A Towers Watson news release said from 2006 to 2009, the prevalence of allocations to company securities declined by more than two percentage points — from 15.6% to 13.3%.
From 2006 to 2009, on a simple average basis, companies holding company securities allocated between 4% and 5% of total plan assets to that asset class. In 2009, roughly 0.6% of DB plan assets in all Fortune 1000 companies were allocated to company securities on a simple average basis. The overall allocation to company securities declined from 2006 to 2008 for all measures, although weighted averages increased from 2008 to 2009.
Larger plan sponsors (based on plan assets) have a greater propensity to hold employer securities, relative to smaller sponsors. During the 2006-2009 period, larger plans shifted slightly away from company securities while smaller plans shifted in the opposite direction, but the movements were too slight to overturn the general observation of prevalence by size. Overall, among the sub-segment of sponsors holding company securities, smaller plan sponsors held higher allocations compared to larger sponsors. But among all companies, larger sponsors were more likely than smaller sponsors to hold company securities.
Of companies holding company securities, the percentage allocating 2% or less of plan assets to company securities was roughly 30% in 2006, 39% in 2007 and 37% in both 2008 and 2009, Towers Watson said.
Meanwhile, for a small handful of companies, company securities made up more than 10% of plan assets. In the few cases where company securities make up more than 10% of plan assets, those companies did not contribute more employer securities than the Employee Retirement Income Security Act 10% threshold allows. Rather, the most likely reason the share of employer securities exceeds 10% is the company’s failure to rebalance out of company securities.
According to the study, in 2009, of companies in the 2010 Fortune 1000 with company securities, slightly more than 35% maintained 2% or less of assets in such securities; this is the largest category. In 2006, nearly 24% of the same companies held between 2.01% and 4% of their pension assets in company securities; this was then the largest category.
The vast majority of DB plan sponsors do not hold company securities as pension assets. While a few plan sponsors recently made large contributions to their plans in the form of company securities, this analysis finds overall a slight trend away from company securities in the pension portfolio over the last few years.
More information is at http://www.towerswatson.com/united-states/newsletters/insider/3364.