The second half of the 20th century saw the birth of the celebrity CEO, and the exorbitant, borderline obscene, wealth that came with the position. Naturally, such largesse is scarcely worth it if you have to pay taxes on it all, so these corporate rock stars looked hard for a solution.
A convenient vehicle was the thick, comprehensive rewrite of the American tax code in 1978. Buried deep down in the weighty document was a provision that permitted executives to escape taxation on bonuses and stock options so long as the proceeds were effectively set aside until they retired.
This allowed executives to basically do with the money what they would have done anyway: Invest it in securities, and watch their fortune grow. Only now it would grow faster still, because it was unencumbered by the headwinds of taxation.
The justification was that employee pension funds had been exempted from taxation in 1926. It really wasn’t the same, but honestly, who was even going to notice? This tiny little tax dodge was buried so deep in the 1978 law — way down in Section 401, Article k — that no one was ever likely to hear of it.
And that probably would have been true were it not for Ted Benna.
An expert on retirement investmenting for a Philadelphia firm, Benna had become disturbed with executives absorbed with looking out for themselves while not caring that their pension plans were going to seed.
Like the fax machine, the era of private pension plans in America was brutally short. American…
