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Retirement Planning > Saving for Retirement

GAO: Big Plans Have 12% Of Assets In Employer Stock

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NU Online News Service, Oct. 7, 4:51 p.m. – Officials at the U.S. General Accounting Office say Congress should consider making employers warn workers about the risk of stuffing their 401(k) plans with the employers’ stock.

A new GAO report shows that holdings of company stock accounted for at least 12% of defined-contribution and defined-benefit pension plan assets at Fortune 1,000 companies in 1998.

Concentrations of employer stock as a percentage of total pension plan assets ranged from at least 8.7% at transportation companies to at least 32% at retail trade companies.

The pension plans of the big, publicly traded companies are not necessarily representative of all pension plans, but they account for about 40% of all U.S. pension plan participants, according to Barbara Bovbjerg and Richard Hillman, the GAO directors who led the research team that wrote the report.

Many employers that give employees company stock try to protect workers against price fluctuations or encourage them to diversify, the GAO researchers write.

But, in cases when company stock does make up the majority of workers’ pension assets, “employees are exposed to the possibility of losing more than their job if the company goes out of business or into serious financial decline,” the researchers write. “They are also exposed to the possibility of losing a major portion of their retirement savings.”

The Employee Retirement Income Security Act of 1974 requires employers to give plan participants some basic information about the investments in the plans.

But current “regulations do not require companies to disclose the importance of diversification or warn employees about the potential risks of owning employer securities,” the GAO researchers write.

Some employers worry that simply telling employees about the problems that could result from keeping too much employer stock in 401(k) plan accounts could expose them to lawsuits, the researchers add.

The researchers recommend that Congress consider requiring employers to provide an investment education notice containing basic information about risk management and the importance of diversification.

The text of the report is available at


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