The Secret Rich-People Pension Nobody Told You About

It's called a top hat pension, and it enjoys tax privileges denied mere mortals.

Have you ever seen the 1982 movie Diner? It’s about a close-knit group of recent high school graduates, all middle-class white guys, in the Baltimore of the late 1950s. The film depicts, with humor and compassion, the futility of resisting, as young men often do, adulthood’s encroachments. Anyway, there’s a great scene where Mickey Rourke and Kevin Bacon go driving aimlessly and end up in Maryland horse country. There they see an elegant blonde young woman in tweed (pictured above) riding in a paddock alongside the highway. Rourke, the group’s ladies’ man, tries to pick her up by asking whether she rides western style. “I do,” she says, “but I prefer English. There’s a finer sense of control.” Rourke asks her name. She answers, “Jane Chisolm, like in the Chisolm Trail.” Then Rourke and Bacon watch this lovely enigma ride off.

After a moment or two of puzzled silence, Rourke asks Bacon:“What fuckin’ Chisolm Trail?”

To which Bacon replies: “You ever get the feeling there’s something going on that we don’t know about?”

One of the pleasures in reporting on income inequality is that I am constantly learning about things going on that I didn’t know about. The latest is something called the top hat fund, a special kind of employer pension that allows unlimited tax-free contributions (your 401(k) will allow you to contribute only $22,500-$30,000 annually, depending on your age). As the name implies, top-hat funds are available only to the most highly-paid top executive tier at big companies. By law, insignificant schmucks like you and me may not acquire one. How can that possibly be? My latest report, in the New Republic, explains all. The piece also explains how Congress, entirely by accident, invented the 401(k) retirement plan in 1978. The 401(k) is why almost nobody gets an honest-to-God defined-benefit pension anymore. Anyway, read my piece.