Ted Benna, who is credited with inventing the 401(k) retirement plan in the late 1970s, says the program was envisioned as a supplement for companies that had their own benefit plans.
"The original plans were a culmination of an enhancement for companies that had defined benefit plans, to supplement those plans plus Social Security," Benna says. "However, the larger usage of 401(k )s has been in smaller companies with less than 100 employees, who have never had a traditional pension plan."
Benna notes that at the time the plan was devised, people lived for about a dozen years after retirement. Life expectancy of 30 years or more today in retirement has resulted in a cost that companies and governments have struggled to meet, he says.
"The hard reality that we're coming to face at this point is that society can't afford to have a huge segment of our workplace sitting idle for 20 to 30 years," Benna says.