Companies are finally learning a lesson from Enron: Don’t put too much stock in employees’ retirement plans. It’s been about five years since many an Enron retiree saw their savings wiped out with the collapse of the energy giant, but companies have continued to fill their workers’ 401(k) plans with company stock. That’s changing, as a growing number of companies are facing lawsuits from disgruntled workers who have seen the value of their plan diminish with share price.
“We’re now telling companies they need to understand that company stock in the 401(k) plan is just a lawsuit waiting to happen,” Michael Weddell of Watson Wyatt Worldwide told The Wall Street Journal.
A recent Hewitt Associates survey reveals that 17% of the 227 large companies surveyed limit the amount of company stock an employee may own and an another 13% expect to introduce restrictions on ownership. About two out of three of the 500 largest companies currently offer its stock as an investment option, and company stock accounted for more than 15% of total assets in 401(k)s, according to 2004 figures by Cerulli Associates.