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Stocking stuffers

Companies still love stocking their employee 401(k) plans with their own shares.

Companies still love stocking their employee 401(k) plans with their own shares.

Of course, pension officers know the fate of the Enron Corp. 401(k), which was loaded with company stock and lost more than $1 billion in value when the company collapsed. They realize too that bills in the House and Senate would restrict the presence of company stock in retirement plans, although Congress may well adjourn for the year without passing any legislation into law.

Companies remain undaunted, however. More than 60 percent of respondents to this month's Pension-
forum permit participants to invest 401(k) contributions in company stock, and 82.5 percent say they do not place a limit on the amount of company stock that may be a part of the fund. Some 40 percent of companies that match employee contributions do so exclusively with company stock, and an additional 4.5 percent match using a combination of cash and stock.

Not surprisingly, companies overwhelmingly oppose congressional interference; 75.4 percent say they don't think Congress should pass legislation limiting the amount of company stock allowed in 401(k) plans.

Respondents have an equally strong opinion on the issue of whether employees should be able to get investment advice for their 401(k) accounts. Under current law, participants in 401(k)s may only receive advice from independent third-party firms, though there is legislation pending that would allow plan providers to offer investment advice directly to employees. All those polled -- 100 percent -- say employees should get advice, but most don't want to be the ones providing it; 75 percent say it should be given by an independent adviser.

Does your company have a 401(k) plan?
Yes 65.80%
No34.2
  
Do you match employee contributions to 401(k) plans?
Yes 85.90%
No14.1
  
If so, at what rate do you match?
25 percent 6.30%
26 to 50 percent44.4
51 to 75 percent25.4
76 to 100 percent20.6
101 to 150 percent1.6
151 to 200 percent0
201 to 250 percent1.6
More than 250 percent0
  
If so, what is the maximum amount of employee contributions you match?
5 percent of salary 23.80%
6 to 10 percent of salary71.4
More than 10 percent of salary4.8
  
If so, in what form is the amount matched?
Cash 55.20%
Cash and company stock4.5
Company stock40.3
  
If you match with cash and stock, what percentage is in stock?
Less than 5 percent 16.70%
6 to 10 percent0
11 to 15 percent0
16 to 20 percent0
21 to 25 percent16.7
26 to 30 percent0
31 to 50 percent33.3
51 to 75 percent0
More than 75 percent 33.30%
   
Does your company,s plan permit participants to invest their contributions in company stock?
Yes 61.10%
No38.9
  
Does your company,s plan encourage participants to buy company stock or bonds with their contributions?
Yes 7.50%
No92.5
  
Does your company,s plan place a limit on the amount of company stock that may be part of the fund?
Yes 17.50%
No82.5
  
What is the maximum?
Up to 5 percent 11.80%
6 to 10 percent11.8
11 to 15 percent5.9
16 to 20 percent11.8
21 to 25 percent5.9
26 to 30 percent0
31 to 50 percent11.8
51 to 75 percent0
More than 75 percent0
No maximum41.2
  
Is there a prohibition on the sale of company stock in an employee account?
Yes, for one year after vesting 0.00%
Yes, for two years after vesting2.2
Yes, for three years after vesting0
Yes, for more than three years after vesting10.9
Yes, until the employee leaves the company or retires17.4
No prohibition after vesting 69.60%
   
How long before your plan vests; that is, before the company,s match belongs to the employee?
Immediately 60.90%
Three months0
Six months1.6
One year4.7
Three years14.1
Five years6.3
More than five years0
It,s graduated over time12.5
  
Do you think Congress should pass legislation limiting the amount of company stock in your 401(k) plan?
Yes 24.60%
No75.4
  
If Congress does pass legislation that caps the amount of company stock in a 401(k) plan, how prepared are you to make that transition?
Well prepared 32.80%
Adequately prepared46.3
Unprepared3
Not applicable17.9
  
Should employees be able to get advice on how to invest their 401(k)s?
Yes 100.00%
No0
  
If yes, who should provide that advice?
The plan sponsor 12.50%
The administrator12.5
An independent adviser75