Financial History 144 Winter 2023 - Page 39

great assets of academia is that you can move [ jobs ], and your retirement benefits will move right with you as long as you ’ re in TIAA-CREF because you ’ re holding the policy .” The policy is “ always yours from day one .” Murray then realized that TIAA-CREF was unique . “ I looked around the landscape and I said we ’ ve got to find an organization ” that can provide the same services for individuals that do not work in academia . “ We have plans wherever there is an organized company plan or an organized group from a labor union or somebody else . But [ the ]... people in the world who don ’ t have any comparable opportunity are people who have a lifetime of work where their economic asset is their skill , their professional ability , but they do not have a continuity of specifically employment .”
To “ fill that gap ,” Murray thought of “ having an individual retirement account where ” an individual could have a special account with “ a financial institution and have a part of his pay , either by his employer ’ s action or by his own action , go into that lifetime savings account .” The key would be to have contributions to the account “ tax deductible just as it is for everybody else in public or private pension arrangements . And the beauty of this is that it becomes a wonderful asset for financial institutions , and they will promote it because they will have a longearned depositor .”
Adding to his insight , Murray remarked , “ Furthermore , here is the ideal place for people to buy stocks ” and “ make longterm equity [ investments ] because they will have locked themselves in through this program and the one thing we know about stocks is that they ’ re illiquid . They ’ re a lousy short-term investment . But if you give me 15 or 20 years , I ’ ll give you a superior rate of total return , which is what you need for your retirement savings .” The challenge , of course , was that Murray needed a way to convince the government to support the idea .
President Richard Nixon announced his intention to appoint a commission to study the nation ’ s financial structure in the Economic Report of the President , which he submitted to Congress on February 19 , 1970 . The commission ’ s mandate was to “ review and study the structure , operation and regulation of the private financial institutions in the United States , for the purpose of formulating recommendations that would improve the functioning of the private financial system .” The commission was named the Hunt Commission after its chair , retired Crown Zellerback Chair Reed O . Hunt .
Murray recalled his interaction with the Hunt Commission and involvement in the idea of creating an individual pension plan in an interview in 1996 . Congress held a series of hearings on pension reform and “ they were kind enough to invite me to come to talk about how the retirement income had gaps in it , and I gave what I thought was excellent testimony .” Nonetheless , “[ n ] obody gave me a time of day ” and my testimony “ got nowhere .”
“ However , the Hunt Commission was appointed to study our financial institutions and invited me [ to speak to them ] because of what I ’ d written and done in the field of pensions .” The commission was tasked with producing a report with recommendations that were “ expected to address how we cure the maintenance of fiduciary standards for the protection of pension promises .” Murray shared with the commission his idea for an individual retirement account , and the commission staff responded by saying , “ Your argument is well made ” and “ this is what we ought to recommend .”
The Hunt Commission ’ s primary task was to make “ recommendations that would improve the functioning of the private financial system .” “ But curiously enough , as you get about two-thirds of the way through the ” report , there is “ a slight departure .” The report talks “ about the gap and the availability of pension plans of the individual ” and “ the potential remedy for this is a thing called an individual retirement account .” On pages 108 and 109 of the 173-page report , the last two pages of the report ’ s section on recommendations , the commission advocates the creation of an individual retirement account :
The so-called “ Keogh Plans ” ( HR 10 ) available to self-employed persons and tax-deferred annuity plans available to public school and certain tax-exempt organizations ’ employees under Section 403 ( b ) of the Internal Revenue Code have contributed to an extension of pension coverage . Nevertheless , a substantial proportion of the nation ’ s working population does not qualify for a private , tax-deferred , pension plan program . Accordingly , the Commission recommends that eligibility of personal retirement plans [ emphasis added ] under Section 403 ( b ) be broadened to provide all individuals with the same tax deferment opportunities now provided for specific classes of employees . Moreover , the funding methods for such plans should be broadened to include trusts , insurance plans , custodial accounts and special savings accounts .
The commission submitted its report , titled “ The Hunt Commission Report ,” to President Nixon on December 22 , 1972 , and it was signed into law by President Gerald Ford on Labor Day in 1974 . One of the key results of “ The Hunt Commission Report ” was the passage of ERISA , which protects the interests of participants and beneficiaries in private-sector employee benefit plans . In addition , ERISA allows an individual “ the deductibility of [ their ] contribution to an IRA .” As Murray observed , “[ L ] o and behold , this retirement tax feature got included .” It is interesting that the Hunt Commission referenced Keogh Plans in its discussion of individual retirement plans , to which Murray also contributed .
Murray also served as a consultant on pension fund investing to the US Department of Labor and the Pension Benefit Guaranty Corporation ( PBGC ). Five of the 23 financial articles he wrote were on pensions , and he taught extensively on the subject in his security analysis course at Columbia Business School . Murray also helped design the pension plan for Andover Academy while he was a trustee .
In 1983 , the Financial Analysts Research Foundation published a short monograph titled “ Understanding Corporate Pension Plans .” The authors , Edmund A . Mennis and Chester D . Clark , dedicated the report to Murray , stating , “ This monograph is dedicated to Roger F . Murray . His years of service , total dedication and significant contribution to the financial analysts ’ profession is well recognized and
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