A Sad Farewell

September 11, 2012

In 1980, the concept of the 401(k) as we know it was born at the Johnson Cos., a benefits consulting firm located not too far from my home in Pennsylvania. Sadly, the founder of the firm, Edwin T. Johnson, passed away last month at home after a long battle with cancer.  Mr. Johnson had been helping his clients with pensions, retirement plans, and health insurance since he started his company back in 1963. 

When Johnson Cos. vice president Ted Benna discovered a way to take advantage of a new section of the IRS code, section 401(k), he revolutionized the way we all now save for retirement by innovating a retirement plan that allowed matching funds from employers and gave employees both a tax break and a choice in deciding how their money would be invested. Johnson used his political connections to help Benna pitch the idea to U.S Treasury Department regulators.

Initially, this concept failed to interest any of their clients, so Johnson allowed his own 80 employees to sign up for the plan, which they called the “Cash-Op.”  Soon, my favorite newspaper, the Philadelphia Inquirer, along with the New York Times and Wall Street Journal started to publish articles on this new 401(k) plan.  Now, 401(k) plans are the norm for employer sponsored retirement plans.

Let’s honor Johnson, who is referred to as the “Godfather of the 401(k),” by reminding employees the importance of taking the time to make the crucial choices that make the 401(k) a success.  These include deciding how much to contribute, not missing out on matching funds, and determining where their money should be invested.