The document traces the evolution of the US retirement industry from its origins to modern 401(k) plans. It discusses the development of pensions in the late 19th century, the establishment of Social Security in 1935, and the shift to defined contribution plans and 401(k)s in the late 20th century. It also outlines major laws like ERISA and key challenges around funding pensions and Social Security in the future given rising lifespans. Overall, the document provides a comprehensive overview of the retirement system's history in the United States.

1. The Evolution of the
Retirement Industry
Derrick Angradi

2. Overview
 The Birth of Retirement
 The Pension Age
 Social Security
 The Shift in Retirement
 ERISA
 The beginning of the 401(k)
 Challenges and Opportunities / The Future of Retirement

3. The Birth of Retirement
 Before the idea of retirement
 The new idea of retirement
 Life expectancy increasing

4. The Pension Age
 What is a pension?
 First pension - The Roman Army
 New York City Police Force Plan (1857)
 The American Express Company (1875)
 The Revenue Acts of 1921, 1926 and 1928
 Pensions Explained

5. The Great Depression
 Stock Market crashes in 1929
 Unemployment reached 37%
 Pensions continue to grow
 The effect on how people viewed their
finances

6. Pension Growth (1940-1970)
0
5
10
15
20
25
30
1940 1950 1960 1970
Millions

7. Social Security
 Social Security Act (1935)
 President Franklin Roosevelt:
“The Social Security Act offers to all our citizens a workable and working method of
meeting urgent present needs and of forestalling future need. It utilizes the familiar
machinery of our Federal-State government to promote the common welfare and the
economic stability of the Nation.”
 How it works
 Amendments to the Act

8. The Shift in Retirement
Pensions
Social
Security
401(k)

9. Employee Retirement Income Security
Act (ERISA)
 ERISA established ground rules for fiduciaries to follow when it comes to
handling plan assets.
 Fee disclosures
 Nondiscriminatory testing
 Accountability for fidcuaries:
 Sheyna Steiner stated:
“Without it, workers could be stuck in a surreal retirement savings hell rife with injustice.
For instance, highly paid executives could gorge themselves on lavish retirement benefits
while offering nothing to the average worker. Or, companies could dangle benefits like
carrots to lure recruits but impose ridiculous obstacles to actually getting them -- like
working at the company for 20 years.”

10. Employee Retirement Income Security
Act (ERISA)
 Established the Pension Benefit Guaranty Corporation (PBGC)
 Protection for pensions
 Companies would pay the PBGC
 If a company went bankrupt, PBGC would make pension payments to the plan
participant.
 The main goal of ERISA was to protect the plan participants as well as hold the
fiduciaries accountable.
 Teamsters Pension fund scandal

11. The Beginning of the 401(k)
 Defined Contribution Plans
 The Revenue Act of 1978
 Established general guidelines behind these new types of plans
 Original goal was to limit amounts that could be placed into accounts for
executives
 Ted Benna found a loophole and started the 401(k) as we know it:
 “I knew it was going to be big, but I was certainly not anticipating that it would be the
primary way people would be accumulating money for retirement 30 plus years later.”
 Simplified Employee Pension (SEP Plans)

12. Laws that affected the 401(k) Market
 Retirement Equity Act of 1984
 Age requirement
 Survivorship benefits adjusted
 Rollover regulations
 Small Business Protection Act of 1996
 SIMPLE IRA established
 Discrimination testing changes
 Established the Required Minimum Distribution

13. Economic Growth and Tax Relief
Reconciliation Act of 2001 (EGTRRA)
 Set up IRA limits
 Established catch up
contribution rules
 Allowed employer plans to be
moved from one qualified
plan to another regardless of
classification (401(k), 403(b),
or 457(b)).
 Auto force out rules

14. Changes in the Pension and Social
Security Industry
 Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)
 Reduced the annual limitations for pension contributions for them to be considered
qualified plans.
 Set up new standards for top heavy plans in order for those types of plans to
remain qualified.
 Social Security Amendments of 1983
 Nonprofit employees were also now covered fully under Social Security.
 Prohibited States from terminating Social Security coverage for state and local
employees.
 Removed all gender based distinctions associated with Social Security

15. Pension Protection Act of 2006
 Established new contribution limits for IRA’s
and employer sponsored plans
 Established the “catch-up” limits
 Employer plans can now be rolled into a Roth
IRA
 Roth source offered within a 401k

16. Pension Protection Act of 2006
 Automatic enrollment
 Default plan investment
 Stricter funding for pensions
 Increased penalties
 Increased tax deductions

17. Challenges and Opportunities (Pensions)
 Challenges
 Expensive
 Insurance through the PBGC
 Pressure from shareholders
 Life Expectancy
 Pension Issues
 Opportunities
 Termination of pension plans
 Alternative pensions plans

18. Defined Benefit Vs. Defined Contribution

19. Life Expectancy

20. Challenges and Opportunities (Social
Security)
 Challenges
 Life expectancy
 Child births decreasing
 Lack of education
 Opportunities
 Increase the wage cap
 Increase tax percentages
 Extend the age requirements

21. Social Security Deficits

22. The Future of Social Security

23. The Future of Social Security

24. Challenges and Opportunities (401k’s)
 Challenges
 Employers must offer a plan
 Participation
 Contributions
 Opportunities
 Education
 Increasing the auto features

25. Auto Feature Importance

26. 401k Automated

27. Retirement Statistics
 Average Retirement Age: 63
 38% of people save nothing for retirement
 Only 4% of people at age 65 will have enough for retirement
 63% of people at age 65 will be dependent on Social Security

28. Conclusion
 Pensions are on the way out
 Social Security has issues it must address
 The 401k plan must force participants to act
 Education on retirement is paramount

29. The Evolution of the Retirement Industry