Enron Lessons Fail to Stick

April 25, 2002 (PLANSPONSOR.com) - Despite the media frenzy over the Enron debacle, very few 401(k) participants have learned their lesson about holding too much company stock in their retirement savings plans, research by Boston Research Group shows.

“Clearly, there is a problem with participant education surrounding a prudent level of concentration of their assets in company stock and the relative risks,” said Cormier. 

The average 401(k) participant who invests in their company stock has 30% of these assets in company stock, with a third of participants holding more than 50% of their assets in company stock. 

But, according to the research findings, despite these high concentrations of company stock holdings:

  • 85% are comfortable with their position
  • 75% feel that their company stock carries the same or less risk than a tech mutual fund
  • half feel their company stock carries the same or less risk than a money market fund

Most troubling is the fact that a third of the sample feel their company stock is as risky or less risky than a government bond fund. Cormier said that added more evidence that participant education around company stock may need an overhaul. 

More than half the sample invested in their company stock because they believe it to be a low risk investment, and when asked what they considered to be a safe or prudent percentage of their 401(k) assets in their company stock:

  • two-thirds said 15% or higher
  • half said 25% or over.

Still, the results show that only 25% of 401(k) participants feel less comfortable about their company stock holdings as a result of the Enron case.

The research comprised a nationwide telephone survey conducted in mid-April 2002 of one-hundred 401(k) participants who have held company stock in their 401(k) account prior to and since the Enron fiasco.