As part of the Revenue Act of 1978, the United States Congress passed a little known provision designed to limit the perks of highly paid executives. That legislative footnote unexpectedly and unintentionally changed the fundamental nature of how employers and employees relate to one another.
It contributed to a massive shift from 20+ year careers with one company to today’s average 3- to 5-year tenure. It is also at the heart of the debate about social security and retirement, and it is why most companies spend more on recruiting today than they do on employee development.
Today, we know that provision as IRS section 401(k). It is the regulation that allowed for a new type of tax deferred savings plan that caught on like wildfire and became the most prevalent retirement vehicle offered by employers in the United States.