Of all the major milestones the 401(k) has crossed, its most recent stands out.
Forty years ago, Congress paved the way for the birth of the nation's first 401(k) retirement savings plan when legislators added paragraph (k) to Section 401 of the Internal Revenue Code.
Since that day on Nov. 6, 1978, the 401(k) has grown and flourished, settling comfortably into households across America. Yet while many say it has aged well, plenty more say that it's time for a few nips and tucks.
"It's helped tens of millions of workers save somewhere between $10 trillion to $15 trillion when you count the money that's been transferred out of 401(k)s into IRAs," acknowledged Ted Benna, a benefits consultant who has been called the father of the 401(k).
Big numbers, indeed. The plans took off almost immediately after The Johnson Cos., the benefits firm co-owned by Mr. Benna, launched its plan in 1981.
By 1984, there were 17,303 401(k) plans holding $92 billion in assets, according to the Investment Company Institute. Today, 55 million Americans are active participants in some 555,000 401(k) plans, which held $5.3 trillion in assets as of June 30. "They've evolved over 40 years from a supplemental savings plan to the primary employer-sponsored retirement vehicle," said Lori Lucas, Washington-based president and CEO of the Employee Benefits Research Institute.
Whether that's reason to celebrate is open to question. Some retirement experts view 401(k)s as hopelessly inadequate to meet the retirement needs of average Americans, while others view them as just beginning to hit their stride, citing improvements such as auto enrollment, auto escalation and better investment education provided by plan sponsors.