Monday, November 15, 2004

Did Enron Teach Us Nothing?

Among 401(k) participants invested in company stock, the average is 40.5% of holdings.

More than one out of four employees have 50% or more of their holdings in company stock.



UnknownVariable said...

The temptation.

When I worked for a fortune 1000 company during the dot com boom, they matched 50% of my 401K contributions to a fund which contained it's stock exclusively. They matched 0% for other funds on the plan.

Needless to say, most people in the company had their 401 portfolio heavily vested in company stock.

On the face, it's a pretty good deal... as long as your company doesnt go belly up (which ours was about to, until we were bought out by a larger competitor).

ALD said...

In my experience working with a large variety of companies and benefit plans, only companies with financial problems try to save a buck by issuing stock instead of spending actual dollars on employee retirement plans. Any company that needs to do this is generally not long for this world.

Healthy companies don't generally have a problem shelling out 3% of pay or so in order to provide a real benefit to their employees. They quite properly see it as a normal cost of doing business.