your correction practice into a growth industry.

I’ve always believed the retirement plan business needs its own version of a greatest hits album for bad decisions. Not because I enjoy watching train wrecks, although professionally speaking, they can be educational. But because some of the most valuable lessons in this industry come from seeing exactly how things go wrong.

Welcome to What Were They Thinking? Retirement Plan Edition.

This is the business where a plan sponsor decides daily eligibility sounds simple because “how hard can it be?” Six months later, payroll missed deferrals for half a dozen employees, HR insists they sent the notices, the recordkeeper says they never received enrollment data, and suddenly everyone is learning far more about corrective QNECs than they ever wanted.

Or the sponsor who wants every available feature because they heard them mentioned at a conference. Safe harbor match? Sure. Automatic enrollment? Why not. Roth? Of course. After-tax contributions for mega backdoor Roth conversions? Sounds exciting. Participant brokerage accounts? Let’s be progressive. Then someone realizes the payroll department still struggles to process regular deferrals correctly.

Then there’s the classic vendor transition disaster. Sales promises seamless implementation. Operations inherits the mess. Census data is incomplete, payroll mappings are wrong, blackout notices go out late, participant loans get mangled, and everyone wonders why conversions have the reputation of airline emergency landings.

And of course, my personal favorite: “We’ll fix it later.”

Those four words deserve their own retirement industry hall of shame.

Because later usually means after the IRS finds it, after participants complain, after the audit starts, or after the correction cost has multiplied.

This series practically writes itself because the retirement plan business is full of well-intentioned bad ideas, preventable mistakes, and overconfident decision-making.

Not every disaster comes from incompetence. Sometimes it comes from complexity. Sometimes from bad communication. Sometimes from trusting the wrong vendor. Sometimes from assuming technology solves operational weakness.

The point isn’t mockery.

Well, maybe a little.

The point is that every retirement plan failure has a lesson. And if we’re smart, we can laugh at the mistakes we avoid instead of the ones we repeat.

As a plan provider, one of the more frustrating parts of asset sale transactions is watching a perfectly salvageable retirement plan get marched toward termination because the M&A lawyers want zero daylight between the buyer and anything that smells like seller liability.

I get it. I spent three years in law firms. I know how these conversations go. The acquisition attorneys are paid to reduce risk, eliminate ambiguity, and make sure their client doesn’t accidentally inherit a landmine hidden in the seller’s filing cabinet. Mention the possibility of assuming a retirement plan, and you can practically hear chairs moving backward.

But from a retirement plan perspective, automatic termination is not always the smartest answer.

In an asset sale, the reflexive answer is often simple: terminate the seller’s plan, force distributions or rollovers, and start fresh in the buyer’s plan. Clean break. No historical baggage. No inherited compliance failures. No worries about undiscovered operational defects. It sounds elegant.

Except retirement plans are administered in the real world, not on legal flowcharts.

Terminations create disruption. Participants get confused. Rollovers get delayed. Missing participants become everyone’s favorite problem. Outstanding loans suddenly require careful handling. Blackout notices, distribution elections, communication failures, payroll coordination, and recordkeeper logistics all become part of the circus. If the workforce is continuing seamlessly under the buyer, terminating the plan can feel like burning the house down because you didn’t want to repaint the kitchen.

There are situations where assumption makes perfect sense. If due diligence shows the plan is reasonably clean, operational history is understood, and the buyer is effectively continuing the workforce, preserving the plan can avoid unnecessary chaos. Participant accounts remain intact. Loans continue without interruption. The transition is cleaner for employees and often less operationally painful.

The challenge is getting M&A counsel to entertain the conversation.

The words “assume the plan” can trigger the same reaction as “let’s adopt a stray raccoon.” The fear is inherited liability, and to be fair, that fear is not irrational. A defective plan can come with expensive surprises.

But zero-risk lawyering sometimes creates avoidable business headaches.

As plan providers, our job is at least to present the option. Explain the operational benefits. Discuss diligence safeguards. Outline risk mitigation. Maybe the answer is still no. Fine.

But too often, the conversation never happens because the legal reflex is immediate termination.

Sometimes that’s the right answer.

Sometimes it’s just the easiest answer for the lawyers.

Washington has a remarkable talent for creating programs designed to help small businesses while making them just complicated enough that the smallest businesses never actually use them.

The revival of legislation aimed at expanding startup retirement plan tax credits for micro-businesses is one of those rare moments where lawmakers may actually be fixing a real problem.

Because here’s the dirty little secret: while SECURE 2.0 made startup credits dramatically better, many truly tiny businesses still remain on the outside looking in.

On paper, the tax credits are generous. In reality? The businesses with five employees, eight employees, or a dozen workers often still look at plan costs, administration, payroll integration, fiduciary responsibilities, and provider fees and decide it’s just not worth the headache.

And that’s the problem.

The retirement industry loves talking about coverage expansion, but too often we talk like every employer has an HR department, a payroll specialist, outside counsel, and a CFO who enjoys deciphering tax incentives over coffee.

That’s fantasy.

The neighborhood restaurant doesn’t operate that way. The local plumbing business doesn’t operate that way. The two-partner accounting firm with three employees definitely doesn’t operate that way.

Micro-businesses don’t reject retirement plans because they hate retirement savings. They reject complexity.

That’s why expanding startup incentives makes sense. If Congress wants broader retirement coverage, the answer isn’t another glossy public policy speech about access. It’s making adoption economically and operationally simple enough that a business owner can say yes without feeling like they’ve agreed to launch a satellite.

But let’s not pretend tax credits alone solve everything.

A tax credit helps with cost. It doesn’t solve bad onboarding. It doesn’t fix payroll integration disasters. It doesn’t explain fiduciary obligations. It doesn’t prevent providers from overselling simplicity and underdelivering execution.

Retirement plan expansion happens when small employers believe offering a plan won’t become another operational migraine.

Tax credits help.

Making the system less annoying would help even more.

Auto-enrollment is one of those retirement plan features that sounds wonderfully simple in a sales presentation. “We’ll automatically enroll employees, boost participation, and help people save.” Great. Everyone nods. Then reality arrives wearing steel-toed boots.

Because auto-enrollment only works when the machinery behind it actually works. That means clean payroll integration, accurate eligibility tracking, timely notices, correct deferral percentages, opt-out processing, and someone actually paying attention. Miss one step, and what looked like a simple feature becomes an expensive correction project.

Take missed enrollment notices. SECURE 2.0 made auto-enrollment even more prominent, but prominence doesn’t equal simplicity. If an employee should have been automatically enrolled and wasn’t, you’re now looking at missed deferral opportunity corrections, potential employer contribution true-ups, earnings calculations, and a whole lot of explaining.

Then there’s payroll. Payroll teams change systems. Fields get mapped incorrectly. Deferral percentages don’t transmit. New hires sit in limbo because eligibility dates weren’t coded correctly. Suddenly the “automatic” part isn’t automatic at all.

And let’s not forget employee communication. Participants notice when money comes out that shouldn’t—or doesn’t come out when it should. Nothing destroys trust faster than employees believing their retirement plan is being run by people making it up as they go along.

Auto-enrollment is a great design feature. I like it. Participation rates generally improve. Employees benefit. But sponsors make a mistake when they think selecting auto-enrollment is the end of the decision-making process.

It’s actually the beginning.

The real question isn’t whether you offer auto-enrollment. The real question is whether your vendors, payroll provider, HR team, and internal processes can administer it correctly every single pay period.

Because in retirement plans, “automatic” is often just another word for “we hope the file worked.”