Hey 401k! They Say It’s Your Birthday …

401k, retirement, Benna, DC plans

And on it goes.

It doesn’t look a day over 39.

An obscure section of the IRS code has ballooned into America’s premier savings vehicle, and today officially turns age 40.

The 401k, and it’s potential, was by all accounts first identified and run with by Ted Benna, the so-called “father of the 401k.”

“The regulations came out in 1978, but they weren’t effective until January 1980,” he explains. “Now on Jan. 1, 1980, there weren’t advisors running around selling these plans; there weren’t mutual fund wholesalers and similar people like there are today.”

It wasn’t until later that year when Benna says he was developing a retirement plan for a bank client in Philadelphia that he added a matching contribution as well as “the pre-tax salary reduction.”

“Nowhere did it say I could add these provisions, but nowhere did it say I couldn’t either,” he quips. “I’d been discussing it with an official and he didn’t say one way or another, but from our conversations I was pretty confident that the final rules would allow for them, which they did.”

The Philadelphia bank ultimately passed on the idea because, unsurprisingly, their attorney didn’t want them to experiment in that way, so Benna and his colleagues at the small consulting firm tried it themselves.

The rest may be history, but the innovation and growth continue. ICI recently looked at 401ks today:

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