David Levine is a Principal at Groom Law Group and a well-known voice in the industry on fiduciary and retirement issues. Co-chair of the firm’s employer focus practice, David advises plan sponsors, advisors, and other service providers on a wide range of employee benefits matters.
Today he joins the show to discuss how the election results and control of Congress by the Democrats may impact the retirement industry and some of the key elements of the Secure Act 2.0 that was introduced in October with strong bipartisan support. Also listen in to hear what’s happening in the space of MEPs and PEPs. And David will shed light on the litigation environment that has been coming to the forefront lately and the future showdown brewing between advisors and recordkeepers for the future of financial wellness.
“Many people view Democrats and Republicans at extreme opposite ends of each other. Clearly, a Democratic administration will do something different than a Republican administration, but the differences are sometimes overstated.” – David Levine
“I think it’s being carefully drafted not to make it like a pure mandate like in the Affordable Care Act, but trying to encourage and trying to get the coverage. People are watching the M-word [Mandate] very carefully in this one.” – David Levine
“It’s easy to say, ‘Oh that’s just a commoditized product.’ But let’s face it—almost everybody gets commoditized sometimes, and none of us like it, but there is value in that.” – David Levine
David, welcome to the Fiduciary U™ podcast. Thank you so much for being a guest today.
David Levine: Thanks for having me. It's great to be here.
Josh Itzoe: Well, we have lots to talk about. We're going to hit on a number of different topics. We're going to talk about just politics and legislation and kind of the regulatory environment. We're going to spend a little bit of time talking about PEPs and MEPs and some of the things happening in that space and potentially even talk about just the litigation environment, which seems to be a constant discussion, nuisance, something to consider over time. So, looking forward to dig into it.
So, why don't we just start with what's happening in the kind of legislative regulatory world with Biden administration and then with Democrats controlling both the House and the Senate? What do you think that looks like for retirement policy within our country? And how would that change from you know the past, call it four years, where we saw a big reversal of a lot of the things that the Obama administration worked on?
David Levine: Well, it's interesting you say that because I think sometimes people view the Democrats and Republicans at extreme opposite ends of each other. Clearly, a Democratic administration will do something different than a Republican administration, Democratic control of Congress will be different than Republican. But the differences I think sometimes are overstated, is where we begin.
Because let's use the example of SECURE Act, the SECURE 1.0, the one that passed at the end of 2019. There, you had legislation that was promoted, sponsored, approved of, endorsed, however you want to put it, by Chairman Neal of the Ways and Means Committee and Ranking Member Brady. So, you had a Democrat and a Republican and the legislation had been advocated and supported by both. And when one was in the minority, one was in the majority and vice versa.
Similarly, in the Senate, the support that you got on retirement bills very frequently, taking out multi-employer pension plan funding relief, which is a whole other corner, which I'm not sure we'll get to today, there is a lot of agreement there. Similarly, if you look at the regulatory side of the House, yes, clearly, the Trump administration differed from the Obama administration, and the Biden administration will differ from the Trump administration.
But if you look at some of the rules that came out, they are maybe not as extreme as you might think on the left or the right. And in some ways, they do hue towards the middle, though there's debates over what the middle truly is. So, I'm first to admit that some of the fiduciary rule and the fiduciary rule exemption that came out later in the Trump administration, there is clearly some views that think, "It's not so bad." There's some who think, "This is horrible." So, you never get complete agreement on this.
But I do think that as we look forward into the next slightly less than four years, as we record this with the first Biden administration, will there be a second, who knows? Well, too early to say that one. You have a Biden administration where the president has hit the ground running on his executive orders. President Obama did that. President Trump did that. President Biden has really been on a tear with his executive orders. He's done his first day executive order that basically says anything that's not effective yet, hold on, whoa, anything that's not published, hold on. Wait.
It's standard practice to revisit. There's all these academic thoughts, discussions as what can you pull back? When can't you? When you get into that people really want. But my personal theory is, look, they're going to try to pull back things at the end. Similarly, just a side note, Congress has the Congressional Review Act, where they can sort of veto and override regulations. And the way you count the days to determine how much time is available for that is very technical.
But the key takeaway is if you use the CRA, a common view is that if you use the CRA to remove a regulation, it kind of blocks the reissuance of anything in that area, potentially. So, CRA can get used. And it got used for some of like the state IRA programs and stuff like this back at the beginning of the Trump administration. But I wouldn't expect them to just do a wholesale, let's wipe out everything the Trump administration did that we can.
Josh Itzoe: Because you have to tread carefully, if you will, in terms of if you want to reissue something kind of in that space?
David Levine: Exactly. Because if you want to issue some guidance in the future, you may have just closed off that field by doing the Congressional Review Act. And there's other things that are happening. The executive order, we sort of talked about sort of saying revisit, look, revisit. On there clearly, the Trump administration ESG guidance or the pecuniary factors guidance is specifically named one of President Biden's executive order saying, "Please relook at this." So, that's clearly on the list. And nobody's surprised about it.
And there's some interesting pieces to it because parts of it are effective earlier like now, parts of it are effective later. And a lot of people were saying, "Well, what do we do when they're trying to sort of balance the two." We could talk about that a bit, if you want.
But there are some things they can change quickly. President Trump had issued an executive order that sort of talked about relying on the enforcement and sort of enforcement positions. And this came up a lot in our missing participant investigations that drive all of us baddy. We get why the DLL is doing it. But they tend to go down the rabbit hole sometimes, but we understand the DLL's purpose and it's a balancing act. And we can all debate and argue in good faith on that one.
But they also have just recently also repealed sort of their regulation that was done at the DLL that said, "Hey, we need to formally promulgate guidance before we try to enforce a position sort of thing." They're kind of like good governance type of things they'd call it. Obviously, the Biden administration has a different view. But they've already pulled that regulation because it's not substantive. It's procedural. They can do that without all the formal process.
But other regulations, if they're published and they're final, you have to go through all the notice and comment. You have to go through all these processes under what's called the Administrative Procedures Act. So, I think there's a lot to look forward to. You have ESG back there or pecuniary factors as the Trump administration called it, I think there is a lot of interest in different quarters to talk about things like fiduciary rule and we've only had like six generations of the fiduciary rule of the SEC.
And it's important to remember, it's not just the law, the SEC regulation best interest. You're not going to have a Democratic majority of the commission. So, you might see some Reg BI discussions there. And that's a great example of a place where in Reg BI, they drew in rollovers into the process, in a way that I think not everybody who might have wanted, I'll call it an assumed Republican position would have said.
Now, the industry has accepted a lot of it and it hasn't been as much blowback certainly, one more positive response than the 2016 Obama fiduciary rule from DOL, but you can see some reworking there potentially. Similarly, you could see a bunch of reworking at the DLL on the ERISA side of the House. Plus, I would expect that they will look at other things. They might look at some of the state initiatives again. There's a bunch of different things that could be done at this point and interpretation.
And one area that you mentioned at the top, PEPs, we can get into that some, but pooled employer plans and multiple employer plans, I expect to see a lot. The last thing I'll mention is I grew up as a computer programmer. So, it's actually my true talent in life, not being a lawyer. And the focus on cybersecurity is going to continue. The DOL, I had an investigation that was, I think, one of the first that actually got the cybersecurity questions that they're asking.
At this point, they're a little bit like the early fee disclosure questions. It's a lot of information gathering. But you're going to get questions about cybersecurity, you're going to get questions about privacy, and there's some strong views there we can talk about.
Josh Itzoe: Absolutely. Yeah. I think when you talk about the litigation environment, and obviously, fees have been the big focus, call it over the past, I'd say 10 or 15 years. Interestingly enough, in 2020, you saw a real uptick in cases filed around fee litigation. I don't think that's going away personally anytime soon. If anything, I think it could wind up accelerating.
But I do think data privacy, especially and also cybersecurity. We saw the Abbott Labs case, I think, that was filed in I believe in April 2020, where a participant had filed suit because I think she had $250,000 stolen from her account, or allegedly stolen from her account by a hacker and they're not being controls in place. I just read the other day, I think there was another lawsuit filed. And so, that seems to be kind of the next frontier, if you will, litigation wise, certainly the protection of assets and information.
But then also how is the industry, this big push for data and personal data, how does the industry use that? And we saw in the Vanderbilt case, again, that was finalized a while back that there were some controls in place about limiting the use of data by providers unless specifically requested by participants. So, I'd love to get into that a little bit.
One of the points that you made at the outset, which I think is a good one is, it seems like the idea of retirement sufficiency and strengthening the retirement system is not a left or right issue. There seems to be very strong bipartisan support there was for the SECURE Act. I think for SECURE Act 2.0, which I think was put forth by Senators Neal and Brady in October, again, the industry seem to respond really favorably to SECURE Act 2.0, and what that looks like.
It seems where you start to get much stronger opinions is around enforcement priorities and the fiduciary rule and whatnot. So, strong support for, let's help people retire more successfully. But how does that get implemented in terms of governance with the different industry players? That's where you get really, really impassioned perspectives.
Can you just talk a little bit about SECURE Act? For SECURE Act 2.0, there were a number of things, everything from automatic enrollment to guidance around student or options around I think student debt repayment, RMDs, catch-up contributions. Can you talk a little bit about what SECURE Act 2.0 entailed? And what you think the probability of success of that proposed legislation would look like?
David Levine: Sure, happy to do it. And I got in trouble for this back over like a five-year period when it was RESA, then SECURE saying, it'll pass. So, I've learned to be a little bit more careful about this. Because all the prognosticators, it's kind of like the talking heads on the Sunday news shows if you've ever watched all that, where they predict. And if you look a year later, it's like none of it was right.
Josh Itzoe: Right.
David Levine: So, the reality is, is there's a lot of support. The two congressmen you noticed, Senators Portman and Cardin, and this is what makes it interesting. Senator Portman announced his retirement recent. And he and Senator Cardin have been the dynamic duo of legislation for over 20 years in the benefits and pension side, especially in retirement.
Josh Itzoe: Have been viewed as strong advocates.
David Levine: Yes.
Josh Itzoe: For the industry and promoting retirement policy. So, I think there's probably some trepidation going on in terms of in the industry. It's the industry losing an advocate.
David Levine: And I think we probably are, but there are other people behind I think who have a real interest. And I don't mean behind in terms of anything, I just sort of next in line to sort of who I think will step up. And don't forget, Senators Portman and Cardin did their Retirement Security and Savings Act proposal in the second half of the Trump administration, and that and SECURE 2.0 have a lot of crossover items in there.
So, I think that there is a real chance of it moving forward. I think if they're looking at bipartisanship, this is probably the area that even during the highly charged years we've been in, you've seen a lot of agreement on. So, I think there's a real chance, whether it's called SECURE 2.0, whether it's called RSL, whether it gets a whole new moniker, I think it is.
And to talk about the things that are in there, I'm Jewish, but I always refer to it as a Christmas Tree Bill. These bills are Christmas Tree Bills because it's like hanging ornaments off the tree. There's so many provisions. And you make a great point, Josh, that the industry is seeing some positively respond. It seems that by giving something to everybody, the industry positively responds, which is smart idea. And it's about savings.
Our industry is one that it has a lot of common interest, there's maybe 90% where everybody agreed. And then there's 10% where there's violent disagreement. I will not get in the battle between the insurance companies and the mutual fund companies about what the right product is. I'm staying out of that discussion. But at the same time, there's a 90% agreement type of there.
So, a couple things that come to mind for me. First, student loans, obviously is a big one. Student loans, I think if you sort of did a heat map and maybe looked at Google Trends, you'd probably see that it got tons and tons of attention a couple years ago when you had, it was like the Abbott Labs PLR on the private letter ruling, which is only applicable to Abbott Labs, what everybody's sort of looks at as a pattern. But the IRS will say it's not binding on anybody else that talked about providing basically contributions for people who are on student loans.
There's some technical issues on nondiscrimination testing in there that we could get into. But the English explanation is it doesn't necessarily work for every plan. And if you have a safe harbor plan, there are some challenges in how you get it implemented there. So, given that, there has been a push, and obviously, there are stakeholders who have interest clearly in this moving. There are stakeholders who just think it's a good idea. I don't think there's that many opposed to be honest.
And these student loan programs basically would allow you effectively to match on student loan contributions and not blow up your nondiscrimination testing and everything. I think that is one when legislation passes, it seems to me that's just easy include. I don't see anybody dropping that out.
Similarly, the idea of, and it's in different pieces of legislation, so, but the idea of, you've got the state mandates and the automatic enrollment things, and Chairman Neal has his separate bills on this as well, about automatic enrollment and plans and sort of state run plans.
And there's legislation out there that the trades have reacted relatively positively to that would sort of say, look, no more state auto mandates. It's all going to be federalized, which I think, is interesting, because I think it's being carefully drafted not to make it like a pure mandate, like in the Affordable Care Act, but trying to encourage and try to get the coverage before watching the M word very carefully I think in this one.
Josh Itzoe: The M word as mandate.
David Levine: As mandate, yes.
Josh Itzoe: I actually think that personally, and I've been a big, very strong advocate for aggressive automatic enrollment and automatic features for 15 years. Our clients have adopted it in a meaningful way.
And so, I was actually really, I get the whole, the mandate and the big brother, but I think when you look at the evidence of what automatic features implemented correctly, and appropriately, and maybe correctly is the different way, but implemented in a kind of a best practices approach, it's hard to argue with the outcomes that these features have done to plans in terms of participation, and to a lesser extent, maybe even deferral rates, really supercharged outcomes, I think, when you factor in escalation up to a meaningful cap of 12, 15%.
So, I was glad to see the support, it seems like, the evidence strongly supports automatic enrollment. So, I thought that was very interesting. And sometimes you get employers who are very, they're all in on it, but a lot of times, they can tend to push back. And so, I do like what you're talking about in terms of hopefully, wink wink, nod nod, but more, instead of just, "Hey, this is suggestion," but more of like, "Hey, this is the right way to do it."
David Levine: Well, I agree with you. And I think there's a lot of benefit, it certainly gets more people. And I know, there's a lot of talk about the accumulation phase. And it's interesting, there's some, just to get wonky for one second, a great example, safe harbor plans. People love them because they reduce the testing. But safe harbor plans can also be challenging.
When there's a lot more flexibility and changing match during the year and all that stuff, I get that, I'm not arguing with that. But if you do automatic enrollment, I've seen a number of employers say, "You know what, we're going to automatically enroll everyone."
And because of just inertia, you can get your participation rates high enough, that sometimes you don't even need the safe harbor. Because even if you test, if you have 90% in the plan, even with optouts of this type of solution, your testing oftentimes becomes pretty clean, and therefore, it may give you more flexibility outside the safe harbor. So, it's something to think about. But that's an example of another value of automatic enrollment that comes to mind immediately.
Josh Itzoe: There is a virtuous cycle, when you talk about that, is you're getting people, more people in participation rates. It's very hard to argue, and you can see whether it's a Vanguard or Fidelity or a lot of providers that do the research, that automatic enrollment plans tend to have participation somewhere around 90%. And voluntary enrollment plans have participation somewhere on the call at 55 to 60% range.
But there is a virtuous there as kind of a aligned interest, I would say as you, as an employer, as a plan sponsor, you implement those features for your people. They're getting in there participating, they're saving more. But as you said, as deferral rates go up, you get more flexibility and cushion in terms of testing, which can be kind of the bane of the existence for a lot of companies, especially smaller employers.
David Levine: There's one other issue I have to mention on this. It's a term I've been using for years. I call it RIP, retire in place. Automatic enrollment, it helps address that. Like I try to be intellectually honest about this. We can all talk in ASPRA aspirational academic way. But there are some people who it is very much purely about dollars and cents. And I understand. They're running a business. I don't judge that either.
And I think even if you look at it from that perspective, automatic enrollment sometimes can actually be helpful because of RIP. Because if you have a workforce and your people don't retire, your health costs go up. You should not force old people out. I'll just have to say that for the record. The Age Discrimination and Employment Act says you can't force old people out. But if you don't give people a glide path to be able to retire, they're going to stick around, which means the older you get, historically, the sicker you become. It's just not a slide on anybody, not everybody.
And what happens is, those people who are there, your health care costs go up, your other costs go up, you have questions about promotion. So, in my mind, there's so much talk about holistic wellness and everything like that in the universe right now. But even from a cold business perspective, if you want to call it cold, having it so the people can retire means you can have a next generation, which to me is a positive.
Josh Itzoe: Absolutely, absolutely. Anything else just kind of SECURE Act 2.0 that you think is noteworthy or relevant that listeners should at least put on their radar screen?
David Levine: There's two things and this kind of crosses over between a number of pieces of legislation. There's two things that are out there that I think I would put out. Number one is 403(b), investments being able to be in things like collective investment trusts, which is a lot of where the market has been going. But it was interesting, I describe it as a barbell. The smallest of the small and the largest of the large started CITs and then converged on the center. It's really interesting that that's how it worked.
But I think the idea of 403(b) harmonization on investments is something you're seeing because right now, there's only so far you can go inside of 403(b). That's why I think the fee lawsuits on 403(b). You got annuity contracts, you got mutual funds. There's only so far you can go on these in terms of pricing. And I think I would tend to disagree with the point of saying, well, you could go to here because you can't sometimes.
Josh Itzoe: Because the product is unavailable, essentially.
David Levine: Exactly, exactly. The other thing that's out there that is lurking in some of these bills, not all of them is as follows. When Roth contributions came in, and actually back in 2001, Roth contributions in plans. Roth IRAs came around few years before that. The rule has always been Roth money can go play at the plan. But once it goes to an IRA, Roth money can't come back. The legislation includes language to pull Roth money back into to allow you to pull money back, some of it does, pull Roth money back into a plan.
So, there's a lot of estate planning implications that gets to our estate planning colleagues out there that wants to do wealth management, but it also leads to a different money flow. So, right now, so often, money flows out and never comes back. Could it change some of the money flow? We'll see. Obviously, we're in the boomer period right now where a lot of boomer dollars are flowing to IRAs out of plans, and in fact, a lot of projection. So, sort of a flattening of assets in 401(k) for a little while, until the millennials and the post-millennial generation start kicking in, and then it's going to zoom back up again.
But I do think that could also change some of the arc we're looking at here in this process. So, those are a number of things. I can keep going on and on. But those are some of the core ones.
Josh Itzoe: Yeah, it's interesting. I think I have read recently that something like $2.4 trillion dollars over the past five years has flowed out of the DC world into IRAs, and, obviously, IRA oversight rollovers that that's been a big over the past five, six, seven years has been a big fight around kind of fiduciary rule.
And a couple of earlier podcasts, just in talking with folks, it seems like, especially in the larger market, for so long, I kind of think the mindset of many plan sponsors was, hey, we're going to get people that are going to retire, give them their money, and let them be on their merry way. And then we don't have to worry about it anymore.
It seems like, especially in the larger market, and we'll see how this trend kind of plays out. But more and more plan sponsors are thinking about what do we do? How do we amend our plans? How do we keep money inside the plan post-retirement? I think part of that's probably aided by guaranteed income and some product there. And I think part of it is probably a pricing element. You have a lot of money flow out of your plan as a plan sponsor, your pricing power goes down as well.
And I think the last one probably is the feeling that where in many cases, not all, and it's changing as the wealth management world is moving, you're seeing a tremendous amount of asset flow over the past 10, 15, 20 years, go from more of the broker dealer model to the RA model where there are fiduciary protections.
But I think the overall feeling with a lot of plan sponsors is the teeth of ERISA fiduciary protections helps to ensure that if money stays in plan, that there are some protections that don't necessarily exist under the Advisers Act, if you will, or under FINRA, or whatnot. So, it'll be interesting to see how that evolves.
David Levine: I wouldn't be surprised to see the Biden administration look at more ways, and I don't know anything here, I'm just prognosticating. But I wouldn't be surprised to see the Biden administration look at other things to your point about how do you keep funds in the plan. There was a Wall Street Journal article like a year plus ago, maybe a year and a half now, on this exact topic of employers trying to keep more and more dollars in their plans. And I think that's definitely something that we will continue to see now and in future years as a real discussion.
Obviously, talking about the business side of our business for a moment, there's been a lot of roll up aggregation work in the business in recent years. Some of it is economy of scale, some of it is viewed as wealth management and cross-selling, some of it is viewed as just higher quality product due to complexity.
I'm not going to say which one is every single transaction here, but I think that clearly, when the DLL six, sorry, the DLL 2016 fiduciary rule went away, that sort of opened the door, I think, for people to say, "Oh, well, there's some more opportunities here." It'll be interesting to see what the Biden administration does.
Josh Itzoe: Yeah, there's no doubt that the next battleground, I have a whole conspiracy theory around this, where over the past decade, what you've seen is whereas the reason why mutual fund companies, a lot of financial services companies wanted to have a distribution arm through a 401(k) plan was, it was a great way to get distribution and flow into proprietary product.
And what you've seen over the past 10 or 15 years is obviously the move towards passive investing and litigation, so the move away from things like revenue sharing and indirect compensation. And what you've just seen is you've seen out a hammering of margins by these recordkeepers that used to be able to rely on essentially 401(k) recordkeeping was kind of a lost leader for these more higher margin products. That's gone away.
And it's had an unintended consequence, I think from the advisory world of service levels declining on the recordkeeping side and response rates, it's been a bit of a challenge. And it's actually stressed a lot of the advisory firms and a lot of my friends and colleagues that sit on my side of the business. We sit around and we talk about this.
There's no doubt in my mind that, especially the larger the recordkeepers, I mean, when you have an empower that paid a billion dollars for personal capital, the battle in the fight is on the next battleground is how do we keep assets on book.
And I'll be interested to see how the advisory industry and how the recordkeeping industry, there's very much a frenemy thing going on at play right now, it will be interesting to see how the convergence when the battle line for the participant, kind of financial planning, financial wellness, if you want to call it that, financial advice to individuals has historically been in the realm of the advisor, there's no doubt that these large recordkeepers are building out the infrastructure to really want to go after and control that experience.
David Levine: Well, it's interesting you say that, yes, I love the word "frenemy." Frenemy is a word I use to describe this industry. Another catchphrase I use in this industry is great at standing around in a circle and shooting it itself sometimes.
Josh Itzoe: Right? I agree.
David Levine: It's because, like you use the word "best practice" before, and I think a lot about this discussion. ERISA is a law that's designed to be flexible. And I know it's easy to say best practice. And it's a nice way to sort of say we really think this is a good idea, and I completely get it. But sometimes there are multiple ways to approach things and different businesses approach from different angles. So, I think keeping that in mind is a good thing. And your example, keeping that in mind, given that the frenemy world and the competition, there's a couple sort of baseline things that immediately come to mind for me.
First, I had someone in the industry once say to me, "Oh, recordkeeping costs should go to zero because it should go completely to zero." I think what you just described highlights the value proposition. I try to tell very consistent message regardless whether I'm talking to you as an advisor or a consultant, talking to a recordkeeper, talking to wellness provider, talking to a point sponsor, any of them.
The simple reality is it takes money and resources to do any of these roles we just talked about. In a public market and negotiation of fees, great. Fees are not the be all end all. There's many other things, whether on investments, it's actually what's the performance, whether it's an advisor or consultant, what do you actually do, because it's apples to oranges, and pears is the way I like to say it.
For recordkeepers, do you want the high touch? Do you want an all automated version? Because those have different costs and components and then a different services. So, when you see people offering ancillary services and other types of activities, a lot of it is for good to participants, but also some of it is the economics of the industry. You got to find a way to pay for things. And sometimes people think everything should be free. And it's not. There's value in almost what everybody does in this process.
And I think sometimes it's easy to say, "Oh, yeah, well, that's just a commoditized product." Let's face it, everybody gets commoditized sometimes, and none of us like it. But there is value in that. And I do think your comment about the tension between folks, I think historically, people used to be more in specific lanes. You had recordkeepers here. You had managed accounts here. You might even had wellness providers here and sort of like in each different bucket, you had advisors in one area as well.
And as the industry has gotten more competitive, you see everybody sort of tossing up into the same area. I kind of describe it as if you're taking a pizza pie, re-slicing it and giving everybody a new piece, although everybody would wind up with a similar sized piece when you're done, which is ironic.
But the reason I say this is I think we are in a competition over the clients, whoever you define the client is at this point. And if I consider it a nine inning baseball game, although extra innings are always a possibility, I've said for a while, I think we're in the third inning, maybe we're in the fourth now. I think we've probably moved into the fourth inning of the game. We're in the middle of the game with all the consolidation.
The natural history though is there will be consolidation, there will be competition, then a new status will evolve, and then it'll start all over again. But you're absolutely right. I think right now, the entire retirement space, and I think everybody's trying to find their place. And this is going to tie into our PEP discussion. Everybody's trying to find out what role they play, where are they going to be, where do they want to be. And I think you're going to see overlap and tension. It's very common. I think it's a natural part of business. It's just the reality.
Josh Itzoe: No, I completely agree. And I love what you're saying about, you're right, there is the blurring of the lanes. I think the real challenge and this is just a critique on the industry in general is, and you mentioned I very much appreciated, the retirement industry in general is, it's all negotiated services. And we've been hit with a lot of disclosure, which people think disclosure and transparency are the same thing. And they're not the same thing.
Ingredients to make a cake and a cake are not the same thing. Ingredients go into a cake. But just because you have really good ingredients, doesn't mean you're going to come up with a really good cake.
David Levine: I'm not a good baker, I get it.
Josh Itzoe: Me neither, me neither. Now, my 14-year-old son is actually, one of the upshots of the global pandemic is he totally got into cooking. He cooks two or three nights a week for us, it's fantastic. But I do think that it's funny, the industry, when everything is negotiated and all the data is controlled, I agree, absolutely, you need your providers to run a profitable business.
Because if you don't, if they don't, there's going to be either one or two things are going to happen. One, they're not going to be in business, and then you're going to have to go through and find new providers. And that's a lot of work and a lot of heavy lifting. Or the other one is they're not going to make money and then service levels are going to drop to zero.
And to your point before, maybe that's okay, and maybe technology helps a little bit of that. Maybe a plan sponsor, they have a pretty simple business, and they don't need a lot of hand holding, maybe another one does. I think there's an opportunity within the industry. And I don't think the industry has done a very good job of the loser in all of this, quite frankly, is the plan sponsor because they don't ... Plan sponsors still are not educated. I put part of the blame on them.
And I've been a big advocate for, I think plan sponsors need to wake up and realize your behavior follows belief. If plan sponsors don't believe that the fiduciary implications they have is offering a plan and the impact that they make on their employees' future and their families and retirement, if they don't believe that is absolutely essential and important, then they're less likely to have actions or behavior that aligns with that.
But on the flipside, and this is where the industry, I think we need to have a much better kind of ... We need to have honest conversations with clients around what does the cost look like. And there needs to be a light kind of shined in that area. Because once you can start to have, people think it's not fun to hold people accountable, it's uncomfortable. But what's worse than that is when you see people fail or not live up to expectations.
And so, accountability is not something you do to someone. It's something you do for someone. I still think as an industry, we service providers, we fight these battles with one another. But we still haven't done a good job of having honest conversations with plan sponsors. And especially, larger market where you get more sophisticated service providers and clients, maybe it's a little bit different. But there's still so much fat that's out there in the smaller end of the market.
And let's talk just for a minute about fee litigation because through August of 2020, I believe there were 65 cases that were filed around primarily fee litigation, but also you're starting to see some things about data privacy and security and cyber, and we can talk about that as well.
David Levine: And by the way-
Josh Itzoe: I'm rambling. Sorry about that.
David Levine: No, no, no. I was going to say, went over 100 at the end of the year.
Josh Itzoe: Went over 100, okay. That's like almost a tenfold increase, I think, over 2019.
David Levine: Well, part of it is, is you have some players who really ramped up their role in this. I'm not here-
Josh Itzoe: Some plaintiffs firms that have taken kind of Schlichter's playbook and essentially co-opted that and now we're really active in terms of filing cases.
David Levine: Well, yeah. Well, it's very interesting. I don't obviously represent any plaintiffs firms and Schlichter gets a lot of credit for being very visible, but there's been a risk of fee litigation before Schlichter. So, it's important to recognize then I'll start in '06. We've had litigation way before that. But the modern era really did start with them and I will fully acknowledge that discussion at this point.
But the reason why I start down that road out of the box is there are a number of firms that have increasingly been moving into this space. There's a bunch of called the old guard, well-known plaintiffs firms that would file several lawsuits a year. And the Schlichter firm would be known like that. But there are other firms that are out there as well that have emerged in the space. Some of them are veterans of some of the big firms that you knew about before. And others are just newer players who've decided to move in. They're using the playbook that others have built, but they're also building their own versions of it.
If I bucket the cases, I bucket them into, on the fee cases into a couple of things. Clearly, you've got proprietary fund cases over here. And there's one law firm that really spent a lot of time on those at this point. Separate and distinct from that, you have, I'll call it the new creative, innovative cases. So, whether it's the actuarial factor of lawsuits, or whether it's the security and data privacy type of lawsuits and the breach lawsuits.
And it's important to keep in mind that security is not just cybersecurity. We referenced that. Because some of it is cyber if it's all electronic, but a lot of it is old school fraud. And it's just that these are big buckets of money and people pay attention to them. But then, of course, I'll call it the more standard fee cases. And I'm careful, if you notice, I'm not going to mention specific names of many of these because we're involved in defending cases and everything from MEPs to single employer plans to fees to everything. So, I try to step very carefully here.
But there are a few cases where they're commonly referred to as the cookie cutter cases on the defense side of the bar. And I got to admit, you have to show some respect for some of the design of some of these cases because people have figured out how to do this, in a sense, maybe more efficiently to our talk about an efficient business.
At the same time, as a defense lawyer, well, this doesn't really say anything is my response in some of these cases. And some of the courts have agreed, some haven't. But I think you see firms who have really come up with their own methodology for how they do this at this point and bring a lot of these cases.
I spent a lot of time doing so-called 104(b) requests. These are the requests that come into plans, either from individuals, or sometimes they're just by the plaintiffs firms themselves on behalf of an individual saying, "Give me A B, C, D, E, F, G, H, I, J, K, L, M, N, O, P." Let's try to see if I can do the alphabet, Sesame Street Style.
Josh Itzoe: You were close. You were close.
David Levine: Where they come in, and they ask you for everything under the sun. And there's rules under ERISA what you have to provide, and they're asking for what we would normally think is a lot more than what they should be entitled to. And it's part of the back and forth. And then so often, they bring the suits. Because these suits, if you get them past motion to dismiss, it takes time. It takes resources for lawyers like me. But it also takes a lot of internal time and resources. And that can lead to settlements.
So, those cases, I'm not sure there's anything really unique other than some of them are being dismissed because courts are saying they're not. They're there. But in some of the more cutting-edge things, I'll leave off the actuarial factors right now, though, it's interesting suit. And I'm a big believer that a diverse type of investment type of thing, so, we have all the lawsuits about vaults and everything like that and plans.
And really, they're using DB, I don't understand why you can't use them in DC. But there's all these discussions and I'm involved in some of those discussions, and as with my colleagues. And similarly, in these, I'll call it the core fee cases, you've definitely seen them move towards use of data privacy type of activities, as well, as you're seeing more attacks on unfortunately, on managed accounts as well. And the data ties into wellness.
So, they're sort of attacking, I'll call it the ancillary services type of thing in these lawsuits. And from my perspective, sometimes these lawsuits tend to try to oversimplify. They try to say everything is an apple, when it's back to that apples, oranges and pears. As it relates to data, there's a whole talk about data out there, both on the regulatory side, on congressional.
I was involved in California with a colleague with like Spark, for instance, on the use of participant employee data and a benefit point because the rules were designed for like the Facebook's of the world, not for the benefit plan world. And we have a great carve out there that we got and this ties into CPRA, the new privacy law the passed-
Josh Itzoe: And California has some of the most stringent IRC laws.
David Levine: Yes. But there's a lot of carve outs for benefits in that stuff that I've worked on, and it's good. But the lawsuits, I think it's important to point out that in the use of data, there's a couple things that I think people sort of jumped by. Is data a plan asset? The ERISA is not the clearest of written of statutes at times, and there's some things in ERISA that sort of talks about what the employer role, but not necessarily the employer's fiduciary. So, there's questions as to who really owns this data. And is it an asset of the plan. It becomes a weird discussion if you actually conclude it. Data is a plan asset, because that means it's an infectious plan asset.
Because unlike dollars, if I give you, Josh, $10, I don't have that $10 anymore. But if I give you a data file for 401(k) X, I still have a copy of it. And then you give it to someone and they give it to someone. If it's a plan asset and it keeps going, is it just becoming an ... Not to use an awful parallel, but is it like a virus that's spreading that's going?
So, I think some people have jumped to say, "Oh, it's a plan asset." I think there's a different debate to be had there on that, but I don't think it's an automatic. But there's the question of, what about contractual negotiation? And that's what the plaintiff spring up in some of these items.
Josh Itzoe: That's some of the nonmonetary judgment I think that we've seen. I mentioned, I think, the Vanderbilt case earlier, where there are controls in place in terms of trying to not eliminate, but restrict how that data can be utilized, and by whom, and for what.
David Levine: Yes. And the reason I go for that is, most of those settlements evolve the university fee cases that have these restrictive provisions. We've had a couple more recently. Why is that relevant? It's because the case that's actually gone to trial and gone off on appeal, the northwestern case, was a win for the defense on this issue. This is a provision that's showing up in settlements. It's not a win in court.
Josh Itzoe: When it's fully adjudicated, it's not showing up. This is a settlement.
David Levine: These are settlements, exactly. Now, there's lots of views and this is a first or second inning discussion here. But it's important to keep that in mind. And you also have to keep in mind, it's different plans for a jumbo plan. I know certain plans have different negotiations. And there's no one right or wrong. That's my best practice comment.
But I do know that sometimes when you have a big negotiation, there's a lot of effort focused on this. But it's a constantly evolving world. So, to say that there is a standard that someone must do, I think is a bit of an overreach. Of course, I'm on the defense side to take it for what it's worth. And I do believe in process and all that stuff, so don't get me wrong. But to say it always has to be done this way or always must be this way, I think is for me a step too far.
Josh Itzoe: Well, and at the end of the day, I think this goes back to what we need is stronger fiduciaries on the plan sponsor side, in my opinion. We need them to be more knowledgeable, more highly informed, and more savvy in terms of how they're representing their employees, and just being able to, it goes back to the disclosure.
The industry, quite frankly, I think wants to rely on disclosure because disclosure is data, and unless you're savvy, I don't know about you, but I think most people, like disclosure makes everybody feel good about conflicts being out there. But not many people read the fine print. Not many people kind of understand that when you pull one thread on the sweater, the whole thing can fall apart. Because there's these unintended consequences or what's related to what.
And I think that's a real challenge in terms of how do we get ... Conflicts can be managed. Everybody needs to be on a level playing field. How do we continue to create a level playing field, not just for those of us in the industry, but also for plan sponsors. Because at the end of the day, they're making 98% of decisions for their employees. We talk about participants, they have so little control over their benefits. It really comes down to how do we strengthen companies and put them in a position.
So, not only can they ask better questions and the right questions of folks like us, but they have a framework to be able to interpret those questions. I mean, it's funny. I went through an RFP in 2020. And I got the RFP and there were some really good questions. I was like, wow, this plan sponsor knows what they're talking about. And then getting into the finals and presenting, I realized that they had no idea how to interpret the questions. They had gotten good questions, but that was only 50% of them. They didn't even know how to kind of interpret what the answers to those questions look like.
David Levine: Well, to your point, it's interesting. I find the evolving landscape really fascinating. The term I've used for a long time when people were saying they're selling 3(38) services and you've seen some lawsuits over this recently, is mind the minder. It's a very interesting discussion .As the lines blur between people playing different roles, a lot of this falls back on the plan fiduciaries to take a lot of responsibility, and it was still even in a PEP.
Because in the PEP world, there's a million different models. Some people say there's like three models. I would say maybe if you take it to like 60,000 feet, maybe there's three models. But as soon as you drop down in the altitude, there's so many different models, it is insane. As a lawyer, it's fascinating and from a business, it's interesting. But trying to understand the models-
Josh Itzoe: Sounds like a lot of billable hours, David, sounds like a lot of billable hours figuring that out.
David Levine: There is billable hours. But it's actually very interesting because you have to understand different business models. And I deserve that because any podcast would not be good without a lawyer joke. But what I was going to say is, for instance, as you see people moving saying, "Hey, I'm offering this service X," a lot of sponsors can handle it.
But as these things are becoming more complex, there's sort of the question, I think that the contracts and what people do, to be clear, when people do the that type of cross-selling, people are very careful and very precise about how they disclose. I'm not saying that they're doing anything wrong. But sponsors sometimes, I've occasionally seen them hiring someone else to mind the people that they hired before. It's kind of this circular thing. You shouldn't have to endlessly do it. But there's a balancing act on this.
Josh Itzoe: Right. Well, let's talk, that's a good transition because the PEP world, that was really I think greenlighted by Secure Act, right?
David Levine: Yes.
Josh Itzoe: With pooled employer plans, which I would I guess consider kind of a not that that's a new really kind of a variant of the multiple employer plan, which has been around forever, it feels like, but with some kind of better features, if you will. One of those I think is kind of ax the one bad apple rule that exists with MEPs. But let's talk about the PEP, again, pooled employer plan landscape. And we, as an industry, love our acronyms. So, you've got the different roles. You have the what's called a think PPP, a pooled plan provider, which really is I think the sponsor of a PEP, and then you've got the service providers involved.
So, you hear some people saying that this is the retirement gold rush, and that everything is going in the direction of PEPs and MEPs and all the benefits around them. You have other people, I probably fall in this camp, that see a place for it, but probably more skeptical of, I see benefits but they're really good talking points at times. But when you get into kind of the real world, sometimes the things you think are going to be benefits don't necessarily play out that way.
So, what are you seeing in the kind of PEP world and how that's evolving? There's a ton of interest. What's going on as far as that goes? And then that's kind of to your point, let's take it from the 60,000. Maybe you could describe those kind of three models at the 60,000. Maybe we can close the aperture a little bit and bring the plane down maybe 30,000 feet and talk sure more about some of the complexities.
David Levine: So, I think when people look at a PEP, they think at 60, the high altitude flight version of this is, number one is assuming it's a recordkeeper, offering a PEP and bundling everything together. Number two is in investment management companies sort of bundling everything together. Number three is, what have I missed, advisors and consultants bundling all together.
And the way you file and register these patches with called form PR, it's like 5500 filings, you file it with DLL. And if you look at the filings that have been done, there's like maybe 40 or 50 at this point that are out there, a lot of them are placeholders, it's a mix of all those people. So, that's the 60,000.
But then let's drop it down 30,000 feet into this discussion, I am going to take one exception to your comment. I think that the SECURE for PEPs created a clear framework than like trying to do an open MEP without SECURE agreed. But there are a bunch more requirements in SECURE. So, I will tell you that I'm hearing people in some quarters saying, "Well, you know what, I'm going to do an old-fashioned affiliated MEP or an association retirement plan," because each of them have different things. So, I wouldn't say it just completely wipes the field, something to keep in mind.
Josh Itzoe: So, there's tradeoffs, right?
David Levine: There are.
Josh Itzoe: Some things are easier, but some things may be harder.
David Levine: Exactly. So, that is number one. Number two, you get into the weeds of building this. So, as you build this, who's going to play what roles. And I think maybe looking at the form PR is a really good starting point. Because you have the pooled plan provider, they kind of take the role of the plan sponsor in this process, but they're also a named fiduciary, the plan, so they have a fiduciary role as well.
So, it's kind of this hybrid role that in some ways we're all familiar with where sponsors were also running their plans. So, that's kind of the starting point on. You then say, okay, who is actually going to do the recordkeeping? And is the recordkeeper the same as the pooled plan provider? Are they not? A whole 'nother discussion there. Who's going to be your recordkeeper?
If I remember recordkeeping, and I'm sure my friends in the TPA business and 316 business can each have a different perspective on this. So, I'm going to try and give a generic one. A recordkeeper can, if we were showing this on video, can do something from A to Z, or could do something from A to D and D through Z is handled by someone else or a group of people. Whether it's the plan sponsor or the name fiduciary, which here could be the PPP, or it could be given to a TPA, which handles a lot of the things with ... And we all know they're different value propositions.
Or it could be like someone saying there are 316. And as a lawyer, 316 is a very narrow legal term under ERISA, but it's a marketing term that doesn't have a precise meaning. And there are some valuable services there. But if you look at 316 offerings, each of them can vary a bit because there's no one rigid line and that's okay and good.
So, you've got to figure out okay, recordkeeper, do you have a TPA? Do you have a 316? Especially when you've got all these payroll feeds, some recordkeepers might say, I want someone else to handle all this certain thing. Then you also have investments. Who's going to manage investments? SECURE says the PPP can avoid a 3(38). Or it can fall back to the employer. But there's lots of different ways to work around this. And I don't mean in a bad way, in a good way. Because what if the employer appoints the PPP as investment arm? Arguably, that's fine to do. But the question is, who points when and where.
You can see, just as I'm drawing right now, if you were trying to draw us on a chart, the lines and dotted lines and boxes multiplies instantly all over the place, then you have to think about contracts. Who contracts with whom? Who does what with whom? How does this tie to your plan documents?
Because unplanned documents, like preapproved documents are great, and the IRS is giving us a model language. But one of the challenges is preapproved language, the IRS is going to focus on what are the SECURE internal revenue code requirements. There's still a million things. And I've worked and talked to colleagues a lot about this. There's like an easy way where you sort of leave it vague. But then of course, if you're trying to know who's on the hook and something goes wrong, you get into details. So, it leads to some creative writing.
And so, I'm interested to see what the IRS does. But my gut says you're still going to have to wrap a bit of around that. But you put all these big pictures together, you get a lot of contracts, a lot of questions as to who hires whom, who approves what fees, how everything works. So, it's kind of like my daughter is learning like factorial calculations in school, it really is like nine times eight times seven times six times five. So, your versions go from three to hundreds.
Josh Itzoe: Infinitely more complex, eight, when you ...
David Levine: Yes, when you actually have to operationalize it.
Josh Itzoe: That's the interesting from my perspective is either you mentioned this kind of role of mind the minor, like, who's going to be able to figure all of that out. And some of those complexities been, what if you get a recordkeeper that has some affiliating from the investment piece, or you have an advisor that has affiliated and a cop's never going to give themselves a speeding ticket?
David Levine: But then the DLL's new exemption, just to add a piece to that, that came out obviously, the Biden administration can revisit it, it has some language in there that makes it hard to use the exemption for capturing rollovers if you're already a fiduciary of the plan. Remember, SECURE requires a bunch of these people to be fiduciaries.
Josh Itzoe: Right, right.
David Levine: So, there's all these different discussions here that go into this that become, it's workable, and I've seen some really great designs out there. But it's complex and it involves a number of disciplines. That's why, yes, you joke about the laws. Yes, it's a lot of work. But more importantly, about trying to get it right makes it extremely challenging in terms of the process. And when I say right, I mean, what works for the client, not legally right.
Because right now, I think everybody's acting under the good faith standard. So, it's hard for someone to say this is wrong. But as we add guidance, I hope the regulator's keep that in mind because I think it's a challenging face for them. And I know, we have a group of clients we have that we represent that sort of like we call them that PEP group that we talk to the regulators about this for that exact reason.
Because it's trying to find something that's workable, because MEPs and PEPs clearly in the small market, there's talk will they ever go large market. My prediction for the foreseeable future, I could see different size plans may wind up in PEPs, but I do not see it like eating the entire universe today. It's another arrow in the quiver at this point. The exact size of it, there are some who say they will fail. I'm not sure they will fail.
There are some who say that within five years, all plans will be a PEP. I'm not sure I see that either. I'm a centrist on this. I see sort of a growing use of them. But if that was the case, there's a great place for places like PEO MEPs. PEO hasn't been around for a long time. They have a decent chunk of the market, but they're not dominating the market. PEPs might be bigger, might be smaller. We'll have to say.
Josh Itzoe: You know one of the things is you mentioned is how these really complex solutions are marketed and packaged. I think they're packaged up and I think the way they're going to be sold to plan sponsors is, "Hey, you give us the keys. You kind of walk away. You can kind of wipe your hands and everything's going to be done for you."
Is that an accurate assessment from a plan sponsor perspective? What are some of the ongoing obligations with PEPs in terms of fiduciary oversight? What about fees? What about, I mean, I realized, like with a 3(38) and the delegation from that perspective, but there still needs, I mean, from a monitoring perspective, I would argue, I think, if you look at ERISA, you can delegate and allocate responsibility. But you didn't still fall back.
I mean, ultimately, if you're going to sponsor a plan, you have to provide some type of oversight or selection or monitoring. Now, what does that look like from a plan sponsor perspective with PEPs? Is it really just flip the keys and walk away and then you're good to go? Or is that an oversimplification?
David Levine: I think it might be a bit of an oversimplification, because there still is the underlying decision of whether or not to be in a PEP and understanding what you're doing. And there's different schools of thought of-
Josh Itzoe: Is that a settler decision or is that a finisher decision?
David Levine: You can argue it's settler, but I think that there's a fiduciary sort of, it's a settler fiduciary blend, I think, and we're working out to see where it ends. Arguably, for instance, if the employer is selecting the investment provider, I think there's an argument that that is fiduciary, although I can make arguments of both side. I'm being careful because different people listen to different things. I don't want things taken off context. I think a lot of this is evolving at this point.
But PEPs were designed very carefully so that employers still had a role. There was talk about removing employer responsibility entirely. And that got pushed back hard during this process. I think the employers still have some type of role to the exact scope to be determined, but clearly, you're picking something. And it really depends on the PEP.
For instance, if you have a pep where, like we're seeing springing up. Some people were creating new entities that have knowledge and experience, but they're not offering any of the services. They just want to be pooled plan provider. They may sign off on every single agreement for themselves. And maybe the employer just monitors the overall type of process and how they're doing and whether it's right for their employees. And it can be very minimal.
But as we know, each different model of agreement has different responsibilities. There could be other versions, where employers do still approve select different activities. And I've worked on these because I think it's important for an employer to understand what it's looking at. So, I think the mind the minder, it's a challenge from a pure business standpoint.
When you upsell 3(38) or just sell, or you say, I will do 3(38), and upsell is not meant as a bad word. You say, look, you don't want to do this. I'll take it, I'll do 3(38). And plan fiduciary sells a monitoring responsibility when they hire 3(38). It doesn't mean you have to second guess everything. That defeats the purpose of 3(38).
But when you have these different models out there and understanding how it all fits together, I think it leads to some interesting questions as to do you need the help? Can you do it yourself? Do you understand what your total fees and expenses are? I think it's going to evolve. I think right now we're in the early days because there's different schools of thought. There are PEPs that have been registered that have one company and its affiliates doing everything. And you have PEPs that are completely unbundled. It's kind of like a microcosm of-
Josh Itzoe: Of the retirement industry the way it is right now.
David Levine: Exactly. It's a microcosm inside the PEP universe. And just understanding that is the key. But I think we're so early in this game that-
Josh Itzoe: Free training still, right?
David Levine: Exactly.
Josh Itzoe: I'm not even sure the season started yet.
David Levine: Exactly. So, yeah. So, it's an interesting thing. But I definitely think there's the question of who monitors, who oversees and who understands how all these different models work because they're all just very different. And they all can be really good. And I think that's important to say. They all can be really good. And there's no one that's right. But that's why coming down from 60,000 feet, even just 30,000 feet, you see how the complexity multiplies.
Josh Itzoe: Absolutely, 100%. Well, this has been an awesome discussion, David. And I think you are obviously highly respected within the industry. And one of the most well-known ERISA attorneys that's out there and seem to be in the mix of all the kind of cool stuff that's happening kind of in the industry. I'd wrap up with two questions for you.
David Levine: Sure.
Josh Itzoe: The first one is, where do you see the industry going over the next five to 10 years for listeners, for those of us in the industry, for plan sponsors that may be listening, but where do you see this industry evolving over the next five to 10 years? And what do you think we should be aware of kind of on the horizon that maybe it's not right in front of us right now, but we want to make sure that we're paying attention to.
David Levine: Sure. I think the industry evolution ... I think we're coming to an inflection point in two ways. One, I think MEPs and PEPs, because if PEPs go the way of big dominance, it's going to be a discussion of what is everybody's role in the future ecosystem going to be. I can tell you, working out a lot in that space right now, just the different pieces, people are still figuring it out. But if PEPs go, I think there's people who are sort of trying to do their staking, they're planting their flag. I do this, I do this. Others are leaving it open. We're going to have to see where that goes if PEPs go big.
Similarly, I do think we're going to have to see where regulation goes. And this is not just litigation, but this is regulation theory here. For instance, if we have eight years of democratic control, let's say, theoretically, it's very possible that we could see maybe not the old fiduciary rule, but it returned to some of what they would consider a stronger sort of enforcement, more restrictive from some people's perspective.
Josh Itzoe: Stronger protections for participant.
David Levine: Wait, they would take what people would consider to be a more aggressive position on consumer protection. And that also goes to privacy as well. So, if we have democratic control of everything, you could see legislation on privacy, you could see enforcement, you could see this, which really, I think might wind the clock back a little bit potentially.
Because it's kind of like, we go through the cycles of American business of conglomeration, divestment, conglomeration, divestment. I think there's a chance you could see some of that, depending where if it's a democratic control of everything. But the republican control, this is all stereotyping because I don't think it's as black and white, maybe it wouldn't be what you might see the current trends of consolidation continuing. With divided government, I think you're going to see, to sound like an '80s or '90s song with Paula Abdul, two steps forward, one step back.
Josh Itzoe: That's the first Paula Abdul reference I think on the Fiduciary U™ podcast.
David Levine: There you go. She's a good choreographer, too. But I think that's what you're going to see. Because you'll see efforts to sort of control what people consider to be conflicts and again, consider, because there's different views on what is the conflict, what is not. As you said before, how can you manage conflicts.
And so, I think there's a lot, but you could see sort of the push-pull on different areas, which could also, in my mind, mean that we're going to live in a judicial court-driven outcome, if that makes any sense. I'm a little wary of that because court-driven outcomes, there are some great decisions, and sometimes you get decisions that you may not really like in there. And sometimes they can be inconsistent from place to place. So, how do you do this?
So, as I look forward, I think adaptability, if I have one word, is going to need to continue to be fixed. This industry hasn't been static. The days of getting several hundred bits as a fee for starting up a new plan, probably not really around at this point. I do think that people are going to figure out what are their roles. I think of this as a lawyer every day, and as an advisor, and a consultant, I would think about. Because there are people saying, I'm keeping the pure play model. There are people saying I'm doing the integrated, holistic model.
I'm not going to say which one's right. But I think saying where are you going, not just looking at, well, what do I have to do today, but where do I think I'd fit as the ecosystem evolves. That to me is the biggest thing.
Josh Itzoe: Now, that's great. That's great perspective. The purpose of this podcast is to make ERISA fiduciary smarter. What would be your single best piece of advice for someone who's an ERISA fiduciary? What would you tell them, if they can only kind of focus on one thing, what would that be?
David Levine: I'm going to cheat, I'm a lawyer. I would say two. Number one, fees are not everything. That's my starting point. I just have to make that point. Fees are but one element of a process. It is not everything. But if I had to pick one thing on an affirmative basis default to fall on, it's mind the words versus documents. I know that sounds really weird.
In a world we live in today, everybody sells in a TikTok type of way and like, it's like two minutes that tells you why they should use their product. As we come to a world where unbundled, especially with all the unbundling that we have now, it's good to understand, focus on understanding who owns what and where their responsibility ends.
Because of doing that allows you to have a more holistic picture of your entire retirement benefits program, health too, benefit programs, so, you understand the players and understand who has said what they're going to do, not just in marketing, but in their agreements. Because that allows you to figure out, okay, what do I own and what is someone else taking care of, and where are the challenges.
And that's maybe not the most refined focus on fees. But in some ways, I think, if you understand that, that can keep you from finding yourself in a quagmire later, where someone says, "That wasn't me, that wasn't me." And you find out it was you, the plan sponsor on the hook.
Josh Itzoe: Right, right. No, I think that's probably one of the best answers that I asked this question at the end of every podcast. I think that's one of the best answers that I've heard so far. And obviously, it's becoming more complex. I go back to that comment you made earlier about mind the mind or who's in the best position to be able to do that. So, where can people stay connected with you or catch up with you? What's the best way for people who are listeners that want to follow you?
David Levine: Sure. Well, I've gone through phases in my career of doing LinkedIn, it's David Levine. You can find me under Groom Law Group, David Levine on LinkedIn. David Levine is the John Smith of Jewish name. So, if you search for Groom Law Group, and David Levine, you'll find it. I used to post a lot more. I don't post that much anymore. It's just other focuses.
Love Twitter, just don't post much. But at the same time, realistically, email or calling me, I carry more technological devices when I used to travel like now that I could ever list, but I'm easy to reach, email, text, phone call, firstname.lastname@example.org, pretty straightforward. But thank you for having me.
Josh Itzoe: Absolutely. I've had a great time and always love your insights and just really appreciate it. I think you are, I don't love the term thought leader. I think right behind financial wellness thought leader might be the most overused terms that's out there. But no, I do think one of the things I've always very much appreciated about you is I feel like you bring a very intellectual honesty to a lot of these issues. And you're very good at being able to kind of parse some of the complexity and simplify the complex. So, I've had a great time, very much appreciate it. And thank you so much for being a guest.
David Levine: Thank you for having me. I appreciate it.
Josh Itzoe: Thanks for listening to today's episode with David Levine. If you'd like more information or to learn more, go to fiduciaryu.com. I've got some great resources there for you, including each episode along with show notes, articles and free tools. I've also recently launched the Fiduciary U™ Community, exclusively for retirement plan advisors. I'm totally pumped about this, really excited about what it could be.
If you're a retirement plan advisor and you want to connect with like-minded professionals, so that you can share ideas and best practices and get advice from your peers and give advice to your peers, and just overall elevate your game, go to fiduciaryu.com. Click on the Community button in the upper right hand corner of the site and fill out the application form. There's no cost to join. It's not a coaching or consulting service, but it is invite only.
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The opinions I express on the show are my own and do not reflect the opinions of my guests or the companies they work for. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such. Any statements or opinions are subject to change without notice. The information and content presented on the show is for educational purposes only, and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk, and unless otherwise stated, are not guaranteed. Information expressed does not take into account your specific situation, or objectives, and is not intended as recommendations appropriate for any individual. Listeners are encouraged to seek advice from a qualified tax, legal, or investment advisor to determine whether any information presented may be suitable for their specific situation. And past performance is not indicative of future performance.