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% |
| No | 34.2 |
| Do you match employee contributions to 401(k) plans? | |
| Yes | 85.90% |
| No | 14.1 |
| If so, at what rate do you match? | |
| 25 percent | 6.30% |
| 26 to 50 percent | 44.4 |
| 51 to 75 percent | 25.4 |
| 76 to 100 percent | 20.6 |
| 101 to 150 percent | 1.6 |
| 151 to 200 percent | 0 |
| 201 to 250 percent | 1.6 |
| More than 250 percent | 0 |
| If so, what is the maximum amount of employee contributions you match? | |
| 5 percent of salary | 23.80% |
| 6 to 10 percent of salary | 71.4 |
| More than 10 percent of salary | 4.8 |
| If so, in what form is the amount matched? | |
| Cash | 55.20% |
| Cash and company stock | 4.5 |
| Company stock | 40.3 |
| If you match with cash and stock, what percentage is in stock? | |
| Less than 5 percent | 16.70% |
| 6 to 10 percent | 0 |
| 11 to 15 percent | 0 |
| 16 to 20 percent | 0 |
| 21 to 25 percent | 16.7 |
| 26 to 30 percent | 0 |
| 31 to 50 percent | 33.3 |
| 51 to 75 percent | 0 |
| More than 75 percent | 33.30% |
| Does your company,s plan permit participants to invest their contributions in company stock? | |
| Yes | 61.10% |
| No | 38.9 |
| Does your company,s plan encourage participants to buy company stock or bonds with their contributions? | |
| Yes | 7.50% |
| No | 92.5 |
| Does your company,s plan place a limit on the amount of company stock that may be part of the fund? | |
| Yes | 17.50% |
| No | 82.5 |
| What is the maximum? | |
| Up to 5 percent | 11.80% |
| 6 to 10 percent | 11.8 |
| 11 to 15 percent | 5.9 |
| 16 to 20 percent | 11.8 |
| 21 to 25 percent | 5.9 |
| 26 to 30 percent | 0 |
| 31 to 50 percent | 11.8 |
| 51 to 75 percent | 0 |
| More than 75 percent | 0 |
| No maximum | 41.2 |
| 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 vesting | 2.2 |
| Yes, for three years after vesting | 0 |
| Yes, for more than three years after vesting | 10.9 |
| Yes, until the employee leaves the company or retires | 17.4 |
| 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 months | 0 |
| Six months | 1.6 |
| One year | 4.7 |
| Three years | 14.1 |
| Five years | 6.3 |
| More than five years | 0 |
| It,s graduated over time | 12.5 |
| Do you think Congress should pass legislation limiting the amount of company stock in your 401(k) plan? | |
| Yes | 24.60% |
| No | 75.4 |
| 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 prepared | 46.3 |
| Unprepared | 3 |
| Not applicable | 17.9 |
| Should employees be able to get advice on how to invest their 401(k)s? | |
| Yes | 100.00% |
| No | 0 |
| If yes, who should provide that advice? | |
| The plan sponsor | 12.50% |
| The administrator | 12.5 |
| An independent adviser | 75 |
