The man who first helped sell the 401(k) savings plan to the Reagan administration has died after an extensive battle with cancer.
Edwin T. Johnson, 82, of Newtown, Pa., passed away Aug. 23. Johnson, the founder and CEO of the Johnson Cos., was one of the key figures in crafting the defined contribution retirement tool which was eventually adopted by the federal government.
Bloomberg reports on the series of innovations made by Johnson which led to the development of the 401(k), first positioned as a way to take care of that particular numbered section of the IRS tax code.
Johnson started his career as a sales agent with Provident Mutual Insurance Co. and first founded a retirement and health consulting company in the early 1960s.
While the credit for conceiving of the 401(k) goes to his company's vice president, Ted Benna - who figured out that the 1978 changes in section 401(k) of the code had created some new, tax-deferred opportunities for pensions and profit-sharing - Johnson used his political connections to try to convince the U.S. Treasury Department to bring the invention into law.
Benna was inspired to do the tax code investigation after a request from a Philadelphia bank, the Cheltenham National Bank, which said it was trying to figure out a new benefit for new hires, versus the costly annual bonus it had been offering.
Benna worked out the details but the clients were concerned about being part of a tax experiment and balked on the idea, so Johnson Cos. crafted its own paperwork and created a plan for 80 of its own employees. That first defined contribution plan, called Cash-Op, enabled workers to get company stock with an employer match and then enroll in a tax-deferred savings account.
Johnson, described as a life-long salesman and influential individual, as well as an inspirational and dynamic boss, wanted to offer the innovation to the federal government, and had an in. He had worked on the unsuccessful 1974 Pennsylvania governor's bid by his friend Drew Lewis, and Lewis had landed a position as transportation secretary in the new Reagan administration.
Johnson amalgamated the essence of Benna's ideas and presented them to Lewis, who called up Treasury secretary Donald Regan and got the political ball rolling. And the rest, as we know, is history.
Edwin Johnson served on the board of trustees of Gettysburg College, where he had graduated in 1951. He was also a founding member of the Newtown Improvement Association and worked with the St. Mary Medical Center's council for many years.
The Johnson Cos. was purchased in 1990 by what is now the U.K.-based Marsh & McLennan Cos.