Ted Benna, the 'father of the 401(k),' has a new mission: helping small business employees save for retirement

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The 'father of the 401(k)' has a new mission, helping small business employees save for retirement.

. Benna, a retirement benefits consultant at the time, based it off a provision in the Tax Revenue Act of 1978 — paragraph k of section 401.. This time, his focus is on small businesses.

While larger corporations have embraced the idea, a large chunk of U.S. workers still don't have the opportunity to contribute to an employer plan. In fact, 36% of private-sector workers did not have access to a defined contribution plan, such as a 401, as of March 2018, according to the latestI've learned the greatest benefit of a 401 is that it turns spenders into savers by making saving the first priority.

Many Americans still don't have access, with many small businesses not offering retirement plans. Why is that? Small employers believe the 401 is too complex and expensive — and it is. They aren't aware there are, in fact, better alternatives available to them. There is limited information. It is not easy for them to find out what is available.There are 11 states that have already implemented or are implementing state payroll deduction IRA [individual retirement account] programs. Oregon pioneered this, adopting their plan two years ago, and other states are following its model.

All the state-run plans are limited to Roth IRAs, from the information I have seen. Those are great for employees who don't pay any federal income tax; however, pre-tax traditional IRAs are usually better for those who do pay income taxes. [this month, plans to offer a traditional pre-tax IRA option by the end of the year.However, there are different alternatives than state-run plans that may, in fact, be better.

 

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