Enron employees held approximately 54% to 60% of their 401(k) plan assets in company stock. However, according to a background memo from the Workforce Committee, Congressional Research Service (CRS) reports that 89% of this Enron stock was purchased voluntarily by Enron employees, not through the company match.
On Thursday, the Committee on Education & the Workforce has scheduled five witnesses who will focus more specifically on the events at Enron and how its plan was administered. Currently scheduled are:
- Mr Tom Padgett, who will testify about his experience as an Enron employee and the nearly $600,000 he lost in his 401(k) account.
- Ms Cindy Olson, Executive Vice President for Human Resources and Ms Mikie Rath, Benefits Manager, both of Enron. Both testified yesterday before the Senate Government Affairs Committee, offering a fairly detailed accounting of the events that transpired before, during and after the so-called blackout period that accompanied the conversion of accounts from one recordkeeper to another.
- Mr Scott Peterson, the Global Practice Leader for Defined Contribution Services for Hewitt Associates. Hewitt Associates was the successor recordkeeper to Northern Trust Retirement Consulting for the Enron account.
- Professor Teresa Ghilarducci, an economist from the University of Notre Dame, who was invited to testify in a broad manner about the implications of Enron for workers.
Enron participants were allowed to change and trade their investment options daily. However, Enron’s plan also had a company matching contribution equal to 50% of the employee’s contribution, up to a maximum 6% of the employee’s base pay. Employees were barred from liquidating that company contribution investment until age 50.
In the case of Enron, the company match was made entirely in Enron stock. In addition to the company match, plan participants were also given the option of investing their own contributions in Enron stock. As a result of these factors, Enron employees had as much as 60% of their retirement savings invested in Enron stock.
The blackout was scheduled to occur on September 30, 2001 because it was the end of the financial quarter. However, this date was pushed back because of changes to the plan.
Plan participants were reportedly notified of the blackout by a mailing sent out in September, with subsequent email reminders sent by Enron to employees on September 27th, October 16th, October 22nd, and October 26th.
Two weeks prior to the blackout – which took place at the close of trading on October 26, according to testimony from both Northern Trust and Hewitt, Enron announced a $638 million loss and a $1.2 billion reduction in shareholder equity.
The blackout period lasted 13 business days – a period during which Enron stock continued a long slide, dropping from $13.81 to $9.24 per share, according to press reports. Enron subsequently filed for bankruptcy on December 2, 2001.