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January 28, 2002
Big Employers Rely Heavily on Company Stock
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At paint chain Sherwin-Williams, for instance, some 92 percent of all money in the 401(k) retirement plan is in company stock.
At Coke, the figure is about 81 percent.
At pharmaceutical giant Pfizer Inc., it is more than 86 percent.
At McDonald's, it is 74 percent.
Enron employees had invested 62 percent of their 401(k) assets in the company's stock as of the beginning of this year, according to the Times, which cited Securities and Exchange Commission filings as its source. The workers had 18 other investments to choose from in their plans.
Though only about one-half of 1 percent of all public companies match their employees' 401(k) contributions with company stock, rather than cash, these companies are often among the nation's largest and best-known, according to the Times.
Enron was one of these companies, matching up to 6 percent of contributions with company stock, said Vance Meyer, company spokesman. The "matching" stock came with a condition - employees could not sell it until they turned 50.
Other companies, such as Coca-Cola, Procter & Gamble, and McDonald's, also match contributions with their stock. The Times notes that such arrangements mean employees end up with a stake in their company, for better or worse, like it or not.
But some 43 percent of workers at the nation's largest employers pour their money into company stock voluntarily, according to a survey by the Profit Sharing/401k Council of America, which represents employers with 401(k) plans.
"Sometimes 50, 60, or 70 percent [of a retirement plan] is in stock, and the workers are not even required to have a single penny in stock," said Edward Ferrigno, vice president of the council. "That's because you're talking about Fortune 50, Fortune 100 companies that got there by doing things right, and they are excellent investments, and the people who work for those companies have great confidence in them."
However disastrous, cases of large losses such as those suffered by Enron employees are rare, according to Ann Combs, assistant secretary for the Pension and Welfare Benefits Administration. The agency, a division of the Department of Labor that investigates pension complaints, began investigating Enron on Nov. 16.
"Most 401(k)s are well-run and well-managed, and employees can be secure that the assets are there and they will be there when they retire," Combs told the Times, describing the average perpetrators of pension fraud as smaller businesses with low public profiles.
Problems arise typically when companies are in financial trouble, file for bankruptcy protection and stop making payments to their employees' 401(k) plans, Combs said. In such cases, the agency prosecutes the companies, trying to recover whatever money the workers lost.
To read the Washington Times story, click here.