The “father of the 401(k)” — a title given to Benna by our own magazine back in 1992 — has long been critical of his now-ubiquitous retirement plan.
Many Americans don't earn enough money to make significant 401(k) contributions, and those who benefit the most from the tax advantages tend to be in the six-figure income bracket, leaving middle- and low-income workers struggling to come up with the money they need to retire comfortably.
The Radish plan lets employers fund savings accounts by rewarding behaviors like good attendance, safety records or strong performance. The contributions aren't treated like regular bonuses, meaning employers can save on payroll taxes while employees don't owe taxes until they withdraw the money. Employers can offer both a 401(k) and a Radish plan, but qualifying employees must earn $155,000 or less per year.
According to Radish, this fund can start off as a simple money market account and be rolled over to a 401(k) or an IRA in the future. And while the account is a lot more flexible than a traditional retirement plan, dipping into the funds comes with caveats. Any money you withdraw before you turn 59 1/2 is taxed as federal income, plus you pay a 10% withdrawal penalty.
Whether Benna's newest product can successfully close the gaps in his original creation remains to be seen. Only a handful of employers have partnered with Radish so far, including a pilot program with a 200-worker trucking firm. — AAF
