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Survey shows employer stock makes up nearly a third of DC pension assets.
Stephen Taub, CFO.com | US
March 7, 2002
The near-vaporization of Enron Corp.'s 401(k) assets has painfully reminded many employees about the dangers of investing a large portion of their retirement savings in their employer's stock.
A new survey, however, concludes that virtually every plan sponsor — 92 percent, in fact — includes its company stock in its defined contribution pension plan. Indeed, employer stock represents 29 percent of the total defined contribution assets in those plans, with an average total amount of $2.4 billion.
The survey does show that the rules governing contributions, matching, transfer, and trading restrictions are not uniform, however. Nevertheless, as a result of what happened to Enron employees, Congress is mulling major restrictions on the use of company stock in defined contribution plans.
The survey was conducted by the Committee on Investment of Employee Benefit Assets, an affiliate of the Association for Financial Professionals. Other findings of the committee:
"As fiduciaries for many of the nation's largest pension funds, [committee] members have first-hand knowledge of the issues related to the use of employer stock in 401(k) plans, and how employees and plan sponsors may be affected by proposed changes," says AFP's president and CEO Jim Kaitz. "Any change in law or regulation should be administratively feasible, not create a whole new regulatory regime, nor impose significant costs on plans or their participants."
Fifty of the committee's 120 plan-sponsor members responded to the survey, which was conducted in October 2001. The average market value for 401(k) plans in the survey was $5 billion.