28 minutes | Mar 9, 2021

Episode 2 - It Sings, But Will it Sail? The Birth of the 401(k)

At 40 years old, the 401(k) has become part of the bedrock of the employer-based retirement system. Tens of millions of Americans have socked away trillions of dollars in a retirement investment vehicle that has fundamentally changed the dynamic of how employers provide a secure retirement for their workers. Today, the 401(k) makes up more than $6.5 of the $9.5 trillion in workplace defined contribution assets. But in 1981, this nascent idea was trying to find its place amongst pension and various savings plans, and it was finding an audience that would propel it to prominence. Host Josh Cohen talks with Ted Benna, father of the 401(k), and Richard Stanger, the author of the 869-word insert to the US tax code that changed retirement.   Key Takeaways: [1:15] Josh Cohen picks up where we left off following the birth of ERISA and welcomes two key players in the creation of the 401k: Richard Stanger and Ted Benna. [3:46] To better understand 401k’s Josh rounds up the history of profit-sharing plans — which is almost as long as the history of the United-States. [6:27] Richard Stenger shares the story of how he came to write the Revenue Act add-on, from President Carter’s election to the entrance of Barber Conable on stage. [11:46] “The beauty of it was that there wasn’t a lot of lobbying. Take a blank sheet of paper, forget the history of pension law: how do we create something that creates a fair distribution of contributions and benefits between rank-and-file employees and highly compensated employees?” — Richard Stanger [13:24] Ted Banner is often referred to as the father of 401k’s, he shares how he came into this title starting with what was called “thrift plans”, Coda Plans and getting a green light on 401k plans in 1981. [19:33] “They took us into a big auditorium and plopped me up in front of 25 of their top tax writers with their crossed arms like” what’s this country hick going to tell us? Less than an hour into the interview it switched over to how can we get that for us?” — Ted Benna [22:10] Ted shares his take — both the good and the bad — on what the employer role is in pension plans, as well as the benefits of the 401k. [24:56] Richard looks back with pride on the legacy of those 869 words he wrote. [26:20] Josh thanks both of his guests and closes out episode 2 of the Accidental Plans Sponsor and shares a teaser on episode 3: looking ahead.   Thank you for tuning in. If you liked what you heard, please subscribe and leave us a review wherever you listen to your podcasts.   Links: The Accidental Plan Sponsor PGIM Follow us on Twitter Mentioned in this episode: Richard Stanger wrote the 869 word add-on to the Revenue Act of 1978. Find him on LinkedIn Ted Benna took Richard Stanger’s idea and ran with it! Find him on LinkedIn
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