The Rosenbaum Law Firm P.C. Blog

The Internal Revenue Service (IRS) and Department of the Treasury issued Notice 2026-13 on January 15, 2026 — a key update for retirement plan sponsors and administrators responsible for communicating rollover distribution options to participants. This guidance revises the safe harbor explanations previously provided and aligns them with recent legislative and regulatory changes.

Under Internal Revenue Code Section 402(f), plan administrators must provide participants with written explanations of their eligible rollover distribution options and the associated tax consequences before distributions occur. Notice 2026-13 updates the model safe harbor explanations, giving administrators two versions to choose from: one for distributions from non-Roth accounts and another for Roth accounts. If a participant is eligible for both, administrators should provide both explanations.

So what changed? The updated safe harbor language reflects tax law developments since 2020, including provisions of the SECURE 2.0 Act of 2022 and policy recommendations from a Government Accountability Office (GAO) report aimed at improving participant understanding of distribution choices. The revisions address:

· New and expanded exceptions to the 10% early-withdrawal penalty, such as those covering emergency expenses and terminal illness;

· Revisions to required minimum distribution (RMD) rules, including later RMD ages and rules for surviving spouses;

· Elimination of RMDs for designated Roth accounts in employer plans; and

· Structural updates like a table of contents to make notices easier to navigate.

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Plan administrators may customize the safe harbor explanations to reflect specific plan features (for example, omitting sections that don’t apply). Using these updated explanations helps satisfy ERISA and IRS disclosure requirements while reducing fiduciary and compliance risk.

As retirement law continues to evolve, Notice 2026-13 represents an important step toward clearer, more accurate communication with participants facing rollover decisions. (IRS)

Big headlines in retirement plan litigation don’t just hit household names; they’re a reminder that fiduciary duty doesn’t come with automatic immunity for size or reputation. Last week, a $70 million ERISA class action lawsuit was filed against the Bloomberg L.P. 401(k) Plan on behalf of more than 20,000 current and former participants.

According to the complaint, plan fiduciaries allegedly failed to act prudently by retaining two investment options that underperformed their benchmarks for over a decade. Specifically, the Harbor Capital Appreciation Fund and the Parnassus Core Equity Fund stayed on the plan menu despite long-term lagging performance compared with relevant indices and peer groups. Plaintiffs say that this failure to remove imprudent investment options cost participants tens of millions of dollars in retirement savings.

This isn’t an isolated phenomenon. ERISA litigation against 401(k) plans has continued to increase, with plaintiffs’ firms seeking to hold fiduciaries accountable for underperforming funds, excessive fees, and poor governance generally.

For plan sponsors and fiduciaries, the Bloomberg case highlights several key points:

· Performance alone isn’t enough — it’s the process you follow when evaluating and removing options that matters in an ERISA challenge.

· Documentation is defense — recordkeeping of investment reviews, benchmarks, and committee deliberations isn’t optional; it’s a core part of prudence.

· Long-term lag isn’t academic — persistent underperformance relative to objective comparators can be used as evidence of imprudence.

At the end of the day, most sponsors don’t want litigation. But they do want to protect participants and their own organization. A disciplined, documented investment monitoring process isn’t just best practice — in today’s environment, it may be your best defense.

Every plan provider says the same thing: “We work with everyone.” That sounds inclusive, but it’s terrible marketing and even worse strategy. The most successful TPAs and advisors I know don’t chase everyone—they own niches. Doctors, law firms, unions, family businesses—each lives in its own financial universe with unique pain points, egos, and landmines.

Take medical practices. Physicians care about two things: reducing taxes and keeping the staff happy enough not to quit on a busy Monday. They don’t want a generic 401(k); they want cash balance combinations, creative profit-sharing formulas, and someone who can explain it without sounding like the IRS instruction booklet. If you can speak “doctor,” you’ll never run out of clients.

Law firms are a different animal. Partners think like litigators—risk first, opportunity second. They worry about fairness between rainmakers and junior attorneys, and they read every word of every document. A provider who understands partnership dynamics and compensation waterfalls becomes indispensable. One who doesn’t gets shown the door after the first uncomfortable partner meeting.

Unions? That’s about trust and politics. Decisions are collective, not top-down. Education matters more than glossy investment reports. Family businesses bring yet another twist—succession drama, relatives on payroll, owners who want maximum deductions while paying the kids minimum wages. Cookie-cutter solutions explode in those environments.

The point is simple: retirement plans are cultural, not just financial. Providers who learn the language of a niche stop selling features and start solving real problems. They know which plan design questions to ask before the prospect realizes there’s a question at all.

You don’t need a thousand markets to build a great practice. You need two or three where you sound like you belong at the table. Pick a lane, learn its quirks, and become the provider who “gets” that world. Generalists compete on price. Specialists compete on trust.

For decades the advisor sales pitch sounded like a broken record: better funds, better performance, better returns. The problem is that every advisor says the same thing, and in a world of index funds and target-date glidepaths, “better investments” isn’t a strategy anymore—it’s background noise.

Plan sponsors don’t wake up worried about alpha. They worry about failed ADP tests, angry employees who can’t get a distribution processed, and whether the Department of Labor will knock on their door. If advisors keep leading with investment charts, they’re solving a problem most sponsors don’t think they have.

The advisors winning business today compete on process, not product. They show sponsors how committee meetings should run, how fees get benchmarked, how participant education actually changes behavior, and how to document decisions so a fiduciary can sleep at night. That’s value an index fund can’t replace.

Think about what really causes sponsors to fire advisors. It’s rarely a fund trailing the S&P by 40 basis points. It’s unanswered emails, confusing payroll files, or a provider team that disappears after the sale. Service is the investment now. Governance is the differentiator.

Advisors need to sound less like portfolio managers and more like risk managers. Talk about cybersecurity. Talk about eligibility errors and late deposits. Bring a calendar that maps out the entire year—testing, notices, fee reviews, education meetings. When you help a sponsor run a better plan, the investments take care of themselves.

None of this means investments don’t matter. They do. But they’re the price of admission, not the reason to hire you. The advisor who wins is the one who walks into a meeting and says, “I’m here to help you be a great fiduciary,” instead of, “Let me show you my five-star funds.”

Stop competing on what everyone can copy. Start competing on what only a real partner can deliver: competence, communication, and a process that protects both the sponsor and the people counting on that 401(k).

Running a 401(k) plan isn’t just about picking a fund lineup and hoping employees save enough for retirement. It’s about process, documentation, and proving that you acted like a prudent fiduciary even when markets misbehave. I always tell plan sponsors the same thing: if the Department of Labor knocked on your door tomorrow, there are five documents you’d better be able to pull out of a drawer without breaking a sweat.

1. Investment Policy Statement (IPS). This is your rulebook. It explains how investments are selected, monitored, and replaced. Without an IPS, every fund change looks random and emotional. With one, you look like a disciplined fiduciary following a repeatable process.

2. Committee Charter and Minutes. If you have a committee—and you should—write down who is on it, what their responsibilities are, and how often they meet. Minutes don’t need to be a novel, but they should show that real conversations happened about fees, performance, and participant needs.

3. Fee Benchmarking Report. “Reasonable fees” isn’t a feeling; it’s a comparison. A current benchmarking report shows you checked the marketplace and didn’t just accept whatever your provider charged because it was easy.

4. 408(b)(2) Service Provider Disclosures. These tell you who is getting paid and how. If you’ve never read them, you’re flying blind. Fiduciary duty requires understanding compensation, not pretending it doesn’t exist.

5. Plan Document and Amendments. This is the constitution of your plan. Operating outside the document is the fastest way to an IRS correction program and a very uncomfortable conversation with ownership.

None of this is glamorous, but retirement plans are built on paperwork the way baseball is built on box scores. You don’t win by accident—you win by keeping records, following a process, and proving you cared. If those five documents aren’t in your drawer, let’s fix that before someone else asks why.

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.