There Is Hope for Improving Americans’ Retirement Security

After a scathing Wall Street Journal article suggesting 401(k)s are not adequate for retirement, Ted Benna, whom some call the ‘father of the 401(k),’ and Lori Lucas of Callan, suggest there are ways to improve retirement security.

By Rebecca Moore | January 23, 2017
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In 1980, Ted Benna, one of the founders and owners of The Johnson Companies and an executive vice president there, suggested adding a 401(k) plan to the company’s retirement program.

He tells PLANSPONSOR he was not trying to start a movement; the only thing he was trying to do is get people focused on saving for retirement. He notes that at the time, the large companies, including The Johnson Companies, had thrift savings plans in place pre-401(k), but those plans were for after-tax contributions. “They were just glorified Christmas clubs. Employees took their money out in December to use for expenditures; they were allowed to take the match out after two years,” he says. “I wanted to get individuals to shift from short-term savings to long-term. With the shift to pre-tax, they had to deal with not taking money any time they wanted to.”

In a January 2 Wall Street Journal article titled “The Champions of the 401(k) Lament the Revolution They Started,” Benna and Herbert Whitehouse, a former human resources executive at the The Johnson Companies express regret that companies have shifted from defined benefit (DB) plans to only 401(k)s or other defined contribution (DC) plans. Their intent in 1980 was to create a supplemental retirement savings vehicle.

In the article, Benna says, “I helped open the door for Wall Street to make even more money than they were already making. That is one thing I do regret.”

In March 2016, Benna announced a new firm, 401kBena, to provide unbiased retirement plan adviser and total fee benchmarking for retirement plan sponsors. Benna says the company folded due to lack of interest. Surprising, since there has been such a focus on 401(k) plan fees in the past decade and a number of lawsuits targeting these fees. But, Benna notes more than 90% of plans cover less than 100 employees, and those are not generally on the screen as far as lawsuits, and “they don’t have to write out a check so it’s no pain to them. That’s the biggest reason for indifference.

Benna has since drafted a book about the history of the 401(k) and fees and “how we got into mess we’re in.” He says, “Whatever time I have left, I will focus on plan fees.”

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