An Unintended Consequence
"Unintended consequences" are often a euphemism for something bad. But not always. Take the 401(k), for example. While the nation turns its attention to Election Day, Nov. 6 happens to be the “birthday” of the 401(k). Well, kind of. It’s actually the anniversary of the day on which the Revenue Act of 1978 — which included a provision that became Internal Revenue Code (IRC) Section 401(k) — was signed into law by then-President Jimmy Carter . That wasn’t the “point” of the legislation of course — it was about tax cuts (some things never change). It reduced individual and corporate tax rates (pulling the top rate down to 46% from 48%), increased personal exemptions and standard deductions, made some adjustments to capital gains and created flexible spending accounts. But it did, of course, also add Section 401(k) to the Internal Revenue Code. That said, so-called “cash or deferred arrangements” had already been around for a long time — basically predicated on the ...