“Much of the push toward 401(k)s was not driven by ordinary workers. It was driven by CEOs looking for tax protection in order to maximize the value of their retirements. … If you read the legislative history…of the 401(k), it’s clear this was a tax break for the folks who made lots and lots of money. …That’s the irony. What it was designed for and what it’s being put to use for are totally different from each other.” Elizabeth Warren
This dingbat really believes this?
The U.S. law regarding 401(k) plans actually prevents such plans from operating this way. For one thing, the total amount of annual contributions is capped for any individual participant in a plan. Also, employers have to pass a "income test" for their 401(k) plans, under which highly-compensated employees lose the tax deductibility of their contributions if the company doesn't have enough low-wage and middle-income participants in the plan.
The second point is an interesting one because it drives some companies to be very aggressive in encouraging participation in their 401(k) plans. Many companies now have a process in place whereby new employees are automatically enrolled in the plan with some nominal contribution (4% or 5%) unless the employee opts out.
The WSJ in a book they published and what do do with your 401k, credits the 401k to a IRS worker named Cohen who petitioned his superiors to develop something in the code that would mimic the 403(b)'s that teachers have.
It may have been the only time in history that the IRS did something right...
That is the problem with an angry pants suit type like Warren, she can say crap like this and get away with it....