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Bad Old Days

Richard Quinn

I RECALL PAYDAY IN 1961, when I was at my first job. There was a paymaster who would deliver our paychecks. At break time, we would be off to the nearest bank to cash our checks. I deposited most of mine in a savings account, plus $2 in my Christmas Club account. But many of my fellow workers took the whole check in cash.

I always thought taking cash was a bit risky. I once got up the nerve to ask a few friends why they took cash. One told me that, once home, he placed the cash in envelopes designated for various bills and then paid those bills in cash.

Another friend said he didn’t want his wife to know how much he made. He gave her an allowance and kept the rest. This was especially important when overtime pay was involved. The extra cash was not, in his view, part of the family’s finances. I later realized this was a common attitude. Whatever the man earned was his money. Remember, this was 61 years ago.

A few years later, the paymaster was gone and checks were mailed home. There was near panic in some parts of the company as workers scrambled to change the address where the checks were sent. Many designated their work address.

Those of us in employee benefits earned the ire of the unions when we decided to mail group term-life insurance certificates to each employee. It never occurred to me that not only did many spouses not know the amount of insurance in force, but also many didn’t know there was life insurance. The insurance was equal to one-and-a-half-times base annual pay. In a few instances, we created family strife when it was learned the spouse wasn’t the beneficiary.

This—what I call pure selfishness—extended beyond pay. Before the Employee Retirement Income Security Act (ERISA) of 1974, a worker had total control over his pension, married or not. To maximize his benefit, it was normal for workers to take a single-life annuity. But ERISA required that, if married, the pension would be paid as a joint-and-survivor annuity, unless the spouse waived her right. I welcomed that change not only because it was fair, but also I was tired of receiving calls from new widows looking for their pension and having to tell them there was none. “But my George told me I would get everything I deserved” carried a double meaning, alas.

In 1984, the Retirement Equity Act created the qualified domestic relations order (QDRO) and added a new wrinkle to the male-dominated “it’s mine, I earned it” attitude. Now, it was clear a spouse was entitled to a portion of the worker’s pension and other retirement income benefits—that they had earned the money together.

This change was a real shock to some workers and retirees. I received more than one threat from workers faced with the prospect of losing a portion of their pension to an ex-spouse. One older retiree showed up at the building with a gun when his pension was cut in half. He had ignored the QDRO that had been filed, and I had no choice but to enforce it.

Thankfully, those one-sided days of handling family income are long gone—I hope. Many of us, me included, dislike excessive government regulation. But there are times when society needs a push to do the right thing.

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John Mitchell
John Mitchell
7 months ago

This article reminded me of my first Navy assignment at a small base in the Philippines in 1967. About a week before payday, a pay list would be posted in the men’s room (head) of the officers’ club. It would list how much each officer was due to receive. There were 3 columns in which you could designate how much to receive in cash, by check or leave “on the books”. (The latter category meant that the Navy would retain that amount in your account and pay it to you, either by cash or check upon your request.) As there were no female officers assigned there, that meant there was no way a woman could learn the amount due any officer nor how much he might be taking in cash, unbeknownst to his spouse. An officer might also be building up a private “stash” by leaving money on the books. Of course, those days are long gone but I’ve often wondered how they handled it once the first female officer was assigned there.

R Quinn
R Quinn
7 months ago
Reply to  John Mitchell

Very interesting.

DrLefty
DrLefty
7 months ago

My parents and my in-laws both divorced. In both cases, the wife had been a stay-at-home mom. My mom got half of my dad’s 401K and, as part of the divorce settlement, he took out a new life insurance policy with her as the beneficiary. He got the house in return for those things, but it was mortgaged to the hilt, and when he died, my stepmother sold it and cleared very little money. My mom has a nice nest egg that she inherited tax free that has been growing for over 20 years since he passed.

My mother-in-law did the opposite—she got the house in exchange for not claiming half of his military pension. She didn’t want to have to deal with him about that in the future. That house (in the San Francisco Bay Area) has been paid off for decades, is worth a fortune now, and makes her a very nice rental income.

In both cases, the wives came out very well. I’m proud of them considering that in their generation, being savvy like that wasn’t typical.

Rick Connor
Rick Connor
7 months ago

Dick, this article hit home. I managed 100s of engineers and worked through many of these issues with HR. The relationship between employee and HR was often strained, but I always made it a point to develop and maintain good relationships with my HR partner. I was also blessed to work with some excellent professionals.

The role of HR , at least in my company, evolved with the outsourcing of benefits and other functions. Their role became “human capital”, with more of a focus on employee development and compliance with regulations. One of my friends in HR said she felt her role had become one of “keeping the company out lawsuits”. They were no longer the “experts” in many cases, and relied on others to provide the answers.

As a Federal contractor we were required to meet numerous financial and employment regulations. There was often grousing form the old guard, but I learned to adapt and embrace. My approach was to understand the spirit of the regulation and work with my managers and employees to figure out how they applied to our situation. If you could get buy in they often had good ideas. And I always emphasized that much of what we had to do came down to basic fairness, professionalism, and decency.

Newsboy
Newsboy
7 months ago

Dick, thanks for taking us through the HR journey to fuller pension disclosure. The ERISA requirement on securing a spouse’s authorizing signature before an employee can opt out of a joint & survivor payment was long overdue, and was paid for on the backs of the widows you had to break the “bad news” to.

One item worth mentioning on this topic is the concept of “pension maximization”, where a future retiree (ideally, while still in their mid-to-late 50s and relatively healthy) will compare the projected future payout of his/her pension at the “single life only ” amount to the “joint/survivor” reduced monthly amount. This spread between payment amounts can be an instigator for purchasing (or retaining) life insurance. The tax-free death benefit paid to the surviving spouse can be used to provide an annuity-like income stream after the death of the first spouse that (in some cases) is as large (or larger) than what their reduced “joint/survivor” pension payment would otherwise be.

There is admittedly a lot more number-crunching required than I have described to thoroughly evaluate this strategy. The assistance of a financial professional with experience in handling pension maximization cases is likely going be needed to ensure that the math on doing this makes sense. Still – it’s still worth mentioning for those with future pension benefits at retirement who are at least a 5-10 year out from their retirement date.

Last edited 7 months ago by Newsboy
Rick Connor
Rick Connor
7 months ago
Reply to  Newsboy

I spent my career with engineers and scientists. We had this discussion frequently, as different waves of employees reached retirement. I first heard about it at a retirement luncheon when I was decades from retirement. I knew nothing about the pension and it was a great learning experience.

Most of the employees at the time said they could not make it work, that the insurance payments far exceeded the difference between the single life payment and J&S payment. In retrospect, I wonder if that was because they waited too late in life to look for insurance, or if it was a comment on the health of that generation.

The company also provided a generous term life insurance benefit (3x salary) with the option to purchase up to an additional 7x salary at reasonable rates. You could also insure a spouse at reasonable rates. I looked at commercial policies but the work benefit was much better. The downside of this is when you left employment you did not have life insurance, and many were at an age and health that made it difficult to find insurance.

R Quinn
R Quinn
7 months ago
Reply to  Rick Connor

True, many people waited until it was too late. I also cautioned people to make sure not to buy term insurance. Another big factor is the age difference between retiree and beneficiary. My wife is 4 years older than me, so the annuity reduction was not too bad. Plus I have retiree group life insurance – which is unheard of these days.

R Quinn
R Quinn
7 months ago
Reply to  Newsboy

Yes, that’s a good point. I encouraged future retirees to consider that strategy.

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