Company Stock Equals Trouble

Employers don’t always look out for the best interests of their employees even though they should. This is especially true with stock ownership inside 401(k) plans, where the perception is that employers are helping their employees by giving them more and more equity in the company.

Stock ownership, depending on the company, can be both a blessing and a curse. The tiny percentage of employees that made their millions by investing in company stock are easily outnumbered by the thousands (maybe millions) who have lost.

In this regard, companies should be protecting both themselves and their employees. How? By imposing limits or restrictions on employee stock ownership within 401(k) plans. And if stubborn employees want to violate those guidelines, they can, but they first need to sign a waiver releasing their employer and 401(k) provider from any legal liability tied to losses should the company’s stock price fall in value.

These powerful preventive steps can reduce the corporation’s legal liabilities by keeping parasite attorneys who file class-action lawsuits on behalf of “cheated” employees far away. It will also help employees to understand they alone are responsible for their own financial outcomes, both good and bad.

Enter the Regulators

The Department of Labor and Securities and Exchange Commission have a dual responsibility to protect 401(k) participants. Shouldn’t these government agencies take immediately unified action to minimize the problems of too much company stock within 401(k) plans? How many more billions have to be nuclear bombed before something is done?

I believe the Labor Department and SEC should place immediate restrictions on stock ownership within 401(k) plans. And if mulish employees want to violate those guidelines, they can, but they first need to sign a waiver releasing their employer and 401(k) provider from any legal liability tied to losses should the company’s stock price fall in value.

All of this would minimize frivolous class-action lawsuits against employers who choose to offer company stock as an investment option within their 401(k) plan.

Likewise, this line of defense would also eliminate the possibility of 401(k) providers being dragged into unnecessary litigation. By having signed documents from employees acknowledging they agreed to exceed pre-determined stock ownership guidelines, they (employees and their desperate lawyers) have no one to blame but themselves when their equity falls in value. I think it’s the perfect solution to a complex problem.

In summary, company stock is rarely a blessing and more frequently a curse. Therefore, help your clients to comprehend that risking their retirement future on company stock isn’t safe, smart or prudent.