Edwin Johnson, ‘Godfather’ of 401(k) Retirement Plan, Dies at 82

Edwin Johnson, ‘Godfather’ of 401(k) Retirement Plan, Dies at 82
Edwin Johnson, seen here with wife Cynthia, was founder and chief executive officer of the Johnson Cos., a benefit consultancy in Newtown, Pennsylvania. Source: The Jackson Laboratory via Bloomberg

Edwin T. Johnson, who led the employee-benefits consulting firm often credited with creating the first 401(k) plan, the workplace-based savings program that today accounts for $3.4 trillion in retirement savings, has died. He was 82.

He died on Aug. 23 at his home in Newtown, Pennsylvania, according to a death notice from Swartz/Givnish Funeral Home in Newtown. The cause was prostate cancer, which he battled for 22 years.

Johnson was founder and chief executive officer of the Johnson Cos., a benefits consulting firm in Newtown that played a key, early role in refashioning retirement savings in the 1980s when defined-benefit pension plans declined in popularity. While an employee of his, Ted Benna, became known as the father of the 401(k), Johnson “was its godfather,” the trade publication Pensions & Investments wrote in a 2001 profile.

“Ed was an inspirational, dynamic leader,” Benna said yesterday in an interview.

He was also “a hell of a promoter and salesman,” his son Tom said in an interview. Describing the partnership between his father and Benna that led to their breakthrough -- a tax-deferred retirement account funded by an employee’s deferred salary contribution and an employer match -- he said, “It was a very, very special combination.”

The Johnson firm’s work on its pioneering plan started with a request from the Cheltenham National Bank in Philadelphia about how it could do away with end-of-year cash bonuses while still competing for top executive talent.

‘Aha’ Moment

Benna, who was then an executive vice president at Johnson Cos., had what he called an “aha” moment while digging into section 401(k) of the Internal Revenue Code, which had been added in 1978. That portion, covering deferred pension, profit-sharing and stock bonus plans, had taken effect at the start of 1980. His notion was an individual investment account, offered to all employees, that would combine a portion of their compensation with an employer contribution on a tax-deferred basis.

Johnson helped Benna pitch the idea to U.S. Treasury Department regulators, who were writing the rules that would put the 1978 tax-code changes in effect. Johnson had political connections, having served as co-chairman of Drew Lewis’s 1974 campaign for governor of Pennsylvania. Though Lewis had lost that race, he had just started working in January 1981 as transportation secretary under President Ronald Reagan.

‘Great Idea’

“I called Drew and told him that I had a great idea,” Johnson told Pensions & Investments. “We made up some slides and went in to see him.”

During the meeting, Lewis made a phone call to Donald Regan, Reagan’s first Treasury secretary, Benna recalled. That call paved the way for Benna to work directly with the Treasury regulator who was drafting the proposed 401(k) regulations.

Two top Treasury officials later passed the news to Johnson that his firm’s 401(k) interpretation would pass muster.

As it turned out, Cheltenham National Bank declined to enact the idea. So Johnson put it in place at his own company, which at the time had a profit-sharing plan but no pension. The program offered to the company’s 80 employees, called Cash-Op, enabled them to buy company stock, with an employer match, in tax-deferred accounts.

Pioneering Work

Benna and Johnson weren’t alone on the 401(k) frontier. Other benefits executives were fleshing out similar possibilities around 1979 and 1980, including Herbert A. Whitehouse at Johnson & Johnson, who, in a 2003 paper, took issue with the notion that Benna or anybody else could accurately be called “the father” of the 401(k).

Since their start in the 1980s, 401(k)s have become the fastest-growing retirement-savings option for U.S. workers. Americans held $3.4 trillion in the plans as of March 31, according to the Washington-based Investment Company Institute, a trade group for the mutual fund industry. That compares with $2.5 trillion in private-sector defined-benefit pension plans.

Edwin Thomas Johnson was born on Jan. 31, 1930, and was raised in Bucks County, Pennsylvania, growing up on family farms. Following his 1951 graduation from Gettysburg College in Pennsylvania, he worked at Provident Mutual Life Insurance Co. in Philadelphia. Later, he got a job at Massachusetts Mutual Life Insurance Co.

Gettysburg Trustee

The Johnson Cos. was acquired in 1990 by Croyden, U.K.- based Noble Lowndes Group Ltd., which today is part of Marsh & McLennan Cos.’ Mercer unit. One of the divisions, Johnson Kendall & Johnson Inc., remains a provider of insurance brokerage and risk management services.

Johnson served on the Gettysburg College board of trustees and helped administer the school’s annual Lincoln Prize, awarded to authors of new books about the Civil War era.

Survivors include his wife of 60 years, Cynthia S. Johnson, and children, E. Thomas Johnson Jr. and Rebecca J. Kerchner, according to the death notice.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE