Human Capital & Careers

Enron Denies 401(k) Charges

Workers claim company prevented investment changes while the stock price disintegrated.
Stephen TaubDecember 16, 2001

Management at Enron Corp. took the offensive on Friday, rebutting charges that it froze employee retirement accounts filled with the company’s stock. Some workers claim that the company prevented them from making investment changes in their plans while the company’s stock price disintegrated in October and November.

The reeling energy company’s management said employees had ample time to make changes in their retirement plans. “Enron notified all affected employees in a mailing to their homes on October 4, stating that a transition period would begin on October 29,” the company claimed in a press release on Friday. “Between the first notification and the first day of the transition period, the company sent several reminders to employees over the internal e-mail system.”

Enron management also noted that the transition period during which employees were unable to change investments in their 401(k) accounts lasted just 10 trading days, from October 29 through November 12, 2001. During that period, Enron’s stock price fell from $13.81 to $9.98. “On five of those trading days, Enron’s share price closed below $9.98,” it added.

“Outside of the brief transition period, Enron employees have always been able to transfer their own contributions in the 401(k) at any time,” the company’s management continued. “They have 20 investment options to choose from, Enron stock being one of them.”

The company also noted that until recently, it provided a 50 percent match on employees’ contributions of up to 6 percent of their base pay. “As is the case with most company matching programs, the match was provided in company stock,” Enron management noted. “As is also the case in many company 401(k) programs, until recently, stock holdings from the company match could not be transferred into other investment options until the employee reached age 50.”

The company now faces more than 60 lawsuits related to 401(k)s in state and federal courts.