More 401(k)s Capping Company Stock

Motivated by the dozens of worker lawsuits against employers that have ensued since Enron collapsed, publicly traded plan sponsors are increasingly putting caps on how much employees can invest in company stock, The Wall Street Journal reports.

"We're now telling companies they need to understand that company stock in the 401(k) plan is just a lawsuit waiting to happen," said Michael Weddell, a consultant with Watson Wyatt Worldwide.

Some companies have stopped contributing company stock to their 401(k) plans as a form of a match. Others are eliminating company stock options from their plans altogether.

A recent survey of 227 large companies by Hewitt Associates found that 17% have begun restricting how much company stock their employees can own and another 13% plan to impose such restrictions this year. However, company stock options are still very prevalent in the U.S. About 66% of the 500 largest companies offer this option in their 401(k) plans, according to the Profit Sharing/401(k) Council of America. About 15.4%, or $305 billion, of all of the money invested in 401(k) plans is in company stock, according to Cerulli Associates.

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.