Secure Act Compliance & MEPs: Live from 401k Conference

[0:00] JD: Very cool to be at Walt Disney World for what I call ari Rosenbaum's that 401k National Conference. Thanks for having us, Ari. [0:09] Chad: Thanks, Ari. [0:10] JD: To be here, we're going to do a short three hour presentation on the Secure Act. [0:16] Chad: So nobody's had any time with Secure act yet. [0:19] JD: I thought that was the plan. [0:19] Chad: That is. No, in my world, it is. No. [0:22] JD: We're going to do a quick little show for you guys, cover a variety of things. Eventually welcome up a guest here on the show. But if you've ever watched Retireholics, which I know all of you have, I [0:34] Mark: always do this and you hate it. Show of hands, how many people have seen a show? Oh, that's statistically speaking, that's. [0:41] Chad: Hey, by the way, I feel like I have green light because this morning speaker said shit. So we can say so when I see that many hands go up, I'm like, shit, we haven't got out there enough yet. [0:51] JD: That might be the first time you've ever cussed on the show. [0:53] Chad: First time, but he started and he's from D.C. i feel like I need a green light for that. [0:58] Justin: Just don't. [0:58] JD: Fair enough. [0:59] Justin: Put it on anyone else. Just own it. [1:00] JD: I was gonna cuss anyways, but always do, though. Okay. Every show of Retireaholics, we do a couple of things. One of the things we always do is have the beer of the episode. Today we've got a very special beer. Let's bring it out. We're gonna be drinking Corona. [1:16] Chad: We always try to pick a local brewery to support. [1:20] Mark: They were. They were buy one, get 700 free. [1:23] JD: Yeah. [1:23] Mark: So I don't know why, but that's a killer deal. [1:26] JD: We're gonna drink price down, trying to [1:28] Chad: give back to a company in need. [1:30] JD: And we'll just drink these at our leisure. But we also play a game called Word of the Episode. And I'm about to name these two words, but if any one of us, and that includes our guests later, say one of these two words, which I'm about to say for the last time, you will have to drink from cupcake Vineyards rose $25 at the gift shop. [1:55] Chad: I was gonna say, why don't you tell them why we ended up with Cupcake Vineyard. [1:58] JD: We were gonna do vodka or something. We called room service. [2:00] Chad: We usually do Jack. [2:01] JD: I said, hey, how much for a bottle of alcohol? And they're like 150 bucks. And I was like, nah, we'll go with Cupcake. [2:07] Chad: That's not true. JD was like, ah, it's not a big Deal. I'm like, absolutely not. I want two bottles of cupcake before we do that. [2:13] JD: The words of the episode. And by the way, this is the most fun part of the show for you, the audience, because you need to be our judge and jury. So if you hear us say one of these words, feel free to shout it out and call us out on it. The words will be participant and plan. Got it. [2:33] Justin: It's very original. [2:34] Chad: Yes. Yep. [2:35] JD: We got something else, Justin. [2:36] Chad: You don't talk. You don't have to worry about it. [2:38] JD: We got something else going on. If you'd like to play along. You can actually text us questions from the audience. Maybe it's questions for our guest. We're giving you Justin cell so you can text him directly. Maybe you want to know something personal about Mark. Maybe you want to know something about the Secure Act. Whatever you want to do. [2:59] Chad: Just maybe you saw us roaming the streets of Vegas after a conference and you want to tell that story. [3:05] JD: Sure. So go ahead and text Justin at this number. It'll be up throughout the show here. You can reference it and he'll field those questions. And thank you for your cell numbers in advance. We'll send you branding marketing stuff on the regular. Maybe some pictures. [3:21] Mark: I don't know. [3:22] Chad: They didn't know that. [3:23] JD: Late night retireholics pictures. No, your number's safe with us. Maybe let's dive into the first chapter of the day. And yes, we are going to talk about secure apps only because it's new, it's cool, it's fresh. So we'll give you a little highlight. So we're gonna talk about the three things that we think are kind of sweet from the re. From the Secure Act. [3:47] Chad: Who has listened to a webinar or been to a conference where Secure Act's been discussed. Dude, there was at least two hands down, everybody else was out there. [3:57] JD: It's kind of a big deal. [3:58] Chad: It is. [3:59] JD: So you guys talk with me, share with me. What do you think is cool about the Secure act? [4:06] Chad: You know, being TPAs, we're obviously talking to many plans that are starting. Dang. Nobody called me out on that. [4:13] Mark: That's the first time I missed one. [4:15] Chad: Many businesses that are setting up a retirement vehicle for their employees skip that one. And in doing so, they want to make this as affordable as possible. So they're looking for credits. They're looking for ways to drive down costs. So the increase to the tax credit is a big one that we're talking about quite often, and we're getting creative with it. It's not. [4:37] Mark: What is the increase, Chad? [4:39] Chad: Why don't you tell us, Mark? Why don't you tell the debate. [4:42] Mark: We had a debate last night about all of this. [4:43] Chad: It was a two hour debate where I'm the nerd. So of course I read the release from the Ways and Means and dove deep into it to think what I have now is an answer. [4:55] Mark: I think are we on consensus? We're going to say 100%. [4:58] Justin: Yeah. [4:59] Chad: So what we were debating last night, we know that the new tax credit is 250dol times the number of non highlys. If you look at every single release, I'm not going there. If you look at every single release from different record keepers and providers, the show or the release is showing that there is no 50% cap or at [5:19] JD: least it's not highlighted. [5:21] Chad: It's not highlighted. They're not saying it's not, they're just not discussing it. Only Brian Graff is the only release that I saw actually we saw one from principal. Two others, we saw one from principal that it states that the credit is actually 50, 50% of initial cost, just like the current credit has been in prior years. But if you look at the publications, Nothing shows the 50% hold back on it. When we got into the actual language of what is edited 45B section paragraph 2 and you read into it, it's still showing that there is a 50% [5:54] JD: cap on what you take the credit, an amendment to the original rules. [5:59] Chad: They're saying that the amendment is only predicated on the, the credit though, not the 50% cap. 50% cap is in A and the credit is in B. [6:07] JD: So you can believe Brian Graf, you can listen to leading ERISA attorneys out there on their opinions, but take it from the retireholics. [6:13] Chad: Yep, we believe, we believe you should Trust us. [6:17] JD: It's 50% of that number, but still very cool because up to that 5050% of that, that's, that's a huge tax credit compared to what we've had historically. And I'm sure as sales consultants that are out there that you guys are pretty fired up about that. [6:31] Justin: Oh yeah, definitely. I mean so many people are on kind of the fence whether they want to do it and they fear that they can get a 25 or up to $5,000 credit. And they're like, all right, we can, you know, makes a lot easier to swallow this for the next three years. [6:42] Mark: Well, and a little different for us being in California where I don't know how many people here are from there, but we have Cal Savers impacting people wanting and having to start plans across the country. That may not be the case, but I think the tax credit can incentivize people who are on the fence. [6:59] Chad: Well, and here's the flip side. The conversation that I have quite often is I'm working with advisors that say, yeah, I'm not touching the startup space. It's tough, it's a lot of work and unless it's coming from a strategic partner, it's just, it can't be valuable, it can't be profitable for my practice. Here's a way in which you can invoice the client and you can confidently tell them, yeah, for the first three years, I'm going to send you a bill for $2,500 or three grand or four grand. I have some advisors in California doing five grand and the thought is they're going to get a credit for that. Now it's tough to spin it after those years if you're not building in an asset based charge to start. But many are doing just that. They're saying, hey, I'm three grand and I'm 50 basis points because you can get a credit for that three grand that I'm invoicing you now. [7:41] JD: I think that's a phenomenal incentive for someone to go after startup plans. [7:46] Mark: I was waiting for that. [7:47] JD: Come on, someone to go after startup, whatever. You know what I'm talking about. [7:52] Chad: That's delightful. [7:53] JD: And, and actually get paid for it. As opposed to 50 basis points on nothing or 50 basis points. [8:00] Mark: What is that math exactly. [8:01] JD: On 100k of flow, it's a dollar. So to say, hey, no, we're going to charge five grand flat fee but half of it's going to be offset by your tax credit. I think that's a great way to go. [8:11] Chad: Well, and by the time you take on the, the billable expenses for administration or take that record keeping cost, pull out the asset charge and make it available, you're going to get to the full 5K. And I think most clients will appreciate you stepping up and saying, look, you want the tax credit, take advantage of it and make sure that you're invoicing these record keeping costs. Potentially. The advisor. [8:31] Mark: Hey, we obviously are really into this subject, but there's more. [8:33] JD: Let's move on to another one. Before we do that, can I tell you this Rose sucks. [8:37] Chad: What do you mean? It's delightful. Think about what else we've shot on this show. [8:41] JD: Participant. Try it. [8:43] Ari Rosenbaum: It's bad. [8:46] JD: We were doing a show in. [8:48] Mark: Is that a 2005 vintage. [8:50] Chad: We don't drink good wine. [8:51] Ari Rosenbaum: James. [8:51] JD: Do they have vintage on it? 2018 from Napa. I have no idea. It's called Cupcake. [8:58] Mark: It's not good. [8:58] JD: Check it out. Cupcake. We were in Hawaii doing the show and we had Sal Tripote on as our guest and he's an industry icon and I told him I was really excited about. [9:10] Mark: Speaking of icons. 401k Fridays. Rick unserved. Just check it out. It's a podcast. They sponsor me. [9:19] JD: Mark has a. I'd also like to [9:21] Mark: mention I have two new sponsors. Advisor2x and make sure I get it right. NPPG. And if anyone else out there is looking for valuable advertising and branding space, I have an entire rope. [9:36] JD: How about the patch on your right shoulder? Doesn't even mention the company that signs my checks. [9:41] Mark: Plan design consultants. [9:43] JD: Just to give you some context, Mark is hoping for kind of like a NASCAR theme. You know, Fidelity T Row Lincoln all over the place. So you know, check it out. We'll see. It goes cheap right now. [9:54] Mark: So it's real. It's like flights like it's just anyway decrease. [9:58] Justin: Hold on real quick before we jump onto the next topic. Something just came in. First question. Do we ever run out of beer during the show? [10:05] Mark: Yes, that's why you have to carry a pocket beer. [10:09] Chad: None of them do that. We don't have a robe. But yes, we have ran out of beer. It's a terrible day. The show ends immediately, lights go down and we leave. [10:19] JD: Usually because we drank too many of them before we started the show, so. [10:23] Justin: But JD undoubtedly loses his laptop. [10:25] JD: Sal did not think that the 5,000 credit was that cool. He seemed very surprised that I thought it was cool. But whatever. Thanks a lot, sales asshole. What we also liked about it was he's my friend. I could say that we Give me another top thing from. [10:40] Justin: Well, hold on. We're not done yet. So it's a max tax credit total of 15k for three years or 5k for three years. So yeah, the max is 5k for three or three years running. [10:51] Chad: It's yeah, 5k three years running. 15k total. [10:54] Mark: Yes. [10:54] Chad: Or 50% of the billable expenses. But you need at least 20 employees to claim it. So it's $250 times the number of non highly compensated employees. [11:04] Mark: Yes, and 100 employees. [11:06] JD: That's a. That's a key next big thing. Secure act, at least from our perspective was what the part time employees. [11:16] Chad: I do think that's. [11:17] Justin: I mean that's an issue in the future. [11:18] Chad: Yeah, but we got a couple of years to deal with that one. [11:20] JD: Hit me with what you guys want to talk about. What's on your mind? [11:23] Justin: Maps PAPs. [11:24] Chad: I think MEPs and PEPs are going to be a big ordeal. [11:26] JD: MAPs and PEPs are the. [11:28] Mark: There was a presentation on this earlier so we should not go into that. [11:32] JD: I didn't see it, so I have no idea what they talked about. [11:33] Mark: Well, that's your own fault. [11:35] Chad: We won't get. I don't think we're going to get deep into Maps and Pass. My. My thought for Maps and pass, which I think is an entire episode of discussion. I see. And when I we said this on a call with an advisor, she said gross was her response back. I could see some of the small market providers taking plans, taking retirement. I don't even know a replacement for that word. I could see them taking clients that are under a certain asset size, pushing them into a PEP or a MEP and doing so in a way that they can shove proprietary product in there. I could see them saying everything under 750k is going to fall into our provider XYZ. I won't sling any mud right now into our provider XYZ mep. And in doing so the core menu now has eight proprietary or their target date suite is probably what we'll see more than anything. And I think this is a way for them to find alternate avenues of revenue and I think in the short term we're going to see that. [12:37] JD: Yeah. Stay tuned. Next episode of Retirehogs. A couple weeks from now we'll stream live. We're going to go deep dive on on Pepsi the good and the bad and the ugly. I've kind of been anti PEP for a while. I'm not. I think there's potential there but I'm with Chad. You really need to keep a close eye on how it will be manipulated and used and mostly with an ion to generate revenue. And so the jury's still out. But you're right, that is a huge thing from this care act. Let's keep moving the part time. 500 hours in three years starting in 21, effective in 2024. I think that's a pretty big deal. I think that if you're in this business, you need to be talking with your clients and making sure that they're collecting that type of data. You need to think about how that's going to be delivered to the compliance administration side. You need to think about how that's going to impact the plan. Oh, thank you. [13:34] Chad: O2. I owe. [13:35] JD: Jeez, that rose is so good. I said it all the time. [13:42] Chad: It's getting worse by the drain. [13:43] JD: The cool thing is when I first saw that I was kind of like oh wow, this is going to be crazy. Like all these people are getting into the plan. [13:49] Mark: But you read the fine print. [13:53] JD: Yeah. But as we read a little further, obviously it's not going to impact testing. So that's very, very cool. It's not going to impact employer. [14:01] Chad: Let's clarify for those that don't know exactly what we're talking about essentially right now most plans say if you're dang. If you're working. Good word JD by the way. Good word. [14:10] JD: I just drink the rose just on purpose. [14:11] Chad: You're working under a thousand hours. It's unlikely that you're going to get access to start participating. The way the new legislation will take over by the time 2024 hits is that if you're working 500 hours over the course of three consecutive years, you're going to be brought into the vehicle. And that means now that you have an opportunity to defer, you don't have to be allowed access to the match, you don't have to be allowed profit sharing, but you will have access to [14:38] Mark: defer and you won't get a top [14:40] Chad: heavy, you won't get a top heavy contribution. So ideally what they're trying to accomplish is giving people who otherwise wouldn't have an avenue to save their own dollars the opportunity to save their own dollars. And if you're watching what's happened legislatively, we tried to pass SB123, Senate Bill 123, which was what we now have in Calsavers, a government ran retirement vehicle that ended up getting pulled off the table by Trump. Then we get it in a few select states and now they change this and this is to going secure Act. They're looking at these long term part time employees and they're saying they're going to be a burden on our retirement system in the future and we need to give them access to save. I think all of us that are in this actual business know that folks who are long term part time employees are very unlikely to save anyways. So yes, it's great we're going to [15:29] JD: give them a vehicle. [15:30] Chad: Unlikely that they're going to move the needle. I would love it looks nice on the surface but it's you could set up auto enroll and then claim a $500 tax credit on the secure. [15:40] Mark: That's a good point. Will auto enroll put park timers in [15:44] Justin: that won't be a nightmare at all. [15:45] Mark: That is for TPAs, that is the [15:48] JD: retire HOLIC's less than comprehensive review of the secure secure act. [15:53] Chad: I think the takeaway for me is let's stand up, let's create billables for startup plans. Dang it. [16:01] Justin: Got you. I haven't drank yet. [16:04] Chad: Let's create billables. Let's allow clients to leverage that tax credit. I think that's a big takeaway for me as a secure act. [16:13] JD: I would like to bring to the. It's not a stage. Bring to the floor podium here in the front, our guest for today and the host of your conference. But before I do that, I want you to know that as a tpa, and I've said this before, I was introduced to Ari many, many, many years ago because my father was a big fan of his blog posts and the things that he was doing. And we have used his. He wrote a great piece on payroll providers as your administrator. [16:47] Mark: Oh yeah, we use it a lot article weekly, to be honest. [16:50] JD: How do we use it? Well, if one of our clients reaches out to us and says, hey, we're gonna fire you guys and we're moving over to this payroll provider, we shoot over Ari's article and say, hey, check out this really smart attorney. He wrote this. He's independent. He thinks that's a really bad idea. I don't think we're the only TPA to do that. I think that TPA is all across the country. If you're watching this show, you know you've done it too. So in my industry, there was this guy called Simon Anderson. He created the three finned surfboard. I just said my industry. Surfing. [17:23] Mark: It is, it is. [17:24] JD: He created the 3 Fin surfboard and it's still the most used surfboard today, some 40 years later. And the surfing community got together and started sending him a dollar. So if you used a three fin surfboard, you send him a dollar to support the guy because he was kind of broke. I'm not saying, I'm not saying Ari's broke. Ari's not a surfer from Australia. But hey, man, but if you're using this article, if you've used this article, [17:47] Chad: send Ari a dollar. [17:48] JD: Send him a few bucks. A six pack of beer, I don't know. [17:51] Mark: Not canned beer. Don't send canned beer. [17:53] JD: He doesn't like canned beer. With that, welcome our guest Ari Rosemam to the stage. Come on up, Ari. We've got a few things planned for you. You come right here in the center and We've got a mic for you. [18:07] Chad: We thought about not giving you a [18:08] Mark: mic, but I'm glad you dressed up for the occasion. [18:11] Ari Rosenbaum: Well, I. I always dress up for the occasion. [18:14] Mark: Yep. Bringing back jorts. [18:15] JD: You don't want to drink my beer. I've been at Disney World for the last three days. Little coronavirus rubbing's been happening. [18:24] Chad: You're not. You're not allowed to say that word. [18:26] Mark: I'm excited that after 30 minutes, that's the first time that that word was used. Sorry, I'm tired of hearing. [18:31] Chad: By the way, I was. I was thinking right before the show, has anybody else noticed that it takes longer to use the restroom now because everybody's finally washing their hands in there? [18:40] Mark: Oh, I was. I kind of thought you were talking about getting older because you're getting older, but, like, that happens or you just need to eat more fiber. [18:49] Justin: I don't know. [18:51] Chad: Perhaps both. [18:52] JD: Chad always bringing up bathroom talk. [18:55] Mark: It gets real awkward when you speak sometimes, man. [18:58] Chad: You're welcome. [18:59] Mark: Justin, say something. [19:00] Justin: I can. [19:01] Mark: It's awkward. [19:02] JD: All right, Ari, I know you're regretting flying us out to Florida for your conference right about now, but just play along. [19:08] Ari Rosenbaum: There's a lot of things I regret. That's probably not on my list right now. [19:11] JD: Ari says I'm gonna do a retirement plan conference. Let's do it. [19:16] Mark: Hold on. [19:17] JD: Oh, yeah, yeah. [19:18] Mark: Sorry. Come on. [19:19] JD: This is for you, audience. [19:20] Mark: I literally hope you're paying attention because [19:22] Chad: normally there's a sign up here that flashes when someone says it to help. [19:25] JD: He does it 10 days before the March 15 deadline, which I know there's only so many days to pick, and I get it. He does it two weeks before Napa Net. And, hey, there's so many conferences during the year, you can't pick any dates to do that. Then coronavirus comes out and the stock markets go to shit. So that's the rough time to have a conference. [19:45] Ari Rosenbaum: Timing's everything, you know? It is what it is. [19:49] Chad: Hey, the way I. [19:50] Mark: All of you got deals on flights, people out here. [19:53] JD: Yeah. You're here, you're dedicated. We don't care about coronavirus. We have strong. [19:58] Chad: Four of us rolled in. [20:00] JD: Yeah, right. [20:01] Mark: One of us didn't. [20:02] JD: Skyler's not here. [20:03] Mark: He died. [20:04] JD: You might have noticed that. Skyler, the mustache man's not here. Rest in peace, Skyler. We're just kidding. He's fine. He's just income. All right, Ari, we're playing a little game. [20:13] Chad: Bad joke. [20:15] JD: We're going to play a little game that's A good joke for us. It's fun to say inside joke. Chad came up with this game and you're kind of a pessimist. A lot of times I feel like you're not afraid to voice your opinion with your blog posts. [20:28] Ari Rosenbaum: I consider myself not pessimist, but there's a term that I use, and it's based on something that Howard Stern asked about Harry Shearer. The turd in the punch bowl, meaning [20:39] JD: we can use that one. We'll call you the turd in the [20:40] Ari Rosenbaum: punch bowl, meaning that I'm the guy who worked for a producing CPA who said, you know what, this revenue sharing thing, I think it's kind of wrong. I mean, didn't make me really popular at that producing tpa. I, you know, and then you. Everybody talks about that TPA provider article. You know, it hasn't helped me get business from these TPA, these payroll provider DBAs. But, you know, I, I've never been afraid to, you know, tell it how it is. [21:04] Mark: I am curious. Have paychecks and ADP sent you anything to say? Why don't you just pull that? Just stop writing that, actually. [21:15] Ari Rosenbaum: And it's funny you mentioned that the article that you see, it's updated every year, so I think in June or July, you'll see another one. [21:21] Chad: I need a new copy. [21:22] Ari Rosenbaum: 1. One of the payroll providers did send me a cease and desist, really, one time out of the. And it was something ridiculous. [21:29] Mark: And you said, go beep yourself. [21:31] Ari Rosenbaum: Listen, you don't send an attorney an attorney's letter. [21:34] Mark: Right. [21:35] Ari Rosenbaum: And the funny part, it was the attorney who worked for that payroll provider and it was something dealing with a litigation that they were sued and they claimed they weren't a fiduciary and there was nothing. [21:44] Mark: I don't, I still don't know what fiduciary is, but. Go on. [21:47] Ari Rosenbaum: But, you know, they sent the letter and I kind of like laughed at it, never responded. And that was like the end of it. [21:52] Mark: Oh, it's a power move to not respond. That didn't work out so well for that presentation earlier for the Democrats. [21:58] Ari Rosenbaum: But yeah, but, but yeah. Attorney. A lawyer's letter. It's. It's just. That's always the way to shock and awe, as they would say, you know, to scare somebody. Oh, I got a letter from a lawyer. But it's like most of the time it's just they just want you to do something. [22:13] Chad: And can we, can you just send [22:17] JD: it in that letter algo with beer bottles. And I'm assuming we're going to get something in the mail eventually. I don't know. [22:23] Ari Rosenbaum: You know, the mouse ears on my logo, I actually had it approved by the hotel. And when I ordered T shirts, one of the T shirt manufacturers didn't want to make it. Like, we got to get a letter from Disney. I'm like, well, I got an email from Disney. Oh, that's not good enough. Okay. I went somewhere else. [22:37] JD: Fair enough. Fair enough. [22:38] Mark: You got to go. [22:39] JD: Yeah. [22:40] Mark: Underground for those shirts. [22:43] JD: Chad's game is in this. We're still doing turd in the fruit bowl. What? [22:47] Chad: The turd in the punch bowl. [22:49] Mark: That's way better. [22:50] Ari Rosenbaum: The turd in the punch bowl. [22:51] JD: Better than a fruit bowl, which I. [22:53] Mark: Strawberry. [22:54] Ari Rosenbaum: I also say that to my wife sometimes where you just. You just. You know, when she complains about. You're just the turn in the punch bowl. And people don't like people who complain. [23:02] JD: Is my wife still here? [23:03] Justin: Wow. [23:04] Mark: Yeah, I'm never, ever going to say that ever to my wife. [23:07] JD: Smarter than that, babe. We're going to talk about. We're going to come up with something that we don't like about our industry and that we would just want to get rid of was Chad's words. So, Chad, you start. What do you want to get rid of? You pessimistic turd in the punch bowl. [23:24] Chad: This came about from a debate in Texas as we were prepping for a show. [23:28] Mark: This is supposed to be quick. [23:29] Chad: What I want to get rid of is cross testing, profit sharing. [23:32] Mark: Done. [23:33] Chad: I think there should be a minimum gateway. If you give the employees a percentage, then you should be able to max out whoever you want to max out. I don't think there should be more for older owners, less for younger owners. [23:44] JD: Your turn, Mark. [23:45] Ari Rosenbaum: I agree. [23:45] Mark: I'm so excited because you just said it. I'm not stealing it from you. They can attest I said it via email. TPA revenue sharing. [23:52] JD: You want to get rid of it? [23:53] Justin: Yeah. [23:53] Chad: Clean cut it. [23:54] Mark: Done. [23:55] JD: We'll just have to raise our fees. Our clients, buddy. [23:57] Mark: Yeah, but it would even the playing field. Don't have to explain. [24:00] Chad: Oh, yeah. [24:00] Mark: Some people claim to credit it back. No, you don't. [24:03] JD: I wrote a blog post saying the same. [24:05] Chad: Sound kind of passionate about that. [24:07] JD: If I had to choose, and this is not as sexy as your guys's ones, but I would get rid of this March 15 deadline coming in five days or at least push it back. [24:17] Chad: So as a third party distribution. [24:18] JD: As a third party administration for corrective distributions. It's almost impossible to in a period of what's really not three and a half months. Because I may not get census till February or middle of February. [24:32] Mark: March 14th. [24:32] Ari Rosenbaum: God forbid. [24:33] JD: Yeah, March 14th. To process corrective distributions, run those failed ADP tests, get the message to. It's ridiculous that we have that short of time to do it. That's what I would get rid of, Justin. What would. What would Your turd in the punch. Punch bowl. So we're calling this segment. [24:54] Justin: By the way, I'm kind of with both of these guys. I go back and forth. I know it's just one, but revenue sharing. I agree with you 100%. [25:00] JD: So you don't have any original ideas of your own? [25:02] Chad: No, they took them. [25:04] Justin: I said them. [25:04] Mark: You know, Justin, your answer should be you want to get rid of all of us. [25:08] Chad: It should be noted that Justin was on the other side of the debate regarding keeping the adp. [25:12] Justin: And I go back and forth on it. But yeah, I not a fan of. [25:20] JD: All right, sounds paychecks and adp. We're going to move on to the next subject. [25:25] Chad: Wait, you're not going to give Ari a chance to answer that? Like he may have some. [25:29] JD: I guess he is the original turd. [25:30] Ari Rosenbaum: Yes, exactly. The ot. Exactly. Have to get a shirt like that. To me, to me, I think it's always been the ADP test. And you know, I live in New York and based on taxation and all that stuff, I can't believe somebody in New York or even California or in Massachusetts at $125,000 is really a highly compensated employee. [25:53] Chad: Good point. [25:54] Ari Rosenbaum: To me more. 150, 175. And you know, that obviously would affect the ADP test, which I think is kind of silly in a sense that obviously if you make more money, you could be able to save more. And if we're really truly caring about the retirement crisis, we kind of maybe go to a universal availability requirement like they have with 403B plans or do something where, you know, the reality is, is that, you know, when we live in, you know, like I said, a high tax state, you know, a buck and a quarter isn't exactly somebody who's really highly compensated employee. [26:24] JD: Yeah, same's true in Cali. [26:25] Mark: Buck and a quarter. [26:28] Ari Rosenbaum: Shh. Okay, I'm from Brooklyn now, Chance, like [26:32] Justin: he's talking about, I'd go on board with your. Get rid of the ADP too. [26:36] Mark: Don't. No, don't, don't. Piggyback, dude. [26:38] JD: Come on. Listen, you had your chance, Justin. [26:40] Mark: Yeah, okay. Why don't you just take. Take this out of the ACP test. [26:45] JD: Does everybody know who Schlichter is, aka the 401k boogeyman? [26:51] Ari Rosenbaum: Jerry Schlichter. Yes. [26:52] JD: Jerry Schlichter. Are you a fan? Jerry Schlichter putting you on the spot? He's probably watching Am I a fan? He's really not listening. [26:59] Ari Rosenbaum: You know, it goes back to the movie Outlaw, Josey Wales. Josey Wales sees a bounty hunter and, you know, he says, are you a bounty hunter? And he says, you know, man's got to make a living. And the ERISA litigators, they have a job to do and, you know, representing plaintiffs and they're just, you know, it's just a function. And quite honestly, people like that, Erisa litigators have really helped the business out. If you look at it that way, in terms of without these, without these lawsuits concerning, you know, feed, you know, high fees, we wouldn't have fee disclosure. I mean, you know, they're, I would say necessary evil, but they're just, you know, professional like anybody else. [27:35] JD: And I'm impressed that you just said all that without saying the two words of the episode. For sure. We're gonna catch them. [27:42] Ari Rosenbaum: I don't think. [27:42] Mark: I think you invited. [27:44] Ari Rosenbaum: That was like mouthwash list. [27:46] JD: Mr. 401K Boogeyman was recently on. [27:50] Mark: Sponsored by 401K Fridays by Rick Unser. [27:54] JD: He was on Rick Unser's 401K Fridays podcast. And if you haven't listened to it, you should. [27:59] Mark: When you listen to 401k Fridays, time actually slows down a little bit because he wants you to focus. Like he slows you down. Sorry, go on. [28:06] JD: He does a full hour every time. And it's really. [28:08] Mark: It's two hours, but it's one hour of actual time. [28:10] JD: It's really only for industry peeps, but it's a great listen. And this one in particular, I think Mr. Schlichter was very forthcoming and really kind of speaking his mind, you know, not really editing himself. And this concept came up of. And you've all read about it in the recent Oracle suit, you've read about it in different articles throughout the industry. Jerry Schlichter is not a fan of cross selling. Right. So cross selling. So in his help me out with the legal terms, but in his agreement with Oracle, that's highlighted there in a previous agreement or suit where they came to an agreement, it was highlighted. And he talks on Rick's podcast about this is his new pathway. This is what he's going after. [29:01] Chad: He's going after. [29:02] JD: He calls it Whack a mole. He originally went after share class. Horrible transparency, not prudent fees. Now he's heavily focused on this cross selling, meaning that he doesn't think it's okay for, for example, a record keeper, like whomever, to name one. Say it like Fidelity was in his lawsuit to provide record keeping services, but then also try to sell those employees in the plan other service. [29:34] Chad: Oh, you skipped the other P word but still hit the P word. [29:38] JD: I tried to avoid the one word and said the other one. Thank you. He doesn't like that. And he calls it whack a mole. This is a new thing that he's going after. [29:48] Chad: And the thought of whack a mole is, hey, you're here to sell me something, get tickets to win prizes, all these different moles. Any sales tactic you can have and you whack it as soon as it pops up, whatever it may be. You want to sell me something? [30:00] JD: This is the new thing that's popping up for him. It's very concerning. [30:04] Mark: Is that really a new thing to get sold? Just saying. [30:08] JD: It's a new thing to be put in the right. In the bad category that in, in his opinion. You're not allowed to ever buy a car. Yes. [30:17] Mark: Yes. [30:18] Chad: You want leather with that? [30:19] Mark: Yeah. You want to get sold? Go get. Buy a car. [30:22] Justin: Well, yeah, but it's two completely different things. I'm just talking private personal data versus [30:26] Mark: we're not there yet. [30:27] JD: Yeah. [30:28] Mark: Setting the foundation of my argument. [30:31] JD: Let me continue to lay the foundation. I thought that was really, really interesting and kind of counterculture to what's happening in the industry. Because we sat through Brian Graf's presentation at the TPA Growth Summit in Washington D.C. and he informed the entire audience that this was the new wave of record keeping in the industry. [30:52] Chad: This is what they all want. [30:54] JD: This new wave of. It's like he knew it was coming. Offering retirement services, record keeping, whatever, for a very low fee. Because what they're really interested in is the employee's data. That's the value. Almost like Amazon, Facebook, Google, but in finance. And it dawned on me at that time, this is why some of these 401k disruptors, these new firms are getting $50 million in VC capital and funding is because they see this next step and that they're going to have the control over the data of the employees and be able to sell them all kinds of things. College saving, wealth management, insurance, who knows what. So here's this industry heading that way and building products in that fashion. And here's this Litigator attorney who is saying, no, that's not okay. You can do it. [31:51] Chad: You should only be able to talk to them about the record keeping services you're providing within this retirement vehicle. [31:58] JD: These two, that's what he said, are heading in exact opposite directions and they're going to collide. Thoughts, opinions? [32:06] Ari Rosenbaum: One of my things is, you know, there was always a theory of peak oil where, you know, eventually we were going to run out of oil. And to me it's not peak oil but peak risk litigation because of all these lawsuits everybody knows about share classes. They have advisors who are more sophisticated and can really steer plan sponsors. At the end of the day, when you're a risk litigator, there's only going to be so many cases that you're going to have and it's like, what are the next. [32:32] JD: Oh, okay, keep going. You don't have to stop talking. You can't keep talking. [32:36] Ari Rosenbaum: You're going to drink that Listerine. [32:37] Mark: I'll drink it for you. [32:39] Ari Rosenbaum: You can have it. But the fact of the matter is, is that, you know, they need new nuances and new ways to litigate cases because they, you know, like I said back to Josie Wells, they have to eat as well. And so, you know, if, well, they eat. [32:52] Chad: Oh, they're eating.4 million in the Oracle lawsuit. [32:56] JD: His recent Oracle, that's a hefty meal was 12 million. [33:01] Chad: 12 million was the suit. [33:02] JD: And Jerry, Jerry first, first name basis. Jerry gets 4 million and 475. [33:10] Chad: 475 for time. [33:12] JD: Wow. Is that in the best interest of the. How much do I get paid for [33:16] Mark: my time on this show? [33:17] Chad: Yeah, I'll drink for that one too. The participants could have gotten 12. I just said I'm drinking for that one. So here was my comment when we had this discussion is so did. [33:26] JD: I'm just kidding. Jerry. [33:27] Chad: Did those plan. I'm going to drink twice. Did those plan participants go out and mark the, the ERISA attorney services to say, well, Jerry's going to charge me 4 million? [33:37] Ari Rosenbaum: Well everybody, this guy would only charge 2 million. [33:40] Chad: Let me go. [33:40] Mark: I would have charged 1 million. [33:42] JD: Let the, let the attorney talk because you guys are accusing attorneys of things. [33:45] Ari Rosenbaum: No, but I mean the fact of the matter is that when any type of class action lawsuit, it's the whoever is the class action plainups, they always get, you know, nickels on the dollar. It's always the litigator who gets at least a third plus cost. So they're always the ones who are always going to make out it's the same type, any type of class. [34:02] Chad: Now, I agree with that. That's what I was just going to say is we as an industry have always said that the record keepers are making too much because they've got proprietary products in there and are charging. [34:12] Ari Rosenbaum: But remember, when he does, it's the same thought. When he does have a class action lawsuit and he lays out the money like Chevron was one of the clunkers, he loses. [34:21] JD: It's a huge investment for them. [34:22] Chad: So he lost 475,000 potentially in Chevron in terms of time, because that's what it took him in oracle to make 4 million. I would love that rate of return. [34:31] JD: Well, it could be more than that. [34:32] Chad: And imagine if a TPA had that [34:34] JD: margin and it's the time by stock right now. So I will defend a little bit, but I do think it's kind of interesting to talk about the 4 million or the third. [34:42] Chad: And I agree with the work that's being done. I, I think it is a good thing. I just don't necessarily should be a nonprofit. [34:49] Justin: Right? [34:50] Chad: No. [34:50] Mark: Working for the people. [34:52] JD: I'm more interested in in general as an industry, how those two polar opposites are going to coexist. And maybe I'm getting too uptight about it because Schlichter is nothing more than an attorney. It's not as though he's writing regulation like just because when those settle, it [35:08] Chad: becomes a premise that we all operate by. [35:10] JD: Does it, does that mean that we have to not cross sell? [35:15] Ari Rosenbaum: I don't know. You know, the problem with the industry is you don't know until something breaks. You know, the whole thing. Like, for example, shelf space payments, which, you know, several companies do shelf space payments. To me right now, they're legal until they are illegal. They are legal until somebody sues them. And, and you know, that's what's going to be happening. And eventually what's going to happen is, quite honestly, I think the Department of Labor is eventually going to close what is a giant loophole around the fee disclosure rules with these shelf space payments that the fund companies pay certain plan providers, you know, and again, Sherry is like, I wouldn't say a necessary evil, but he is somebody. If it's not Jerry, it's going to be somebody else who, you know, he's not the police, but he is, you know, I think a great avenue to enforce change. And we only got fee disclosure regulations because we had people like that doing sponsors, large plan sponsors being sued for high fees. [36:10] JD: Can I also defend, though, what we've [36:11] Mark: Left out is, well you said plan. [36:14] JD: I just said plan. Even Schlichter would say it's not that you can't cross sell. I think he would defend himself by saying if you have a proper agreement in place and you as the, the sponsor can show that you've benchmarked for that other cross selling service. And it just so happens that even though Fidelity is your record keeper, they would also make the best, you know, wealth management for your people that you're showing to them. That's okay as long as you've done that due diligence and made that decision in the best interest of those people. And that's what he says on Unsearched podcast. I kind of feel like I'm still going to try to sue you. [36:52] Justin: But he still says if the something sponsor was to do that and choose that so they could solicit, you know, sell the data and still get the lower fee, that it's still a violation of their fiduciary. [37:07] Chad: Yeah, those are two different things though. JD is not saying sell the data, he's saying sell product that they would be allowed to come back. [37:13] Justin: Yeah, but essentially it's what they're doing still cross selling. [37:16] Chad: I think selling the data is different. You're going to an outside and this was part of the conversation is they want, because we've asked some of these record keepers that are getting $50 million in VC funding why it's because their thought is they're going to take this data and they're going to physically farm it. We're going to sell it to outside companies to farm it. [37:32] JD: Who else has that kind of data? [37:34] Chad: Nobody has. [37:35] JD: You talk about Amazon, Facebook, Google knowing everything about us, but these people will be the first to know your account balance, your deferral rates, your investment choices, your compensation, your bonuses, your income. I mean that's some very VALU data to the financial services. [37:53] Chad: So let me, let me kind of put a ribbon around this because move on. But I agree with the work that he's doing. I don't agree with the thought that providers prudent advisors shouldn't be able to cross sell product. And I look back, the example I gave you is like my wife, I went into my doctor after my wife was pregnant with our first child and he said, hey, I see your wife's pregnant, it's time to get a TDAP shot. I wouldn't have got a TDAP if he had not said that. I wouldn't have been told I need a TDAP shot. It was because of that relationship of him sharing that data, my wife's doctor sharing that data with him, because they're in the same practice. That got me there. I think that for the average employee who are trying to help and give access to retirement vehicles, I think for them to have a resource that they don't have to pay a dollar amount for to ask these questions to them, potentially get good guidance. That's the difference is in the examples he gives, these advisors were not giving good guidance. But to get good guidance, that's invaluable. [38:53] Justin: As long as that's averaging, I think it's completely fine. But as soon as you cross that line to. What was it? The. The 403B case. [39:00] Chad: The dog. [39:01] Justin: Dog insurance, but still. [39:04] JD: Dog insurance. [39:05] Mark: Yeah. [39:05] Chad: Okay. [39:06] Justin: They're saying, hey, give me 300 grand. Now I'm gonna. Was it Tia, right? It was Tia. Yeah. Goes out and says, hey, give me 300 grand of your personal dollars. [39:14] Chad: It was from a tax deferred account. [39:16] Justin: Tax deferred account. We're going to invest it, but we're going to charge you 86 bips, plus, you know, investments in our proprietary mutual funds. I mean, that's. [39:22] Chad: Plus you're in a taxable. [39:23] Justin: That should be. [39:24] Chad: That was a. I also go back to the fiduciary definition. That was just a bad decision for that person. [39:29] Mark: We are all consumers at the end of the day. [39:32] Chad: Take some money. [39:33] Justin: Here we go. [39:34] Mark: Sit on the side of the table and be like, don't say yeah to something you're being sold. Think about it. Do your own research. [39:41] JD: Okay, true. But the crux here is if you hear it from your employer or the person that your company. [39:48] Mark: That they're not hearing it from their employer. [39:51] JD: Well, yeah, your employers are giving the. [39:54] Mark: From their employer. They're opening the door for that. But we're. You have to know when you're being sold something you don't. [40:00] Chad: Well, in my terrible example, and I admit this terrible example, but if my employer says, hey, we will provide you gas since you're on the road all day, but you have to fill up this gas station, that gas station, and there's someone selling crack on the corner of that gas station, does that mean that my employer is endorsing that? Does that mean that my employer is endorsing the Red Bull inside that gas station because they said, we'll cover. [40:23] Mark: That is a stretch of all stretches. [40:25] JD: I never did any due diligence on that crack. [40:28] Mark: There's a runner on first, and you're in the stretch right now, my friend. [40:31] Chad: Jesus, Throwing from the wine. [40:33] JD: I was putting it more like, we talked about this last night. You drive crack, you drive through McDonald's, [40:39] Chad: taking it to an extra first. [40:40] Mark: Everybody. [40:40] JD: You drive through a McDonald's drive thru, which I says, the vegetarian, and you get your Big Mac or whatever and they say, hey, would you like a Coke with that? You're like, so the Coke's $15. I think I'm going to run across the street and get it from the 711 for 60 cents. Like, no. There's something cool about efficiency. [40:58] Chad: Right. [40:58] JD: And convenience. And I think that the next 2.0 version of retirement solutions will be companies that are working to use that data, not farm it out, but use it to create solutions that are efficient and easy for those employees to use. And that's kind of a good thing. It's not necessarily a bad thing. Keep your eyes on it. It's really, really interesting. Check out the podcast by Rick. [41:27] Chad: He's sending texts. I know. [41:28] JD: He's sending text messages. [41:29] Justin: Okay, all right, real quick. [41:30] JD: Yeah, sure. [41:31] Justin: Another question came in. Oh, and I don't like whoever said this because I got to say this. What are your thoughts on annuities for 401k plan participants? [41:40] Chad: On the what? [41:41] Justin: What are your thoughts on annuities? [41:45] JD: Did you really want to know the answer to the question or are you just trying to set them up to drink the rose? I have no, I have no comment on that. I think that's cool. I think giving someone a steady stream of income and retirement is a great thing. And to put it into a 401k plan, sure. Obviously all the cons are, what are the fees? What's the structure? You know, how does that all work? [42:09] Chad: I still couldn't hear the question. [42:11] JD: Oh, do you. Should you put annuities for in 401k plans? [42:14] Chad: That's a big part of that discussion. I think the annuity thought inside the retirement world has been there for quite some time. You've seen guaranteed income for life and other streams. It's taking on a different variation now and it's transportability and being able to move from record keeper to record keeper or pre retirement to actual retirement, because we haven't seen many of those folks needing that money in retirement. I do think that if we're trying to serve the average American, the average American could use an annuity as part of their retirement. That's why pensions existed, you know, 30 years ago in their true form. Now we have cash balance, which I think is being leveraged now. I see a fit for it. [42:53] JD: Truthfully I'm a bad person to answer that because my dad was in financial services his whole career. Right. And so he always taught me like, you don't need to buy something like that. You manage your own retirement. But I understand that for the, for a typical person to know that they can count on a certain sum of money every month is. There's a lot of value in that. [43:14] Ari Rosenbaum: So the problem is that I feel like if you allow the insurance people back into 401k plans, you're going to just ask for abuse and they're just going to sell this, you know. [43:24] Chad: But why do you have to allow insurance folks back in? [43:27] JD: This is an annuity. Who's going to do it, Chad? [43:29] Mark: You? [43:30] Chad: It should know this should be built as part of the offering. You don't necessarily need an insurance provider to offer that product. When I say provider, I should say advisor. You don't need an insurance advisor to offer. Look at the people who are still doing the business. J.D. i mean, you're looking. [43:46] JD: He's talking about the insurance companies. [43:48] Chad: Looking at all these insurance companies that are still the ones that are leading in this space, you know. [43:52] JD: Yeah. [43:52] Ari Rosenbaum: Straight life. [43:53] JD: He's not talking about the person that's selling it. [43:56] Ari Rosenbaum: Yeah, it's just going to be a huge commission based, you know, and the, you know, the. Not the. Great. [44:01] JD: Let's be a turd in the punch bowl, punch bowl one more time because I got news for you. I think this industry is going to go down that path, continue to in a lot of ways. We talked earlier about the PEPs. I think we've gone into this share class fight to institutional index based types of funds. And I see companies now working hard to bring back in the proprietary types of things. Like, I think you're gonna see a lot of ugliness of people trying to make money any way they can. And you're right, it could happen in the annuities. [44:35] Ari Rosenbaum: We're gonna go back to, you know, and then jerk out. [44:38] JD: You know, it's a vicious circle. So keep your eye on that and watch out for that and do your best. [44:44] Chad: You're start litigating again. [44:46] Ari Rosenbaum: I don't do litigation. [44:47] Justin: Thank you. [44:47] JD: Do your best to stop it. Okay, One thing I didn't tell you, Ari, we're going to wrap this show, but we got a fun little game that I didn't tell you about and I haven't done this before, so I don't know the amount of pain that's involved. [45:00] Ari Rosenbaum: Sure. [45:01] JD: Go ahead, Mark, pick it up. Show the audience what we got going on here in front of you or Chad's going to pick it up. We found this on the Internet. It's a little game you play. You put your fingers in it and it shocks somebody. [45:14] Mark: Electric. [45:15] Chad: Brandon did it last night and screamed in the hotel room at 1 o' [45:19] JD: clock in the morning. He did. So if you've said, raise your hand. If you've said the word of the episode, then you must put your finger in the machine. We'll step up to the front. We'll do it to close out the show. But again, I want to thank you guys for. Thank you going through this debacle with us, this train wreck. He's ready to do this. I'll step around to the side. [45:40] Chad: Do you want to test it first, Ari? You want us to throw you in there first? [45:43] JD: I guess I can reach. Reach over. [45:45] Mark: Get in there, like soon. [45:46] JD: It's not just the shock. It also. Is it going to start when. No, we hit start. Right. [45:50] Chad: I have to hit start. [45:52] JD: It also will infect you with the corona. [45:54] Chad: It only shocks one person, so it's random. [45:56] Ari Rosenbaum: So it's a Russian roulette. [45:58] JD: I'm actually nervous. [46:00] Chad: Okay, B, you want to throw on this? [46:02] JD: Thank you for tuning in. This has been the Retireholics live from Orlando at that 401k national conference, it's the Shark Sound. [46:13] Ari Rosenbaum: Nice jostling. [46:14] JD: Yeah, it's the Shark Sound. Had to be me. [46:20] Mark: Had to be me. Thank you, everybody. [46:23] JD: Thank you. Have a great rest of your conference.