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.”