Episode Transcript

Speakers: Craig Andrews, Jeff Atwell, Bluesman Grendel and the Compliance Choir

[0:00] Craig Andrews: You never know how much time you have.
[0:02] Craig Andrews: For me, that stopped being an idea and became reality on August 22nd, 2021.
[0:09] Craig Andrews: The doctors put me on a ventilator and told my wife to call hospice so she could prepare
[0:14] Craig Andrews: for the day they planned to pull the plug.
[0:17] Craig Andrews: Six weeks later, I woke up to an entirely different reality.
[0:20] Craig Andrews: I could not walk, I could not talk, I could not even lift my own arm, and I woke up realizing
[0:26] Craig Andrews: something else, I had not made the right preparations for my family.
[0:30] Craig Andrews: The plans I thought were pretty good fell through when it mattered most.
[0:34] Craig Andrews: That is why fiduciary alchemy welcomes voices that would have warned me about the holes
[0:39] Craig Andrews: in my plans.
[0:40] Craig Andrews: My hope is that you live a long and prosperous life, but I also hope you make better plans
[0:45] Craig Andrews: than I did.
[0:46] Craig Andrews: So tune in, take notes, and stay with us through the end when bluesman grindle and the compliance
[0:51] Craig Andrews: choir.
[0:53] Craig Andrews: Giving a word of caution.
[1:00] Craig Andrews: Today I want to welcome Jeff Atwell.
[1:02] Craig Andrews: He is with fiduciary exchange, and he specializes in qualified retirement plans.
[1:08] Craig Andrews: He's been doing it for over 40 years.
[1:11] Craig Andrews: He's been involved in over 3,000 plans since 1978.
[1:16] Craig Andrews: Jeff helps plan sponsors have a qualified retirement plan which meets the plan sponsors' goals
[1:22] Craig Andrews: and objectives and provides an opportunity for employees to save a dignified retirement.
[1:31] Craig Andrews: And so if you're a business owner, you have some responsibilities that you may or may
[1:37] Craig Andrews: not know about, and we're going to talk about those today.
[1:41] Craig Andrews: Jeff, welcome.
[1:43] Jeff Atwell: Hey Craig, thanks, I appreciate the opportunity to be with you today.
[1:47] Craig Andrews: That's great chatting with you, I mean, we've sort of run into each other and known each
[1:53] Craig Andrews: other for what, a couple of years, a year and a half, two years?
[1:57] Jeff Atwell: About a year and a half now, yep, about a year and a half, yeah.
[2:01] Craig Andrews: And you're up in Hillsborough, I'm down in the Austin area, of course you're up in Hillsborough,
[2:06] Craig Andrews: but you said something about West Texas, where did you grow up?
[2:10] Jeff Atwell: I mean, anybody here at you talk knows your texts and knows I'm not.
[2:14] Jeff Atwell: So I grew up in the Suffolk area, little town south, a little bit called Tohoka, and then
[2:21] Jeff Atwell: I lived in Midland for 18 years and then moved to the Metroplex area about 23 years ago.
[2:28] Jeff Atwell: So you know, almost in the Metroplex, as long as I was in West Texas, you know, so not quite
[2:36] Jeff Atwell: the close.
[2:38] Craig Andrews: You know, I was driving through probably real close to where you grew up, I can't remember
[2:45] Craig Andrews: the town, but it was probably 45 minutes south of Lubbock.
[2:52] Craig Andrews: And we were headed, we were headed to Colorado via, oh heck, UFO town in New Mexico.
[3:00] Craig Andrews: Roswell.
[3:01] Craig Andrews: Roswell, yeah.
[3:02] Craig Andrews: We're heading out to Roswell and then we're going to hang north and go up into Colorado.
[3:07] Craig Andrews: And so we just stayed in some hotels somewhere real close to where you grew up.
[3:11] Craig Andrews: And I remember there were some oil field workers that saw in the hotel and we had just become
[3:18] Craig Andrews: energy independent.
[3:19] Craig Andrews: It was the first time I went, when we were having breakfast in the morning I saw them,
[3:25] Craig Andrews: I just went up to a couple and said, Hey, I want you all know that I really appreciate
[3:30] Craig Andrews: what you do.
[3:32] Craig Andrews: You guys have helped make us energy independent.
[3:34] Craig Andrews: That's so important from a national security standpoint and just a, they looked at me like
[3:40] Craig Andrews: I had two heads.
[3:41] Craig Andrews: I think they were just there earning a paycheck, but I just, I considered them patriots.
[3:45] Jeff Atwell: Exactly.
[3:46] Jeff Atwell: Yes.
[3:47] Jeff Atwell: You know, that's what's so cool about living in Midland for 18 years, watching most of
[3:52] Jeff Atwell: my clients for oil and gas clients and some form of fashion, working the oil field and
[3:57] Jeff Atwell: to see what they do to, to create the energy that we have firsthand, like working on the
[4:04] Jeff Atwell: rig, drilling wells, working on the workover rigs, you know, servicing those wells, just
[4:10] Jeff Atwell: keeping everything going is absolutely amazing watching everybody work and the job they do.
[4:17] Jeff Atwell: And most of it is pretty risky from a, from a risk standpoint, you know, working on the
[4:23] Jeff Atwell: old public, you know, so yeah, yeah.
[4:27] Craig Andrews: It's hot and it is.
[4:31] Jeff Atwell: Yeah.
[4:32] Jeff Atwell: Yeah.
[4:33] Jeff Atwell: Yeah.
[4:34] Craig Andrews: So what had you moved?
[4:35] Jeff Atwell: Oh, go ahead.
[4:36] Jeff Atwell: Go ahead.
[4:37] Jeff Atwell: You know what's so cool about West Texas now is that it's become a very popular place to
[4:43] Jeff Atwell: raise grapes for wine.
[4:46] Craig Andrews: Really?
[4:47] Jeff Atwell: Yes.
[4:48] Jeff Atwell: In fact, there's a winery in San Saba that gets all their grapes from the brownfield,
[4:54] Jeff Atwell: the Hoka area for their wines that they make in San Saba.
[5:00] Craig Andrews: I would never guess that.
[5:01] Craig Andrews: That's pretty wild.
[5:02] Jeff Atwell: It is.
[5:03] Jeff Atwell: It's amazing.
[5:04] Jeff Atwell: Yeah.
[5:05] Jeff Atwell: Yeah.
[5:06] Craig Andrews: And what?
[5:07] Jeff Atwell: So you say the metric plaques, but you're Hillsborough, which led by an hour 45 minutes
[5:12] Jeff Atwell: to an hour south of about 60 miles south by an hour.
[5:17] Jeff Atwell: It's an hour 15 minutes to DFW airport for me.
[5:20] Jeff Atwell: Yeah.
[5:21] Jeff Atwell: Yeah.
[5:22] Jeff Atwell: And once again, once you get north of 20, it's nasty.
[5:27] Jeff Atwell: Yeah.
[5:28] Jeff Atwell: Nasty driving.
[5:29] Jeff Atwell: Yeah.
[5:30] Craig Andrews: Where had you moved out to Hillsborough?
[5:33] Jeff Atwell: Well, I met my wife who was raised in Hillsborough.
[5:38] Jeff Atwell: So that's really been a blessing for me.
[5:42] Jeff Atwell: It's really a funny story, I'll tell you.
[5:45] Jeff Atwell: So my mom, at the time, lived in Walsahatchee, and my wife was managing a clothing store
[5:52] Jeff Atwell: at the mall, you know, the mall in Hillsborough when it was still operating, is being re-reconformed
[6:01] Jeff Atwell: to a different venue now.
[6:03] Jeff Atwell: But my mom was in there shopping one day, and Lori, my wife was waiting on her, and
[6:10] Jeff Atwell: she says, "You're really nice.
[6:12] Jeff Atwell: Are you married or anything?"
[6:13] Jeff Atwell: She says, "No, I don't even have a boyfriend."
[6:15] Jeff Atwell: She said, "Well, you need to meet my son."
[6:17] Jeff Atwell: Oh, boy.
[6:20] Jeff Atwell: Mom was already always looking after me, right?
[6:23] Jeff Atwell: And so, and she, mom said, "Well, can I get your phone number?"
[6:27] Jeff Atwell: She said, "Okay."
[6:29] Jeff Atwell: So she wrote her phone number down, and of course, mom called me and gave it to me.
[6:34] Jeff Atwell: And so I called Lori up, and we had a date, and we had a blind date there in Hillsborough.
[6:42] Jeff Atwell: And, you know, didn't want to leave.
[6:46] Jeff Atwell: And so about a year later or so, we got married and moved back up to the Metroplex where I
[6:52] Jeff Atwell: was living at the time.
[6:53] Jeff Atwell: But then her parents lived on the home place that they had bought about 60 years ago, and
[7:01] Jeff Atwell: they became ill.
[7:02] Jeff Atwell: And so we decided to move back to the home place so she could help take care of them.
[7:07] Jeff Atwell: And they have since passed away, but that's what's so cool about what has developed since
[7:12] Jeff Atwell: then.
[7:13] Jeff Atwell: We have about 150 acres that now has become a compound for five different family members.
[7:21] Jeff Atwell: And what's so cool about it is there's nine kids on the compound all under eight years
[7:25] Jeff Atwell: of age.
[7:27] Jeff Atwell: So it's quite an interesting environment, a lot of family activities and things of that
[7:34] Jeff Atwell: nature.
[7:35] Jeff Atwell: So it's just really cool what has evolved over the years.
[7:39] Jeff Atwell: And I think it's really an honor to her mother and father that what they bought 60, 70 years
[7:47] Jeff Atwell: ago now has been utilized by multiple families and multiple generations.
[7:53] Craig Andrews: That does sound amazing.
[7:54] Craig Andrews: I love that.
[7:55] Craig Andrews: And hopefully that persists.
[7:57] Craig Andrews: Hopefully you're far enough away from DFW that that remains untouched.
[8:02] Craig Andrews: Right?
[8:03] Jeff Atwell: Right.
[8:04] Jeff Atwell: Yeah.
[8:05] Jeff Atwell: Yeah.
[8:06] Craig Andrews: Let's talk a little bit about what you do.
[8:10] Craig Andrews: And I mean, just in a nutshell, what is it you do for folks and for business owners in
[8:16] Craig Andrews: particular?
[8:17] Jeff Atwell: Right.
[8:18] Jeff Atwell: Yeah.
[8:19] Jeff Atwell: So several years ago, in 2006, the tax regulations and the regulations involving the governance
[8:27] Jeff Atwell: of a retirement plan started becoming more and more complex.
[8:33] Jeff Atwell: And they continue to be more complex as we go through time.
[8:38] Jeff Atwell: And so I saw a real need for to develop a service where a business owner could outsource
[8:43] Jeff Atwell: the governance of the retirement plan to a third party.
[8:47] Jeff Atwell: Therefore, relieving themselves of that responsibility as much as possible.
[8:51] Jeff Atwell: You can't get rid of 100%.
[8:54] Jeff Atwell: And so we developed that service and basically since then we have grown substantially and
[9:01] Jeff Atwell: then in 2019 Congress passed new legislation creating the pooled employer plan, which allows
[9:08] Jeff Atwell: for unrelated employers to join a plan that is governed by a prudent expert such as our
[9:15] Jeff Atwell: firm.
[9:16] Jeff Atwell: And that concept is taking off substantially and we've been growing at about 150% a year
[9:22] Jeff Atwell: year over year for about five years.
[9:25] Jeff Atwell: But basically what it amounts to is every single retirement plan in existence, doesn't
[9:30] Jeff Atwell: matter how big you are, whether it's a start up plan or a plan with billions of dollars
[9:34] Jeff Atwell: and assets, they all have to play by the same rules.
[9:38] Jeff Atwell: They'll have to be in compliance with internal revenue code, the Department of Labor, or
[9:43] Jeff Atwell: risk regulations and the legal plan documents at all times.
[9:48] Jeff Atwell: And what's the rest of STEM for?
[9:49] Jeff Atwell: I keep hearing that term, the Employee Retirement Income Security Act.
[9:55] Jeff Atwell: So that's what the acronym stands for and it was passed into law in 1974 on Labor Day
[10:01] Jeff Atwell: by President Ford.
[10:03] Craig Andrews: Huh.
[10:04] Craig Andrews: Okay.
[10:05] Craig Andrews: Wow.
[10:06] Jeff Atwell: Yeah.
[10:07] Craig Andrews: Well, he was only in for a short term and he made a big impact.
[10:09] Jeff Atwell: That's right.
[10:10] Jeff Atwell: Exactly.
[10:11] Jeff Atwell: It changed the world because up until then just about anything went from a business owner
[10:18] Jeff Atwell: to a brief story about that.
[10:20] Jeff Atwell: So the Studebaker Automobile Company in the '60s was having difficulty financially.
[10:26] Jeff Atwell: And there were no rules protecting the rights of participants and their beneficiaries in
[10:30] Jeff Atwell: qualified plans at that particular time.
[10:33] Jeff Atwell: So Studebaker decided that they were going to use the assets that had accumulated in
[10:39] Jeff Atwell: their pension plan to try to keep the company afloat.
[10:43] Jeff Atwell: Well, you know what happened to Studebaker.
[10:46] Craig Andrews: Right.
[10:47] Craig Andrews: Right.
[10:48] Jeff Atwell: So all the participants that were covered by that pension plan lost their money and
[10:54] Jeff Atwell: their pension associated.
[10:55] Jeff Atwell: Not only did they lose their job, but they lost their pension as well because there was
[10:58] Jeff Atwell: nothing protecting them and those assets.
[11:02] Jeff Atwell: So Congress as a result of that because it was a huge deal as you can imagine.
[11:06] Jeff Atwell: Yep.
[11:07] Jeff Atwell: You know, began writing these regulations.
[11:09] Jeff Atwell: It took them six years to write the Arissa regulations.
[11:14] Jeff Atwell: They started in the late '60s and finally, like I said, in Labor Day of 1974, finally
[11:20] Jeff Atwell: was enacted into law.
[11:22] Jeff Atwell: And it's a very specific body of law and it's evolved over the years.
[11:27] Jeff Atwell: I collect my job security act because it's always changing and more and more responsibilities.
[11:36] Jeff Atwell: And it's specifically meant to protect the beneficiaries and participants that have assets
[11:41] Jeff Atwell: in retirement plans, primarily 401(k) plans today.
[11:45] Jeff Atwell: So if anybody misuses those funds, an employer or an employee of an employer or an advisor
[11:52] Jeff Atwell: working with the plan, then they could be held accountable for the misuse of those funds.
[11:59] Jeff Atwell: And over the years, I've actually seen the Department of Labor throw people in jail for
[12:02] Jeff Atwell: misusing assets that are in retirement plans.
[12:07] Craig Andrews: So is this the thing I keep hearing in conjunction with Arissa is fiduciary duty.
[12:13] Craig Andrews: Is that what you're talking about?
[12:15] Jeff Atwell: Correct.
[12:16] Jeff Atwell: Yeah.
[12:17] Jeff Atwell: Yeah.
[12:18] Craig Andrews: And the other thing that because I've had a whole bunch of folks on my other podcast
[12:22] Craig Andrews: in the healthcare space putting together health plans and they talk about Arissa and fiduciary
[12:29] Craig Andrews: duty.
[12:30] Craig Andrews: Right.
[12:31] Craig Andrews: Is that the same?
[12:32] Jeff Atwell: It's very similar, and that's the Arissa responsibilities in the healthcare area are
[12:38] Jeff Atwell: really evolving rapidly.
[12:42] Jeff Atwell: Health and welfare plans were not subject to the scrutiny that qualified retirement plans
[12:47] Jeff Atwell: were under Arissa until just recently in the last few years.
[12:52] Jeff Atwell: And those regulations involving health and welfare plans have really become more complicated
[12:59] Jeff Atwell: and put more responsibility on business owners sponsoring health and welfare plans.
[13:04] Jeff Atwell: But the same responsibilities have been required in qualified plans since 1974.
[13:12] Jeff Atwell: And most employers don't realize what their responsibilities are.
[13:16] Jeff Atwell: And that is the foundation of Arissa is that you have to act as a prudent expert in governing
[13:21] Jeff Atwell: the retirement plan.
[13:22] Craig Andrews: Well, those are scary words prudent, prudent expert.
[13:26] Craig Andrews: Yes, because most business owners, you know, for me, right in my business, I'm struggling
[13:32] Craig Andrews: being an expert at what I do and that's a full time job keeping my level of expertise
[13:37] Craig Andrews: up at marketing.
[13:39] Jeff Atwell: Yeah.
[13:40] Craig Andrews: Right.
[13:41] Craig Andrews: I don't have time to figure out this other stuff.
[13:43] Jeff Atwell: Correct.
[13:44] Jeff Atwell: And that's the dilemma that business owners have as well as the board of directors, you
[13:48] Jeff Atwell: know, the in-run case many years ago now proved that the board of directors has fiduciary
[13:54] Jeff Atwell: responsibility, the officers at the board of points to oversee the retirement plan has
[13:59] Jeff Atwell: fiduciary responsibility.
[14:00] Jeff Atwell: And the committee that is appointed to govern the plan has responsibility as well.
[14:06] Jeff Atwell: And I don't know if you realize this or not, but the department labor over a five year
[14:10] Jeff Atwell: period of time collected over $250 million from the board of in-run, skilling in late
[14:17] Jeff Atwell: the two officers and the investment committee or the administrative committee overseeing
[14:21] Jeff Atwell: the plan, it took them five years to do it and millions of pages of investigation.
[14:26] Jeff Atwell: But they collected $250 million from those individuals because as a fiduciary, you can
[14:31] Jeff Atwell: be held individually liable for any fiduciary breaches that you may occur.
[14:37] Jeff Atwell: And so that's kind of the standard that everybody needs to be aware of is the responsibility
[14:43] Jeff Atwell: goes way up on the up the ladder in the hierarchy of any business structure.
[14:48] Jeff Atwell: Yeah.
[14:51] Craig Andrews: And so the, you know, one of the things that's been going on on the healthcare side, Johnson
[14:58] Craig Andrews: and Johnson is involved, I don't know where the suit stands now, but it was a $20 million
[15:04] Craig Andrews: lawsuit because they didn't meet their fiduciary responsibility on the medical side, on the
[15:10] Craig Andrews: health benefit side.
[15:11] Jeff Atwell: Yep.
[15:12] Jeff Atwell: That's right.
[15:13] Jeff Atwell: And there's a lawsuit that's very similar to that in the Colofaut plan space.
[15:18] Jeff Atwell: One of the most recent ones was a company that serves in the same capacity that I do.
[15:25] Jeff Atwell: And they failed to oversee, it's a $2 billion retirement plan, and they failed to oversee
[15:31] Jeff Atwell: the service providers and document that their compensation was reasonable and that they
[15:36] Jeff Atwell: were doing the services that they were engaged to perform for the plan, there was no documentation.
[15:42] Jeff Atwell: And the DOL came in and sued them for breach of fiduciary duty and they ended up writing
[15:46] Jeff Atwell: a check for $45 million.
[15:48] Craig Andrews: Oh my goodness.
[15:50] Jeff Atwell: Yeah.
[15:51] Jeff Atwell: Yeah.
[15:52] Jeff Atwell: And so it can be very, very financially devastating to a company for an operational defect or fiduciary
[16:02] Jeff Atwell: breach.
[16:03] Jeff Atwell: And you have, you have two risks.
[16:05] Jeff Atwell: Number one, you have the internal revenue code that you have to follow and that's the
[16:09] Jeff Atwell: regulations that allow the plan to be qualified and the contributions going into the plan
[16:14] Jeff Atwell: to be deductible at the company level and so forth.
[16:17] Jeff Atwell: And if you don't follow those regulations, then you can have an operational defect that
[16:22] Jeff Atwell: can disqualify your contributions, which could be horrible.
[16:26] Jeff Atwell: Yeah.
[16:27] Craig Andrews: Right.
[16:28] Craig Andrews: Because then everybody, everybody had assets accumulated in the plan, all of a sudden has
[16:32] Craig Andrews: a tax boy event.
[16:33] Jeff Atwell: Yeah.
[16:34] Jeff Atwell: Yeah.
[16:35] Craig Andrews: Oh my goodness, yeah, that could be horrendous.
[16:40] Jeff Atwell: And in the IRS, when they come in and audit a plan, they come in and look for income tax
[16:45] Jeff Atwell: dollars for failure to operate according to the IRS regulations, right?
[16:49] Jeff Atwell: And there's all kinds of regulations that the plan has to meet on an annual basis.
[16:53] Jeff Atwell: And then the DOL, that's the agency that governs ARISA.
[16:57] Jeff Atwell: And they're coming in looking for fiduciary breaches that could affect the participants
[17:01] Jeff Atwell: and beneficiaries covered by the plan, like not making timely deposits.
[17:05] Jeff Atwell: We deal with that all the time, you know, employers, they have certain time standards
[17:10] Jeff Atwell: that the DOL has said on how frequently and timely that can make deposits once they're
[17:15] Jeff Atwell: withheld from the participants' paychecks.
[17:17] Jeff Atwell: If they do not make those on a timely basis and they have to pay lost earnings on those
[17:23] Jeff Atwell: deposits and a penalty based on those lost earnings to the government.
[17:27] Jeff Atwell: And so that happens all the time.
[17:30] Craig Andrews: And this has to be really frustrating because, you know, it's just it makes running a business
[17:36] Craig Andrews: all the more complicated.
[17:37] Craig Andrews: When I think about at least myself and I think about other business owners, I know, you know,
[17:42] Craig Andrews: they have some passion to do something.
[17:44] Craig Andrews: They wouldn't create jobs for people.
[17:45] Craig Andrews: They wouldn't bring value to life.
[17:47] Craig Andrews: And they want their employees to have a good retirement plan.
[17:52] Craig Andrews: And this is just in some ways, this feels like a dark rain cloud hanging over the whole
[17:57] Craig Andrews: effort to do something good for the employees.
[17:59] Jeff Atwell: Exactly.
[18:00] Jeff Atwell: And, of course, that's the impetus that gave us the desire and to build the services that
[18:08] Jeff Atwell: we have built over the years and make that available to participants.
[18:12] Jeff Atwell: That's why the pooled employer plan concept since 2019 has really gained a lot of attractiveness
[18:20] Jeff Atwell: to business owners is because now there's a resource that they can utilize to outsource
[18:28] Jeff Atwell: the governance of the plan to a prudent expert because this is all we do all day long every
[18:32] Jeff Atwell: day.
[18:33] Craig Andrews: And so help me understand what the pooled employer program is.
[18:37] Jeff Atwell: Yeah.
[18:38] Jeff Atwell: So basically it's a concept that was created by Congress specifically to deal with the complexities
[18:44] Jeff Atwell: that we've been talking about so that employers can have a willingness to maintain the retirement
[18:50] Jeff Atwell: plan and be able to focus on running their business and not governing their plan, have
[18:55] Jeff Atwell: a quality plan that is run by an expert but also to encourage business owners who do
[19:03] Jeff Atwell: not have a retirement plan to start a plan because a lot of business owners haven't started
[19:09] Jeff Atwell: a plan because they didn't have to deal with the complexities of it.
[19:13] Jeff Atwell: So that's why Congress created this concept and it's working and it's amazing how it's
[19:19] Jeff Atwell: taking off and the attractiveness that business owners have found the pooled employer plan
[19:26] Jeff Atwell: to be as a resource for them to have a quality retirement plan without having to spend the
[19:32] Jeff Atwell: time governing it like we've been talking about.
[19:36] Craig Andrews: Why doesn't like Fidelity or Vanguard or these guys do that?
[19:42] Jeff Atwell: Why isn't?
[19:43] Jeff Atwell: So if I'm investing individually, I can log on to Vanguard or what have you and buy some
[19:52] Jeff Atwell: funds, mutual funds, why aren't those guys doing this naturally just as a part of what
[19:58] Jeff Atwell: they do?
[19:59] Jeff Atwell: Well, those organizations, they have investments within the pooled employer plan like the mutual
[20:07] Jeff Atwell: funds that they prepare, the Fidelity funds or Vanguard funds or TRO price.
[20:13] Jeff Atwell: So those funds are generally being utilized within the pooled employer plan.
[20:17] Jeff Atwell: So they're gathering assets, which is what their primary goal is, is to gather assets
[20:21] Jeff Atwell: as a fund manager, right?
[20:24] Jeff Atwell: And so their expertise lies in managing mutual funds or ETFs or CITs for that matter collective
[20:31] Jeff Atwell: investment trust and really not in becoming a prudent expert in governing a retirement
[20:35] Jeff Atwell: plan.
[20:36] Jeff Atwell: They're not in a unique area, this niche that I operate in on a daily basis, and there's
[20:42] Jeff Atwell: not bringing firms like ours in the country that specialized in outsourced fiduciary
[20:47] Jeff Atwell: governance.
[20:48] Jeff Atwell: And that's what makes it so exciting for me.
[20:51] Jeff Atwell: But their funds are being utilized in this concept and they're gathering assets through
[20:56] Jeff Atwell: the pooled employer plans that they're utilized within.
[21:01] Jeff Atwell: But their focus is on record keeping the plan or providing the funds within the plan
[21:08] Jeff Atwell: and not governance, which is a very unique area and required.
[21:13] Jeff Atwell: And there's a lot of responsibility that goes along with that.
[21:16] Craig Andrews: Well, and something else I heard recently, that makes a lot of sense.
[21:19] Craig Andrews: I didn't realize that.
[21:20] Craig Andrews: I didn't realize that.
[21:21] Craig Andrews: I figured, I just assumed somebody as big as Fidelity, TRO price or Vanguard would just
[21:28] Craig Andrews: have all that sorted out, be a turnkey package.
[21:35] Craig Andrews: But the other thing that I've heard others say is that there's been a lot of fat in the
[21:44] Craig Andrews: 401(k) plans where somebody put together a plan, it had high fees, and it just wasn't
[21:49] Craig Andrews: really doing much for the employees.
[21:52] Craig Andrews: And a lot of that right now is being disrupted, I guess, by these newer regulations.
[21:57] Jeff Atwell: Well, you're exactly right, and like I said, I set my first 401(k) plan up in 1983, I set
[22:08] Jeff Atwell: my first retirement plan up as you stated in 1978, but my first 401(k) was in 1983.
[22:16] Jeff Atwell: And the expenses that those participants paid back in those days was horrendous.
[22:22] Jeff Atwell: It was amazing because there was no technology, there was no real products available at that
[22:27] Jeff Atwell: particular time.
[22:29] Jeff Atwell: And over the decades, what we've seen through evolution of ETFs and mutual funds, participants
[22:37] Jeff Atwell: in retirement plans, it doesn't matter how big the plan is, startup plans now have funds
[22:40] Jeff Atwell: available to them with zero expense ratios, right?
[22:45] Jeff Atwell: And it's all because of the fact that in 2013, the Department of Labor passed new regulations
[22:52] Jeff Atwell: that really focused in on compensation and fees.
[22:57] Jeff Atwell: And that's really something that a lot of plan sponsors don't realize is that that plan
[23:05] Jeff Atwell: sponsor has to document that the compensation being paid to the service providers providing
[23:11] Jeff Atwell: services to the plan and the fund expense ratios are reasonable for a plan of that size.
[23:19] Jeff Atwell: And they have to have documentation and let me tell you how important that is.
[23:23] Jeff Atwell: It's to pay compensation from the plan to a service provider is an exemption to a DOL
[23:30] Jeff Atwell: prohibited transaction, okay?
[23:34] Jeff Atwell: So there's two sides to the coin.
[23:36] Jeff Atwell: Number one is the service provider has to provide a disclosure to the plan sponsor disclosing
[23:41] Jeff Atwell: what their services are and the compensation they're going to receive before they can
[23:46] Jeff Atwell: receive compensation.
[23:48] Jeff Atwell: So because of that fact, everybody does that.
[23:51] Jeff Atwell: So if you're an investment advisor, a record keeper, like Fidelity or Vanguard, you're
[23:56] Jeff Atwell: going to give that plan sponsor that disclosure because you want to get paid, right?
[24:01] Jeff Atwell: But the other side of the coin and this is where the exposure is, is that the plan sponsors
[24:07] Jeff Atwell: are supposed to suppose to take that disclosure and then evaluate the compensation being paid
[24:12] Jeff Atwell: to each individual service provider and document that that compensation is reasonable, which
[24:17] Jeff Atwell: will never be defined by the department.
[24:24] Jeff Atwell: Right?
[24:25] Jeff Atwell: And that and have that documentation in file that it is because if they don't, then they
[24:31] Jeff Atwell: have a prohibited transaction.
[24:34] Jeff Atwell: Now let me tell you the consequences of that.
[24:37] Jeff Atwell: So let's assume that the plan is paying $50,000 to the service providers annually for the
[24:44] Jeff Atwell: service's record keeping, advisory services, administration compliance services, let's
[24:49] Jeff Atwell: say it's just $50,000, there's a six year statute limitation.
[24:54] Jeff Atwell: So if the DOL came in and that plan sponsor did not have adequate documentation to prove
[24:59] Jeff Atwell: that that $50,000 was reasonable, then the DOL is going to say you have a prohibited transaction,
[25:04] Jeff Atwell: you're going to have to reimburse the plan for up to six years times, $50,000 to make
[25:08] Jeff Atwell: the participants hold because you allowed this to happen.
[25:12] Jeff Atwell: That's $300,000.
[25:13] Craig Andrews: Wow.
[25:14] Craig Andrews: Wow.
[25:15] Craig Andrews: Jeff, this one thing that's clear is this gets complicated quickly and it's hurting my brain
[25:25] Craig Andrews: a little bit.
[25:26] Craig Andrews: So I imagine it's hurting the brain the most business owners.
[25:31] Craig Andrews: If the business owners listen to this and they want to reach out and just get some questions
[25:36] Craig Andrews: answered or figure out they're doing the right thing, how could they reach it?
[25:41] Jeff Atwell: Well, my email address is j@well@americantcs.com or they can give me a call on my phone at
[25:51] Jeff Atwell: 972-358-6778.
[25:56] Craig Andrews: That's awesome.
[25:57] Craig Andrews: Jeff, I really appreciate you coming home to fiduciary alchemy, it's a technical subject.
[26:02] Craig Andrews: It's not fun to talk about, but it seems very, very important and I appreciate you sharing
[26:06] Craig Andrews: your knowledge.
[26:07] Jeff Atwell: Yeah, thank you, Craig.
[26:08] Jeff Atwell: I really appreciate the opportunity to be with you today.
[26:13] Craig Andrews: Thank you for tuning in to fiduciary alchemy, the coolest financial podcast you're likely
[26:18] Craig Andrews: to find.
[26:20] Craig Andrews: We go looking for voices like the one you just heard because I want you to dodge the mistakes
[26:24] Craig Andrews: that I made and learn it without the coma, without the drama, without nearly paying the
[26:29] Craig Andrews: man.
[26:30] Craig Andrews: I don't know why I lived, when so many others died, that part's still a mystery.
[26:36] Craig Andrews: Now some folks ask, Craig, what is it you do?
[26:39] Craig Andrews: Well I'm telling you now, that's no mystery at all.
[26:41] Craig Andrews: We solve hard marketing problems and crowded markets, so good folks like our guests can
[26:46] Craig Andrews: rise above the noise, become visible, memorable, irresistible, and grow like never before.
[26:53] Craig Andrews: If organic growth is your problem, reach out, call me, let's make a plan and bring your next
[26:58] Craig Andrews: steps into the light.
[26:59] Craig Andrews: But don't leave yet, stick around a minute more and listen to blues man grendel and the
[27:04] Craig Andrews: compliance choir deliver a word of caution, just for you.
[27:23] Bluesman Grendel and the Compliance Choir: This podcast is for information, education, that is all.
[27:32] Bluesman Grendel and the Compliance Choir: It is not financial tax or legal advice to guide your call.
[27:41] Bluesman Grendel and the Compliance Choir: Nothing here's an offer, nothing here's a buy or sell.
[27:48] Bluesman Grendel and the Compliance Choir: No recommendation, no solicitation, I'm saying it plain and well, plain and well,
[28:03] Bluesman Grendel and the Compliance Choir: it's not fair, it's not fair, it's not fair, it's not fair, it's not fair, it's not fair
[28:21] Bluesman Grendel and the Compliance Choir: for you.
[28:38] Bluesman Grendel and the Compliance Choir: It's not fair, it's not fair, it's not fair, it's not fair, it's not fair, it's not fair
[29:05] Bluesman Grendel and the Compliance Choir: for you, it's not fair, it's not fair, it's not fair, it's not fair.
[29:18] Bluesman Grendel and the Compliance Choir: It's not fair, it's not fair, it's not fair, it's not fair, it's not fair, it's not fair
[29:38] Bluesman Grendel and the Compliance Choir: for you.
[29:49] Bluesman Grendel and the Compliance Choir: It's not fair, it's not fair, it's not fair, it's not fair, it's not fair, it's not fair
[30:09] Bluesman Grendel and the Compliance Choir: for you.
[30:20] Bluesman Grendel and the Compliance Choir: It's not fair, it's not fair, it's not fair, it's not fair, it's not fair, it's not fair
[30:44] Bluesman Grendel and the Compliance Choir: for you.