W. Scott Simon
President Gerald Ford signed the Employee Retirement Income Security Act into law on Sept. 2, 1974–36 years ago on the publication date of this month’s column. Among those sitting in the audience in the East Room of the White House that day witnessing this historic event was Jeffrey Mamorsky, a young attorney for Mobil Oil. Mamorsky was invited to the signing ceremony because he played an important part in educating and advising the congressional staffs that drafted ERISA. But how did an attorney for an oil company who wanted to grow up to be a sportswriter wind up in the White House that day, smiling and happy that this great law had finally been enacted and now signed into law?
Many of us deal with qualified retirement plans in our profession every day. Some even become engrossed in the intricacies of the laws of ERISA, the Internal Revenue Service and the U.S. Department of Labor, and the regulations thereto. Very few of us, however, really know the story behind ERISA, and how and why it came into being. So I thought it might be interesting over the next few months to explore the historical antecedents of modern qualified retirement plans in America and in the process record the oral history, so to speak, of one person who played an important role in shaping the world that many of us inhabit in our professional lives today.
I recently interviewed Mamorsky, who is now co-chairman of the Global Benefits and Compensation Group at Greenberg Traurig, LLP, an international, full-service law firm with 1,800 attorneys in more than 30 offices in the United States, Europe and Asia.
Scott Simon: Thanks for consenting to this interview, Jeff. I’m sure that many people will find it interesting and enlightening.
Jeff Mamorsky: Glad to be with you.
Did you always want to grow up and be a lawyer?
No. At first I wanted to be a sportswriter. I always loved writing. From the time I was 16, I had to support my mother and my younger brother. I started out writing for the school newspaper in junior high. After that, I managed to work my way through high school, college and law school as a sports writer. I worked for the New York Times, the New York Daily News and the Herald Tribune, and I actually did pretty well; I made about $60 a week and this was in the late 1950s, early 1960s, doing that.
Where did you go to college?
I went to NYU when they had an uptown campus in the Bronx in University Heights, because they had the best college daily newspaper in the United States, the Heights Daily News–other than Columbia. When I graduated from college, I wanted to go to Columbia journalism school and get my master’s degree. But even though I got in, I didn’t get a scholarship. I was really disappointed because that’s what I really wanted to do, to be a sportswriter.
So what did you do then?
Well, I got a scholarship to law school. My college dean told me I would be a good lawyer because I was a good writer and I liked to do research. So I went to law school at the University of Buffalo but after only one year there, I was drafted by the Army during the Viet Nam war. After I got out of the Army, I looked for a job pending my return to law school. I saw an ad in the newspaper, went to the employment agency, and lo and behold there was my old fraternity brother from college. He said that he had the perfect job for me at Prentice Hall as a legal editor. The only problem was that I was not yet a lawyer but he sent me over there anyway even though I hadn’t yet graduated from law school. I got the job but after a couple months, the personnel department contacted me and said, “Mr. Mamorsky, we don’t have your transcripts from law school,” and I said “Well, I still have to finish law school.” Well, that caused a stir and they were going to fire me, but my immediate boss said there was no way you are going to fire Jeff, he’s the best writer we have ever had here.
So you’re in your first job after getting out of the Army and within a few months, they’re already ready to fire you?
Yes. So I guess there was a compromise with those who wanted my scalp. One, they punished me by lowering my salary from $9,000 to $5,000 a year. And two, they reassigned me to the pension and profit sharing department which published legal loose-leaf services updated on a weekly basis in the benefits and compensation area.
So let me get this straight: after finding out that you weren’t a law school graduate, Prentice Hall was going to fire you but they relented at your boss’s insistence but not without punishing you by lowering your annual salary nearly 50% and assigning you to pensions.
Yes, that’s about right; crazy, isn’t it! Now remember, this was in 1967 and at that time there were only two legal loose-leaf services–one was Commerce Clearing House and the other was Prentice Hall. That was obviously prior to ERISA and lawyers didn’t really do any pension stuff then. Pension work was really done by actuaries and insurance companies, and the only lawyers that were really involved were the people at Prentice Hall and Commerce Clearing House. So I had the good fortune of being a legal editor at Prentice Hall in 1967–except that I was not yet a lawyer!
Were there any people that really helped educate you about pensions?
Yes, two in particular. One of the people that helped me out greatly was a gentleman by the name of Leo Brown who was the pension chief of the IRS in Manhattan. In the late 1960s, early 1970s, most Fortune 100 companies were headquartered in Manhattan so Leo was a very important guy. In my first month on the job at Prentice Hall, the IRS came out with some tandem stock options rulings. I didn’t know what I was doing so my boss told me to call Leo Brown and that he would help me out. I expressed some reservation in calling the pension chief of the IRS but I summoned up the courage and called him anyway, and surprisingly he took me under his wing. Leo helped me a great deal, really taught me pensions. Leo then introduced me to Isidore Goodman who, prior to ERISA, was the IRS pension chief of the entire country. That’s no exaggeration; I mean when he made a speech, it was tantamount to a revenue ruling. Mr. Goodman asked me to cover and publish all his speeches for the Prentice Hall Pension & Profit Sharing publications. Eventually I traveled to Washington DC more and more, I got to be known as the person who was close to the IRS and who knew Isidore Goodman, and also Leo Brown.
My understanding is that what really kicked off the movement to reform pensions in America was closure of the last Studebaker Motor Company manufacturing plant in 1963. Upon termination of the Studebaker pension plan on October 15, 1964, current retirees and retirement-eligible employees over the age of 60 received their full pension, vested employees under the age of 60 received about 15% of their pensions and non-vested employees, including everyone under 40, received 0%.
Sadly, that was true. Prior to ERISA, a non-bankrupt employer could legally terminate a pension plan without funding all vested benefits. In the old days, there were no rules as we know them today whatsoever. There were labor laws under the 1947 Labor Management Relations Act [informally known as the Taft-Hartley Act] but they really didn’t do very much at all. The Act said only that it was legal for a union to set up a pension plan as long as you had a joint board of trustees consisting of both management and labor. The reason why Studebaker caused such a huge brouhaha was that in those days there was no vesting until you retired. I know that it sounds absolutely crazy now but that’s how it was. The only real regulations then were found in the qualification rules of the Internal Revenue Service that had been in place since 1928. There were also interpretations by Isidore Goodman through his speeches, and through revenue rulings, but they basically related only to maintaining the qualification of a pension plan through compliance with the tax laws. There weren’t any vesting rules, eligibility rules, survivor rules, break in service rules or any of the other things we know today. And most unbelievably, there weren’t any fiduciary rules at all! Now even though the Studebaker plant closing happened in 1963, before the time I got into pensions, it still wasn’t until around 1968 that any bills were introduced in Congress to reform pensions. Since I was the legal editor at Prentice Hall in charge of pensions then, I was responsible for covering the congressional hearings and writing about them.
Who pushed these reforms in Congress?
There were four gentlemen who were the greatest proponents. The most important one was Senator Jacob Javits from New York and I got sort of friendly with him over the years. Jack–that was the first name he went by–Javits was just passionate about passing legislation to protect the workers with regard to their retirement benefits. Jack Javits was a great man, a real icon. And there was Senator Harrison Williams – Pete was the first name he went by – from New Jersey who was also passionate about pension reform and a great man. Then on the House side, there were John Erlenborn from Illinois and John Dent from Pennsylvania, who also were very, very, passionate. So you had four gentlemen that were just driven to get these laws passed. But even though these bills started to float around beginning in 1968–with Jack Javits really the one that started it all–things really didn’t start to happen until 1972. That was lucky for me because at that point in time Mobil Oil asked me to join them. I had been at Prentice Hall from 1967 to 1972, I finished law school at night and I also got my LLM in tax from NYU law school at night. Prentice Hall paid for my education, so it was just great, it was a phenomenal experience. To this day, I still count my lucky stars for my association with Prentice Hall.
So what drew you to Mobil Oil?
Well, first I have to tell you that I didn’t even plan to join Mobil. I had an offer from a major law firm and wanted to take that. But my mentor, Leo Brown, encouraged me to join Mobil because lawyers didn’t do pensions then, and Leo told me that if you really want to learn about pensions, you should go to a company like Mobil because it was really a leader in the employee benefits area. Mobil at that time was No. 3 in the Fortune 100, and it was the first company to ever do a savings plan which was a precursor to the 401(k), and the first to do a 501(c)(9) cafeteria plan. There was a brilliant guy there by the name of Bob Lane and he was one of the first great pension benefits lawyers. He was working in-house and he was about to retire so they were looking for someone to take over his job and be the benefits and compensation counsel at Mobil.
Tell me about your experiences at Mobil.
Well, one early experience at Mobil taught me the importance of a lawyer being “solution driven” rather than just seeing limitations and telling a client “No.” Mobil was in the process of buying a pipeline company from another large oil company. Pete Krist the executive vice president of employee relations summoned me to his office and told me that Mobil hoped to receive a highly favorable tax treatment on the deal. I told him that two revenue rulings were just issued by the IRS that did not permit favorable tax treatment [both are still in force today]. I felt it was my job to give him solid, accurate legal advice so I said “I’m sorry, Mr. Krist, but based on those revenue rulings we just cannot do it.” He looked at me and turned bright red and then he said, “Mamorsky, how long have you been with Mobil?” And I said, one month sir, and he looks at me and says, “you better figure this out.” So I went to work and found a way to get favorable tax treatment. I bounced it off Leo and he said it worked. That’s when I became solution driven.
So I guess the favorable tax treatment of that pipeline deal made Pete Krist a happy camper?
Well, after solving the problem, I called Krist and went back up to his office. I told him that I got it done, and he was so impressed, he was just blown away. He mentioned what I had done to the chairman of the board of Mobil Oil, Rawleigh Warner Jr. They were both very impressed with what I had done because it was their experience that lawyers aren’t very solution driven. As a result, Warner, who was also then chairman of the Business Roundtable, asked me to become counsel to a Business Roundtable Taskforce that had just been established to review the various pension reform bills that were then being introduced in Congress. This Business Roundtable Taskforce was actually the precursor to the ERISA Industry Committee–known today as ERIC–which is the leading representative of large companies in the benefits and compensation area today. I provided input to Mobil and the other companies in the Business Roundtable Taskforce and by doing so, I began working with the House Pension Task Force and the Senate Finance Committee in looking at the bills. And that lead to my going to Washington to help draft ERISA.
My interview with Jeffrey Mamorsky will continue next month.
W. Scott Simon is an expert on the Uniform Prudent Investor Act, Restatement (Third) of Trusts and Title I of ERISA. He provides services as a consultant and expert witness on fiduciary investment issues in depositions, arbitrations and trials as well as in written opinions. Simon is the author of two books including The Prudent Investor Act: A Guide to Understanding. He is a member of the State Bar of California, a Certified Financial Planner® and an Accredited Investment Fiduciary Analyst™. The author’s views expressed in this article do not necessarily reflect the views of Morningstar.