A History of Annuities & Retirement Plans


1600s

Tontines become popular with European governments to pay for wars and public works projects. A tontine gave each participant income for life, with the payments increasing to the survivors as the other participants passed away. Payments ceased upon the death of all participants.

1700s

The British Parliament authorized annuity sales. Annuities became popular among European “high society” as a form of prevention from a fall from grace, unavailable in other riskier investments.

1812

The Pennsylvania Company for the Granting of Annuities was founded.

1875

American Express established the first private pension plan to create a stable, career oriented workforce. By 1899 there are 13 private pensions in the United States.

1905

Andrew Carnegie established the Teacher’s Pension Fund eventually becoming the Teacher’s Insurance and Annuity Association (TIAA) in 1918 to provide annuities to educators.

1919

Over 300 private pension plans exist, covering approximately 15 percent of the nation’s wage and salary employees. The growth of pension coverage is attributed to employers’ desire to attract workers, reduce labor turnover, and more [humanely] remove older, less productive employees.

1921

The Revenue Act of 1921 exempts trust income coming from stock bonus or profit sharing plans from an employee’s current taxable income.

1926

The Revenue Act of 1926 exempts trust income coming from pension plans from an employee’s current taxable income.

1935

President Franklin D. Roosevelt signed the Social Security Act. Social Security is essentially a lifetime income annuity. Life expectancy in 1935 is about 60 years at birth. Individuals who reach the age of 65 can expect to live, on average, another 12 years.

1940

Ida May Fuller became the first Social Security recipient. She received 35 years of payments for a total of $22,000.

1942

The Revenue Act of 1942 adds a numerical nondiscrimination coverage test and a general nondiscrimination test for benefits and contributions for a pension or retirement plan to be qualified under the Code.

1960

18.7 million private-sector workers (41 percent of all private-sector workers) are covered by a pension plan.

1974

The Employee Retirement Income Security Act of 1974 (ERISA) is enacted. The Act requires participant disclosures, establishes vesting schedules, sets minimum funding rules, limits annual contributions and annual pension benefits, and requires that a joint and survivor annuity be provided to an employee who retires at

1980

35.9 million private-sector workers (46 percent of all private-sector workers) are covered by a pension plan. Dietrich & Associates is established to specialize in the funding of pension plans with group annuity contracts required to terminate pension plans and guarantee benefits to participants.

1990

39.5 million private-sector workers (43 percent of all private-sector workers) are covered by a pension plan. 11.5 million private-sector workers are covered only by defined contribution plans.

1995

The Department of Labor issues interpretive bulletin 95-1 requiring pension plan sponsors to use only “safest available annuity providers” when using annuities to fund pension obligations and to utilize “independent experts” to analyze insurance companies to comply with their fiduciary obligations.

2000

Dietrich has provided more than 1,000 pension plans with group annuity contracts guaranteeing benefits of more than $2 billion dollars (present value) for more than 100,000 participants and the largest “independent expert” provider of annuity contracts for pension plans nationally.

2005

Dietrich & Associates pioneers and markets the concept of utilizing group annuity contracts to fund specific retiree pension plan obligations for plan sponsors to transfer pension risk to insurance companies, originally known as pension carveouts or annuity buyouts

2006

.20% of all private sector workers are covered by defined benefit plans and 43% of all private sector workers are covered by defined contributions plans. Life expectancy is age 74 for men and age 79 for women.

2010

Dietrich and several major insurance companies collaborate to design and develop institutional priced guaranteed income annuity options for participants of profit sharing/401k plans to replace lifetime income benefits no longer available through defined benefit pension plans.

2015

Pension Risk Transfers become a primary financial solution for pension plan sponsors to transfer pension risk

2017

Dietrich & Associates has acted as advisor on and placed more than 2,000 group annuity contracts for plan sponsors securing benefits for more than $ 4 billion of benefits for over 200,000 participants.