The Fact
Congress added section 401(k) to the Internal Revenue Code in the Revenue Act of 1978. The IRS published regulations for section 401(k) in 1981, and the first 401(k) plans were established soon afterward. The provision allowed employees to defer part of their salary into employer plans before taxes.
What This Means
The 401(k) is not an ancient feature of American employment. It emerged just as Gen X was growing up and entering the workforce, during the same period that private-sector retirement was shifting away from traditional pensions.
Sources
- Congressional Research Service, Summary of the Employee Retirement Income Security Act (ERISA), section on the Revenue Act of 1978 and 401(k) plans; U.S. Bureau of Labor Statistics, ERISA at 50.