Rick Unser (00:00:00):

Well, David, welcome back to the podcast. It's been a little while and I can't wait to hear what you have to say today about coronavirus and fiduciary implications and maybe some more non coronavirus related stuff like 401k litigation. So thanks for being here.

 

David Levine (00:00:16):

Thanks for having me back.

 

Rick Unser (00:00:17):

I'm mobile right now, so not in my usual settings, but hopefully this all comes across in a way that everybody can benefit from. But I guess on that note we, we really have a, what I think is a double whammy here for employers when they're looking at their retirement plans. You've got this pandemic of coronavirus coven 19 whatever you want to call it. We've got a bear market to boot, which you know, probably goes hand in hand with the, with the broader pandemic in the economic impact that that has had. But I mean I've already had a lot of questions from employers kind of sitting back going, man, with everything going on here, are we going to get sued over our retirement plan based on either one or both of these things and the impact they've had on our employees? Are you getting those questions? Are you hearing things like that as well?

 

David Levine (00:01:08):

Yeah, I am. And you know, there's been lots of questions about everything that's going on at this point between the pandemic and bear market. You've got people saying, well, if I make decisions about these new features and options I can give to people, whether it's the coronavirus distribution, the a hundred thousand dollars or more loans, or do I defer your minimum distributions or do I change my vendor now or can I still change funds? One of the first questions is, well, do I have risk? The Moyers are bickering amongst themselves at times these days, and I think we're waiting for guidance and frankly the IRS is really overwhelmed and has a lot going on, so you can't blame them for not having the answers to everything immediately. I think the decision though, on a lot of the cares act coronavirus relief items, those are designed decisions.

 

David Levine (00:01:56):

Those aren't fiduciary decisions to say, do I put these in the plan, do I make them available? Yes, there's discussions about how you monitor and run your plan, but it's pretty similar to what we've had. Years ago someone said, Oh, target dates are special and they need special monitoring and special standards, and that's not the case here. It's just about saying, is this process working as you go forward, but right now people are just trying to be good to their folks. As it relates to the bare market though, decisions about your investment line up at this point or decisions about vendors, you can obviously keep going, but maybe you decided isn't the time right now because you say, you know what, we've got a lot of communications to employees. They've got a lot going on. Maybe there's reasons why it's better to wait, or maybe you say, we're going to go ahead and then you say, okay, if we're switching funds, how do we address the fact and make sure people are aware at least or process-wise, that people are in and out of the market for a limited amount of times and they know what's going to happen?

 

David Levine (00:02:54):

Because when we live in a world where the Dow moves a thousand points a day, you could win. You could lose based on the trade in trade out and how the transition goes. So it's important to think through things and focus on your messaging, but it's a lot of what we've lived with before. I don't think it's a dramatic increase in litigation. I think if someone brings this litigation, I'll be say these are employers, try to do the right thing. I just don't think it's appropriate to bring this litigation unless someone really is asleep at the switch. But I can tell you right now, employers saying yes to this, no to this making decisions. It's hard to say how they're asleep at the switch. They're trying hard right now, Rick. That's my personal view.

 

Rick Unser (00:03:31):

Yeah, I would echo that. I, I would say over the last couple weeks I've been busier than ever with employer calls with trying to understand all the various moving parts and impact to the plan, to participants, to investments, all of that fun stuff. So I would say that in a broad sense, people are taking notice. People are trying to do the right things with the information they have and certainly with the best interest of their plan participants and binds. So I agree. I think that that level of attention is there. But I guess the one thing that that I think about is, okay, six months down the road, a year down the road and you start getting these plaintiff's attorneys, plaintiff's firms that are, I don't want to say Monday morning quarterbacking things, but it's I guess close to that, right? Which is, Hey, you know, here's what you should have been doing during that time period as it relates to monitoring your plan investments. Or you know, why didn't you do this, this or this, when that was clearly the, the logical path that an informed plan fiduciary would have taken during a period of time like this. So I guess those are the things that, as I'm thinking about it, and I think as I've talked to other employers that they're kind of trying to think through to the extent they have the time to think through it with everything else going on in their businesses. Are some of those types of maybe complaints or arguments that could emerge.

 

David Levine (00:05:00):

And Rick, I think you make a great point on that. Let's put this way, I love your podcast because you interview people on all sides of the spectrum and all ends of the spectrum. And the plaintiff lawyers may have a different view on this, but my strong view is, first of all, I strongly dislike 2020 if we were all supposed to have 2020 hindsight, well maybe we could be as good as Warren buffet, but we're not. And it's about process and effort. So to me right now, looking back and saying, well, why did you allow this? Why did you allow that? I think the key is when you go through it today, you do your best. For instance, some record keepers, and today we're recording this at the end of the first week of April, the recordkeepers are trying to move quickly. So some of them are saying, Hey, we're putting this on for all your plans starting in a couple of days.

 

David Levine (00:05:52):

It's not just one. There's a bunch of them doing it and it depends on your market on plans and things like that. If you're a small plan, negative consensus is how everything works. We have some large plans where they've said, we want consent. We were only going to do things if we consent, but the vendors are trying to work with them. So there's sort of a middle ground. They get this email saying we're going to turn it on and they say, well, you're supposed to get my consent but I consent. So there's simple process items here that make this work. And if someone in six months says, well, why didn't you get this person to sign off? Or why didn't you consider, you know, the impact of this decision on participant account balances a, it's settler and B, I think part of it is is you asked for the documents, you review them and if you ask questions and do that, I think the plaintiffs have a lousy argument for that type of argument. Unless someone basically agrees during this time to allow a vendor to just move people's money somewhere out of the plan and take it. I think it's a weak argument. It's my very honest answer.

 

Rick Unser (00:06:55):

Yeah, and let me just have you dig a little deeper there on some of the changes around the cares act or AKA the stimulus bill that was passed at this point last week back on March 27th because I think for some there's really some confusion about, well, what do I do? What do I have to do? Am I required to do something? Are these changes just happening and I have no voice in all of this. So I guess from a definitive perspective, what is needed by an employer, a plan sponsor, either explicitly or implicitly to determine what impact these are going to have on their plan.

 

David Levine (00:07:35):

Sure. Let's talk about the real world version. I think the starting point we begin with is what can your vendor handle? Because a law passes on a Friday expecting the vendor to have everything coded up by Monday. That'd be amazing.

 

Rick Unser (00:07:49):

Yes, exactly.

 

David Levine (00:07:51):

Let's just doesn't work that way. It just doesn't. So I think from a process standpoint, a, if you haven't heard from your vendor and some of them are still figuring it out and that's understandable. Yeah. Ask them, what are you doing for this? What's your strategy? What's your approach? If they come back and say, this is what we're going to do, and they give you an all or nothing, if some vendors may do, because there's just timing limitations here and say I'm turning on all the cares features. You could say, okay, how are you doing it? And try to get as much information as you can and then say either yes or no. And even if it's a negative consent, try to say yes or no affirmatively. So at least you've documented a record at this point. Then as as this evolves in a couple months, they will, what do you do?

 

David Levine (00:08:36):

And there starts to be IRS guidance. Say, how are you addressing this? How are you addressing this? For instance, the tax reporting or minimum distributions, great example. Like minimum distributions are suspended for 2020 so if you're 70 half of 72 now, but 70 and a half that's relevant for the moment and you got a minimum distribution in January, how do you suspend the kids? Something that's out of the box already ask the record keeper or if they're doing anything different. To me it's about asking things, documenting the best file possible, but at the same time recognizing that there's a limit. Like the classic example is if you're a large plan and you're negotiating a record keeping agreement and you're on a big enough plan that you can negotiate back and forth even there, you don't always get everything you want and sometimes you have to make a decision as to what's more important.

 

David Levine (00:09:26):

And I think that's the same thing here. What I would say is if you're told a, B and C are mandatory, and I think my colleagues view on mine is that the cares act items are not mandatory at this point. But the guidance isn't clear. But we look at the Katrina guidance from 15 years ago and say it didn't make things mandatory, but I think that's the way you approach things and handle it for my senses. You just literally get information, read it over, say at least we've thought about it. Even if it's just thinking briefly and if even if you just have to agree now maybe at your next committee meeting with your advisor, like you rec, you talk through and you say, okay, where are we, where's this going? And he put that in the minutes. I think that's the best we can do right now in terms of process and checking the box. And then of course you've got gotta update your plan documents in time. If you're preapproved, we'll get documents at some point from your vendor and you should check them over to make sure they match. And if you're individually designed, you've got like two years for that or even four years if you're a governmental plan. There's a lot of time here.

 

Rick Unser (00:10:20):

Yeah, and I think the important thing here is just to remind employers as well that this is their decision. So I've actually had a couple conversations with employers or they're like, well, do we have to do this? You know, we're pretty fortunate that we don't have a lot of impact to our business from everything that's going on. I mean, you know, yes we have people working remote or, or you know, things like that, but we don't have reduced hours. We haven't had to put people on furlough. We're not seeing major disruption to our revenue streams, et cetera. So you know, is this mandatory? Do I have to do it? And I don't know, how do you answer that?

 

David Levine (00:10:59):

My personal belief that is not mandatory, although there's some things, for instance, the Corona virus 10% early distribution tax relief, like someone leads a 45 and takes a lump sum. Normally you'd have to pay a 10% early distribution tax. There's relief. I think if it works like it did in Katrina and similar situations, even if you don't put it in your plan and individual, I think there will probably be a way, and there's no guarantees for an individual to claim it on their tax return and take a deduction. But if you're an employer that's not furloughing not changing anything. I still think it's worth considering these things. This is a design decision, but the reason why I say it's worth considering, if you look at the definition of who's eligible for coronavirus relief, it's not just about someone who's working in the office or now working at home, as many of us are. It's about your, your spouse, family member dependent children, things like that could, they could after you, what if you're still full time, but you're on commission. It's hard, I think to assume that even if your organization isn't furloughing people there's or won't be impacts. So I think it's worth giving a thought to these items, but again, it's a total business decision in the end. Hopefully that answers your question.

 

Rick Unser (00:12:08):

No, it really does. And that was one of the points that I shared with this particular group too, as I said, Hey, I get it that you might not be having a major impact in your workforce. But think about the spouses, think about family members and what if they are, and this is their access to money is through your plan and you're not allowing it. How does that look from a PR standpoint, how does that look from, Hey, we're trying to take care of our employees and I think that at least gives people that pause to say, all right, well maybe that is, maybe that makes sense. So

 

David Levine (00:12:41):

Agreed. And I'd throw one question out there for, for you and everybody listening. Many of you in the past have put in disaster, wildfire relief in your plans. Coronavirus relief and coronavirus loans just like that. It's what we've seen before. So sometimes we make things harder than they are, but the relief for the coronavirus as much as different than the relief, there's very almost identical in a lot of ways. If that's the case, if he adopted it before, maybe the same logic applies here and it's a very easy conversation.

 

Rick Unser (00:13:12):

A minute ago you mentioned the RMD side of things and I would agree. I think there is some work to be done there to interpret some things to help people out. What else is out there that are maybe the top two or three things that would come to your mind that that employers should be just keeping an eye out from, whether it be their retirement service partners, the department of labor, the IRS that would require some further guidance or further clarification as we get into some of these things and how they are actually are going to work and function over time.

 

David Levine (00:13:49):

Well, I think that a number of considerations top of mind for me is repayment. Well, as you'll recall in the secure app, we have language in there about birth or adoption with and the ability to repay them, but language on birth or adoption. Withdrawls is not like language in the cares. Cares is much more like the disaster relief provisions in the past and secure there has been strong positions taken. Then you look at legislative history, that repayment must be permitted, if that makes any sense at all. For disasters it's always been a more permissible. Of course in carers you can repay to an IRA or some other vehicle as well. How is that gonna work process wise? I'm pretty sure the IRS will work out a reporting process. They've given us relief. Again, like back in the Katrina days, they gave us some good guidance on all these different nuances, but at the same time, how does repayment work? I think that's something that it's going to come down the pike and are people going sit, try to say it's required or not. We don't like leakage from plans, but it can be messy and some record keepers not to their fault. This can be really challenging to code up and build, so we'll have to see that as number one.

 

Rick Unser (00:14:57):

Yeah. Now. On that note, I already got a question the other day saying, okay, if somebody takes a [inaudible] distribution, again, the distribution, not the loan, are all of their go forward 401k salary deferrals considered a repayment of that distribution as like, wow, I don't think so, but that's a really interesting point in terms of there's already that amount of confusion from an employer standpoint about how that repayment side could be handled.

 

David Levine (00:15:30):

I'm going to give another example that's coming up that I think is a great one. Let's use this as an example. Let's say you have someone who quits or is laid off. You don't know why they want to tap their money. If you try to default people to coronavirus distributions first, that money is well indirectly eligible for rollover, but it's not. You can't just do a direct rollover and you get voluntary opt-out withholding, but someone might want to just do a direct rollover. It's about understanding what people are trying to accomplish. Plus there's room, unfortunately for abuse in this process. Retirement savings, we understand we're schizophrenia industry. A phrase I use a lot is we stand around in a circle and shoot it ourselves. That's why I avoid the word best practice, even though I accept the use of it, because we talked about the plaintiff's lawyers, they like to take what people say is best and use it against us.

 

David Levine (00:16:25):

I'm like, there's lots of different practice, but talk about something that we think could come up but I don't think an employer's responsible for nor is a vendor, but with a coronavirus distribution, a Copa distribution, you could take some money out of a plan, 0% with withholding and then because a outside advisor says, I want to invest the money. If you take a hundred grand out and give it to the outside advisor, and in some cases it could be a good choices, but in other cases it could be just a way to tap your retirement money to get them into different investment products. We all know there's different schools of thought on pros and cons between the retail side of the world and the retirement side of the world, but that's a great example of things that I think are looking and that's an area where I think education will come into play.

 

David Levine (00:17:07):

I think communications, wait, no, people are just drinking from a fire hose, but I do think we're going to see more focus on communications as we go forward. Some clients are like, we barely have time to deal with this. Let's just do as best we can and just say yes because we want to help our folks. Some other folks may have more time or may think it's a pressing need, but it's not required and say, you know what? We're going to do some communications. I know we've been working on that for some clients because they want people to have a feeling for what does this mean and there's so many little nuances. Your example about are my future deferrals repayments? That's a great question. Personally, if it were me, I would treat my future deferrals as future deferrals. That way. If I ever want to repay from outside money, I can repay from outside money. But that's just me.

 

Rick Unser (00:17:49):

Yeah, and another

 

David Levine (00:17:50):

Question that I got the other day was, well, okay, I get it that I can take up to a hundred thousand dollars and it has to come from the vested account balance, but can that come from all sources? Can that come from match? Can that come from profit sharing? Can that come from safe Harbor? Are all of those sources eligible? I think the answer's yes, but I don't know that I've seen anything definitively that says, well, if I have $20,000 of my own money, that's, that is well obviously vested and then I have $100,000 of profit sharing that's vested. Does that mean I can take $100,000 out if I needed to or are, are there any types of those restrictions around what sources that money can come from? And I think that's a fantastic question. My personal view is there's no restriction on sources, although I think for money purchase plans based on some prior IRS guidance.

 

David Levine (00:18:41):

Again, you're all, we're sort of filling blanks with prior guidance, but that's what we, that's what lawyers do. I would argue that you could take any source of the money purchase. I would pause. I'm not sure we can get there on that, but I think there's a second point that you're just flagging with your comments, and this is a big one to me. I think underneath it all, one thing to really think about is if you just want to say yes, say yes, document the why. But if you're more than yes and you and you say, you know, for some reason you have a paternalistic view or you just think it's appropriate in your design. Again, keeping focused on design and your vendor can accommodate it. And that's the second part. You're not required to allow endless inservice distributions. Normally you can limit the number of them per year. You can limit the dollar amounts on things. You have non-discrimination testing. But I would argue you could limit the size of a coronavirus distribution or even, or even you don't need to go to 100,000 you can go to 75,000 there's nothing saying you can't, and I know other lawyers may disagree. I think we're spending a lot of time with angels on the head of a pin, but that's just my practical takeaway because you've always, the law defines what the outside limits are, not the inside on this.

 

Rick Unser (00:19:55):

Yeah, and the only thing I've heard that I think makes sense if you are going to try to customize against what the law allows for is making sure that you have the, whether it be internal administrative or external administrative capabilities to monitor that. And I, I thought that was a really good point that you know, Hey, the law says 100,000 in a lot of recordkeepers in their systems are going to be set up for that. If you're going to say 75,000 is there some check or balance to make sure that somebody doesn't exceed that 75,000

 

David Levine (00:20:30):

Well, it's fascinating you say this because let's put this way in my job I worked with service providers, I worked with for plan sponsors and when you've worked with different folks, I think one of the things you really learn over time is you have to accept the limitations on all sides for sometimes a service providers, not just record-keepers, may do things for its own convenience to make its business work better. And you know what? That's part of their economic design, not the offering that they're making available, but sometimes a plan sponsor will ask for extreme customizations that they think are right for them and they're entitled to make Mick. And in a lot of cases, especially if you're willing to pay, you can usually get to both of those, but in many cases, especially times like this, it takes time to get things done. So if you say, I'm going to allow loads of only up to two thirds and $70,000 your record keeper may not be able to build that overnight.

 

David Levine (00:21:27):

And also you need to think about your payroll processing and how you get it. If there's any implications on payroll processing or what gets fed back and forth between you and the record-keeper, that could take time. So I think everybody needs to try to have reasonable expectations. Yes, the plan is the client and obviously that's important and you and I both work with our own clients and our obligations to our clients, but not withstanding that there are practical balancing you have to do. And I think it's essential that everybody recognize that there are, everybody has limits. Plan sponsors can't be responsible for doing every little signing off on every little thing, which is why they outsource. But also record keepers and advisors can't do everything that the plan sponsor, they can't manage all the payroll angles. Everybody has a role to play and it's just about fitting it all together.

 

Rick Unser (00:22:15):

Well said. I'm going to pivot us back to some of the fiduciary stuff we were just talking about, but before I do anything we missed here on some of the administrative considerations around the new cares provisions in retirement plans.

 

David Levine (00:22:32):

I think yes. I think number one for right now it's important to understand what is going live when and how it's being communicated out to employees. I think that is an administrative item because I think right now there's the chance and and there's no B. This is my point about saying there's not a legal requirement that you technically communicate everything immediately. In fact, technically you probably don't for a calendar your plan Tony have tell people with a summary of material modifications till next year, but I think from an administrative process item, it's understanding when everything will be up and running and communicating cleanly and clearly to your employees. Number one. That's the first thing on that. Number two. I think if you have a workforce that's that's older that could take required minimum distributions and you have an active retiree base, a large retiree base, and you get a lot of calls from retirees, maybe more of a legacy industrial company for instance, I would be really focusing on understanding what's going to happen initially with required minimum distributions with your plan as one by your vendor so that you can tell your people what it means because people are going to say, Oh, I thought I could roll this over.

 

David Levine (00:23:36):

Why am I paying taxes? You're going to want to know these things. And those are two big items right now. The other things, because you don't have hardships, suspensions and things like that to deal with at this point. I think thankfully payroll is something to think about, but I'm not sure that there's massive changes on any of that at this point. So I think we've hit a lot of that already to be candid.

 

Rick Unser (00:23:59):

Not perfect. Good, good thoughts. All right. Let me take you back to the fiduciary world for a minute and and kind of this concept obviously that we've seen a pretty big draw down in the market. We are after being in a bull market since we really bottomed out in March of 2009 from the last major meltdown in the market and the global financial crisis, we've had, you know, pretty darn close to 12 years of a pretty strong rally where there hasn't been a lot of issues from an investment standpoint. The one thing that that I guess I think a lot about is over this 12 year bull market, we've had the emergence of target date funds. We've had the, the vast utilization of this qualified default investment alternative process where people are, when they make vendor changes or investment changes or they're conducting re enrollments. A lot of people in some cases, you know, 90 plus percent of participants in assets have ended up in target date funds.

 

Rick Unser (00:25:03):

And as I look around, obviously with what's going on in the market, every target date fund has taken a hit during this time period. Are there things that employee ERs should be doing? Are there, from a fiduciary standpoint, does that give you any pause or does maybe that bring you comfort that so much money is invested in target date funds and a lot of it's gotten there through the default process? I don't know. I just, for me that's something that I'm kind of hyper conscious of right now and I'm curious in terms of what your thoughts are from the legal side of it.

 

David Levine (00:25:40):

Sure, absolutely. And let me pivot that into even a little bit broader question if you'll indulge me for a moment because one of the things that everybody always likes to ask is you, and I know and I know we've talked about this, is well what comes next to mitigation? And we've had a long run with target date funds taking over the world, and I'm not going to say which one is the best product here, but remember, default investments have many, many different options to do balanced funds. You can do target date funds, but you can also do things like managed accounts. And in recent years you've seen a drive to, I'll call it diversification of choice and I'm not sure what your poisonous preferences react, but for me, I have seen people, some people say we're going with managed accounts as our default. Some people say that we're going with target date funds.

 

David Levine (00:26:36):

We've also seen an evolution and we're seeing some litigation on this. Or rather than dive in a particular case, I'll talk generically a moment cause we defend some of these and we're actively involved. So I don't want to get too far involved in any specific case, but we're seeing an evolution of product and the term I use is blender product. Whereas it used to be record-keepers that recordkeeping advisers did. It did selection of funds and vendors managed accounts with managed accounts. But now everybody seems to do a little bit of everybody's jobs at times. And some of these blender products have a bunch of people working together, which can be for faint Hastick outcomes. But at the same time as you look at your QDA, it's about saying, well how is this QTI done? The number of default investment lawsuits that we've had over the years have been pretty small and they've usually been cases where someone promised we wouldn't change your fun stuff that very honestly are not sort of, I'll call it mainstream big litigation items that I would expect.

 

David Levine (00:27:34):

I am my colleagues of windup advising or defending on cause we defend these cases. But I think in the new wave of lawsuits you've seen, which is sort of the proprietary fun lawsuits, NextGen and some of the stable value lawsuits where the plaintiff's firms, whether it's the jury slicker liquor or the Nichols caster of the world, they've really started to say, well, who's doing what? What products are inside? And they've really started looking at these things very honestly. I think in a lot of cases I think they're wrong. I just think they're flat out wrong because people have worked very hard. But now as the market gyrates to come back to where your original question was, I think it's important for plan fiduciaries to really say, how did we do to our peers? How do we do our benchmark? Are there other alternatives? Is our alternative.

 

David Levine (00:28:22):

Good. How does it fit with our workplace demographics? I think the 12 years of up was amazing, but at the same time, a more aggressive allocation did better. But just like you've always should be monitoring target date ponds or your QDA, you've got to keep doing it. So my takeaway right now is really dig into it and say, why is this my QDA? What's my basis? Are there alternatives? What have I got up there? It doesn't mean that you need to switch, and it doesn't mean just because your phone went way down when others went less. Maybe it's because you're as did bitch better longterm, and you have employee demographics. That makes sense. I think you need to think about those things, but there's not one thing you need to think about. It's part of the ongoing monitoring and the deeper dive, but I think it's very dependent on the size of your plan, the demographics, so to say. So if someone comes along and says, well, you need to look to demographics, I'm kind of like, your plan has $1 million in it. I don't think that's practical. Your choices are more limited. But Rick, you know, this is your place where you're sorting investments in options. You may have stronger views than me on this. So I think that's both a current and next wave discussion to think about because default investments there, they're all different. And the question is why did you choose the one you're in?

 

Rick Unser (00:29:36):

Yeah, and I would agree with so much of what you just said there. And one of the things that that I've really been trying to put out into the marketplace on the podcast and in other venues is just, Hey, these default choices, which again, most people are using as target date funds are complex vehicles. You've seen one target date fund, you seed one target date fund. And I think from a fiduciary standpoint, you really need to dig into and look a little more at those rather than just performance or fees. And again, we've talked about this ad nauseum on the podcast, but I think in an environment like this is really where that work starts to pay off. And not that if you did all that work flawlessly, you had the best target date fund, but I think you really understand how your target date fund is reacting in this environment rather than just saying, Oh my gosh, we have the best performing target date fund and you know, to your point, David, it's Dow, it's one of the worst performing targeted funds.

 

Rick Unser (00:30:37):

Why is that? And again I'm not casting stones here or saying anything's wrong with one process or another, but I think getting to the bottom of what is our target date fund, how was it managed? What is the philosophy? What are some of the risks and considerations that the management team is looking at and trying to mitigate for their investors? And does that align with who you are as a company with the profile of your employees? I think all of those conversations, whether they be cursory to align philosophically or whether they be based on deeper dives that bring in a lot of data analytics, et cetera. I'm with you. I think some of that is probably more appropriate for different types of plans and different types of asset bases. But I think at a basic level everyone needs to have that high level understanding of what's going on and what the philosophy behind the management of their particular strategy is.

 

David Levine (00:31:33):

I agree. And I can, and what item might ask him that, let's face it, everybody is influenced by whether it's product, they sell, things that their business does bias from their sponsor side about what they think is good from how they, they operate as a business. And so in full disclosure, like I work with to Colts or trade group on these of alternatives and defined contribution plans and there's different views. But I think an interesting discussion is, well what's in your target date button? What's right? Are annuities good? Which is not as a culture discussion because there's a whole bunch of people are thinking annuities could be valuable in there. And there's all these products that I've worked on working on and see. And then there's the discussion of what, what about alternative asset classes? How are they performing in this time? There's no one right or wrong despite like the Intel case, an HEB case where they're saying ultra bad. But the point is it's about really looking and saying, well, what worked for us both in the up and down Mark Christians, why are we choosing, and I think now is a great time to come back and say there are QDA performed the way we wanted. Is this the right one? Are there other ones? I think it's a great chance to revisit as we go through. Not required, but definitely good to do.

 

Rick Unser (00:32:42):

No, I totally agree. All right. Let me ask you a pointed question and I think just looking at things you can do from a protecting yourself against people trying to come in with hindsight, we're now sitting basically at the end of the quarter where there's a lot of the investment reporting and all that stuff starts to come in. Do you have an inter of investment committee meeting or fiduciary committee meeting if maybe you're not scheduled to have one this particular quarter or if maybe you meet annually. Is this a significant enough event that says we should get out of whatever our usual cadence of meetings is and have something that we do as a special meeting or an interim meeting based on current environment and market conditions, et cetera?

 

David Levine (00:33:32):

That's a great question. I think if you're in the middle of a transition and you're hearing about bumps because of market liquidity, like we haven't heard of funds locking up the same way we did in 2008 but if you're hearing any of that and your advisors but you, it brings that up. Maybe it's something to consider, but I, I think it's not necessarily, I don't think it's automatically necessarily and I wouldn't require it and here's the reason why markets go up and down. Yes, they're definitely going wild right now. Nobody, no question about that, but first of all, with your advisor, you, they're usually watching anyway. Second of all, everything is down. Everything is off. He, he decisions right now are not required. You could be second guessed by moving too fast or too slow. We all know that we've had various funds and I'm not going to pick on companies where they've had news about a company or a fund and someone says, Oh, we should all get out of this fund, and then a year later the only fantastical and everybody piles back in. We've seen that before. I think in terms of process, retirement is a long term investment and just judging on a two month bear market, I don't think it's required if people are raising questions. Certainly a discussion or an interim report could be helpful, but I don't think it is a must do at this point, but it certainly, it shows great diligence by a committee. If they notice this and they want to raise it, that's great, but it also doesn't mean just because the committee doesn't meet that it's a problem.

 

Rick Unser (00:34:58):

Well said. You've mentioned this a couple times, so let me, let me steer into this. You're making a fun change. You're making a record keeping change or some other big change in your plan that is going to cause disruption, blackout periods, potential time out of the market. I've gotten that a few times as well and have a few people actually going through that at this point in time and they're admittedly a little nervous and a little concerned. What are some of the process points or what are some of the thought points that you would encourage people to think about and is time out of the market? Maybe one of the important things to, to consider? Is there anything more important to consider as you are thinking about, Hey, it's, you know, it's a crazy time and we have this change scheduled for May 1st and should we continue with it or should we reschedule?

 

David Levine (00:35:51):

Absolutely. And I've been asked this question a bunch of times. The world does not stop and if you've decided a fund isn't right for you, you could say, you know, maybe it's performing differently or there's some reason to hold, but I don't think you have to is my response. I think at this point it's good to dot your I's and cross your T's from a process standpoint. Have the notices going out to everybody, are they clear as day what it means? Are you certain, you know how long the transition time for out of market is going to be in? It's clearly defined so people know. I think if you take those steps, I think you can proceed at this point. It doesn't. Prudence isn't about a black and white and if you show you've tried to do this as best as possible and communicated, I don't think you have to stop, but I have no problem if someone says stop because they say, look, our people are are confused.

 

David Levine (00:36:42):

They're not focused. We want to make sure people have this knowledge. I can see justifying it that way and I know I'm doing the classic aware arguing both sides here and I get that, but I actually very comfortable justifying both ways because I don't think bad news means the sky is falling on everything you do, but I also can know that it means people can be distracted and do you want their attention during this time? Both of which are valid points. And I think from a process standpoint having that discussion and saying we're going to proceed or not are still great discussion items at this point.

 

Rick Unser (00:37:13):

Yeah, and where I've tended to weigh in a little on this conversations have been around magnitude of change. I I think that you know to the extent someone's making a fun change where you're going large cap value to large cap value or you're making a fun change. That is our plan has grown and we have a now a less expensive share class or a share class that would lower cost to our investors. It's the same management team. Those type things. I think those are kind of no brainers and ones that logically make sense to to proceed with. I mean church certainly if you feel very strongly that you wouldn't want to, I think to your point David, I think you could easily construct an argument that says, well we'll do this at a at a future time, but I think those things are are ones that probably make sense to to move forward with.

 

Rick Unser (00:38:03):

Where where I've hit the pause button a little bit is been we are changing providers, we are defaulting everyone into a target date fund or some other type of QDA structure. There is likely going to be major disruption to the types of investments in the level of risk people have and there's money that's going to be out of the market for five to seven days just from an enormous administrative and time period. I think that's where I've skewed a little more to, you know, if we all think this is in the best interest of the plan participants, let's proceed. But if we do your point, if you feel like it's there's too much going on, people aren't going to be able to process, then you know there's probably not much harm in pushing this out 30 or 60 days. Assuming that 30 or 60 days means that the, you know, that we've returned to normal.

 

David Levine (00:38:56):

Yes. And Rick, I think there's one thing that you said that I think is so spot on. I think if you are changing people from large cap growth to international equity excluding Europe or something like that where it was just make this up and everybody's just going to be moved. I think they're given that the extreme changes and everything. If you are proceeding, which you can as you note, I think making sure your communication is strong. Even normal communication should be good, but I think if you really want to cover yourself a little bit more, focusing on your communication strengths can be of great value at that point.

 

Rick Unser (00:39:35):

All right. I'm getting ready to pivot us again here. Before I do, I'll give you another chance. You had some good points the last time so I'll give you the chance again here from a fiduciary standpoint during this crazy time during this bear market that we've just entered into, anything else that you would leave people with as some thoughts of maybe what they can be doing today that might not be part of their normal cadence or rhythm in a fiduciary meeting that might reflect well on them down the road?

 

David Levine (00:40:05):

Sure. A couple of things and I know I've seen a lot of people talking about this. Number one it is really understanding and from what I hear the vendors have been good, but understanding during this time how the responsiveness, the call center times the trading hiccups, whether it's on the main account or self director brokerage window, if you have one on what's going on in terms of the operations of your vendors, are they struggling, are they not? That shows you're on top of things minding things to see how things are operating, number one. Number two, if you have company stock during this time, I think company stock, there are those who love it, those who hate it and I think everybody has their biases. Sometimes it's personal bias, sometimes it's business their businesses either for or against it regardless. Right now during company stock. I think the case law, the way I read it, and you take the IBM remand and out of the Supreme court, the cases ever since dude and hopper, I guess it's six years now, have been extremely favorable or very favorable as nice way to the defense bar and show some point of my friends on the plaintiff's side.

 

David Levine (00:41:19):

Meadow is agree with that, but I think a lot of it's been wins for the defense bar. But if you're looking at company stock right now, you know continuing to monitoring and focusing, but this is also a good chance to look at your IPS. There are different versions of IPS, Rick, I can't tell you which version you use, so I'll be honest. There are different IPS out there. I have done ones for fortune 50 companies that are two pages long or three pages long and I have seen one and these are defined contribution plans for ones that are 20 pages long. We can all debate about what you're putting in IPS. My personal belief is simpler. Aspirational is better. If you're going to follow it, fine, but if you're not, that's my big concern. But I think now is the time to say, all right, does our IPS give us white wide enough latitude in challenging times like this?

 

David Levine (00:42:07):

And if not, maybe it's a good time to enhance it and clarify that. So that's another thing to focus on. The last thing I would suggest for things that I think there's already on the radar, but I think as an essential item, many plan sponsors, we've, we spent a lot of time, and I know we'll get to this probably because it comes up all the time talking about data and data privacy and data security. Security and privacy are two different things but they overlap a lot. But when I started out as a programmer, so to me this is like near and dear to me, but one of the things that I think is very important to address right now is in this time of remote work, especially on the employer sponsor side of the house, how are you securing your data? How are you securing your information, cyber breach?

 

David Levine (00:42:55):

How do you deal with impersonation in an era of furloughs and layoffs? Lee and I don't mean this as a negative on a person, there's many people hurting. There already are people hurting? How many people do we all know in the restaurant industry who are struggling and the vast majority of people are good people and they're just gonna try and get along. But there will be bad actors somewhere and it's not because I've worked in the restaurant industry. In fact, it may be someone who just takes advantage of it and tries to scam people because of it. Watch your security. Watch how people are across all too. Like right now is the time to watch for unscrupulous business practices as well or just best as practices that don't align with your corporate values and script. Those practices might be outside third parties that are just trying to sell your people, but sometimes you may also see people try to roll out other services.

 

David Levine (00:43:42):

Think about what does it mean and look carefully and say, what's the security we have on our end as well because we want our own employees tapped and made afraid. I can't tell you how many questions I get from clients already, whether it's a service provider or a sponsor saying to me, Hey, we're getting asked these questions. What should we do? And people are scared and rightfully so, especially in certain industries. It's important to really think how do you protect them at this point? I know it's not about paternalism, it's about being right as a fiduciary. So those are a couple items. Feel free to poke some holes in me, Rick, but those are kinds of the things I would pick on right now.